UNFI sales up 15.8% in Q1

UNFI sales up 15.8% in Q1

Acquisitions of three distributors' assets in the first quarter of fiscal 2013 contributed $11.2 million in net sales.

Highlights

  • GAAP net income of $21.5 million for the first quarter of fiscal 2013; adjusted net income of $22.8 million, a 17.8 percent increase over adjusted net income for the first quarter of fiscal 2012
  • GAAP diluted EPS of $0.43 for the first quarter of fiscal 2013; adjusted diluted EPS of $0.46, a 16.1 percent increase over adjusted diluted EPS for the first quarter of fiscal 2012

United Natural Foods, Inc. (Nasdaq: UNFI) reported that net sales for the first quarter of fiscal 2013, ended October 27, 2012, totaled $1.410 billion, an increase of 15.8 percent, or $192.6 million, over $1.217 billion in net sales recorded in the first quarter of fiscal 2012. The Company's previously-announced acquisitions of certain assets of three distributors completed during the first quarter of fiscal 2013 contributed $11.2 million in net sales during the first quarter of fiscal 2013. Excluding these incremental net sales, the Company's net sales increased by $181.4 million, or 14.9 percent, in the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012.

"Despite moderated inflation and higher than anticipated product shortages, strong consumer demand continued to drive steady growth for our products and services during the quarter," said Steven Spinner, President and Chief Executive Officer. "We anticipate growth for the holiday season should remain strong as consumers continue to move towards a healthier lifestyle."

Total operating expenses in the first quarter of fiscal 2013 increased by $8.3 million, or 4.4 percent, to $199.4 million, compared to the first quarter of fiscal 2012, which had total operating expenses of $191.1 million. Total operating expenses were 14.1 percent as a percentage of net sales for the first quarter of fiscal 2013, a decrease of 155 basis points compared with the first quarter of fiscal 2012. Total operating expenses for the first quarter of fiscal 2013 included expenses of approximately $1.6 million related to the termination of a licensing agreement and the write-off of the associated intangible asset. Total operating expenses for the first quarter of fiscal 2012 included $5.3 million in expenses related to the restructuring and divestiture of the Company's conventional non-foods and general merchandise lines of business and $1.6 million in expenses related to the onboarding of a new national customer. Excluding these expenses in each period, operating expenses as a percentage of net sales were 14.0 percent for the first quarter of fiscal 2013, a decrease of 110 basis points compared with the first quarter of fiscal 2012.

Non-cash rent expense associated with the Company's previously announced new Aurora, Colorado distribution facility, which is scheduled to open in the fourth quarter of fiscal 2013, represented approximately $0.8 million in expense during the first quarter of fiscal 2013.

On a GAAP basis, operating income as a percentage of net sales increased 21.2 percent to 2.6 percent for the first quarter of fiscal 2013 from 2.1 percent for the first quarter of fiscal 2012. Operating income for the first quarter of fiscal 2013 was $36.6 million, an increase of approximately $10.5 million, or 40.3 percent, from the comparable quarter in fiscal 2012. Adjusted to exclude the expenses associated with the write-off of the intangible asset, operating income as a percentage of net sales was 2.7 percent for the first quarter of fiscal 2013 and is consistent with the prior year comparable quarter's operating income as a percentage of net sales adjusted to exclude the restructuring and onboarding expenses. Operating income adjusted for the items described above increased 15.8 percent in the first quarter of fiscal 2013 to $38.2 million compared to $33.0 million in the first quarter of fiscal 2012.

Gross margin was 16.7 percent for the first quarter of fiscal 2013, which represents a 110 basis point decline from gross margin of 17.8 percent for the first quarter of fiscal 2012. Gross margin for the first quarter of fiscal 2013 was negatively affected by higher supplier out of stocks, increased inbound freight costs as well as the Company's drive to maintain higher service levels, which together represented approximately 70 percent of the year over year decline. The continued shift in customer mix towards the supernatural and conventional supermarket channels also negatively impacted gross margin during the first quarter of fiscal 2013.

Other expense, net, reflects $4.9 million in expense associated with an agreement in principle to settle a multi-state unclaimed property audit primarily related to an acquisition completed in 2007. The Company finalized a settlement agreement in November, and will make payment in the second quarter of fiscal 2013.

GAAP net income for the first quarter of fiscal 2013 increased by $6.4 million, or 42.1 percent, to $21.5 million, or $0.43 per diluted share, from $15.2 million, or $0.31 per diluted share, for the first quarter of fiscal 2012. Earnings per diluted share, adjusted to exclude the after-tax expenses associated with the write-off of the intangible asset, the unclaimed property settlement described above and the discrete tax benefit of $2.7 million primarily related to the reversal of reserves for uncertain tax positions were $0.46 for the first quarter of fiscal 2013.

"UNFI continued to execute on its strategic plan during our first quarter," added Mr. Spinner. "I'm proud of our continued drive towards operational excellence during this very important holiday season. We are currently in the process of integrating our recent acquisitions into our existing operations, and expect all integration tasks to be completed by the end of our third quarter of fiscal 2013."

 

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