United Natural Foods year-end results: sales up 17%

United Natural Foods year-end results: sales up 17%

United Natural Foods, Inc. reported that net sales for the fourth quarter of fiscal 2011 ended July 30, 2011 totaled $1.16 billion, an increase of 17.2%, or $170.2 million, over net sales of $988.5 million for the comparable quarter in fiscal 2010.

 

Financial Highlights

Fiscal 2011 fourth quarter net sales increased 17.2% over the comparable fiscal 2010 quarter to $1.16 billion

Fiscal 2011 operating income increased 12.9% over fiscal 2010, or 18.4% excluding restructuring expenses

Fiscal 2011 earnings per diluted share of $1.60 per diluted share, or $1.68 excluding restructuring expenses

United Natural Foods, Inc. UNFI -2.53% (the "Company") reported that net sales for the fourth quarter of fiscal 2011 ended July 30, 2011 totaled $1.16 billion, an increase of 17.2%, or $170.2 million, over net sales of $988.5 million for the comparable quarter in fiscal 2010. Net income for the fourth quarter of fiscal 2011 decreased by $0.5 million, or 2.6%, to $17.2 million, from $17.6 million for the comparable quarter in fiscal 2010, primarily due to pre-tax expenses of $6.3 million recognized in connection with the previously announced restructuring of the Company's UNFI Specialty Distribution Services division ("UNFI Specialty"), including the $5.8 million non-cash impairment charge related to the Company's Harrison, Arkansas facility and other expenses incurred in connection with the divestiture of the Company's general merchandise and conventional non-food lines of business (collectively the "restructuring expenses"). Earnings per diluted share for the fourth quarter of fiscal 2011 were $0.35, inclusive of the restructuring expenses. Excluding the restructuring expenses, earnings per diluted share for the fourth quarter of fiscal 2011 were $0.43, which represents an increase of 7.5% from $0.40 per diluted share for the fourth quarter of fiscal 2010. Earnings per diluted share in the fourth quarter of fiscal 2011 also included the additional dilutive effect of the Company's common stock offering completed in the first quarter of fiscal 2011.

Gross margin was 18.6% for the fourth quarter of fiscal 2011, which represents a 43 basis point improvement sequentially from the gross margin of 18.2% for the third quarter of fiscal 2011. The higher gross margin compared to the prior sequential quarter was due to purchasing and logistics efficiencies, and higher fuel surcharge revenues. Gross margin for the fourth quarter of fiscal 2011 was consistent with the prior year quarter, which was primarily the result of the higher fuel surcharge revenues in the current year quarter, partially offset by the continued shift in the Company's customer mix.

Operating expenses as a percentage of net sales increased to 16.0% for the fiscal 2011 fourth quarter, primarily as a result of the $6.3 million of pre-tax restructuring expenses recognized during the quarter. Excluding the restructuring expenses, operating expenses were 15.5% of net sales, a decrease of 38 basis points compared to the fiscal 2010 fourth quarter. Operating income as a percentage of net sales was 2.5% for the fiscal 2011 fourth quarter, compared to 2.7% of net sales in the prior year comparable quarter. Excluding the restructuring expenses, operating income as a percentage of net sales was 3.1% for the fourth quarter of fiscal 2011, and increase of 42 basis points compared to the fiscal 2010 fourth quarter.

Fiscal 2011 Summary

Net sales for fiscal 2011 totaled $4.53 billion, a 20.6% increase over the prior fiscal year. As a result of the continued shift in customer mix, gross margin was 34 basis points lower than the comparable prior year period, at 18.2% of net sales for fiscal 2011. Gross margin was also negatively impacted during the year by start up costs related to inventory issues and incremental freight and service costs incurred during the first half of fiscal 2011 in connection with the initial period of operations of the Company's new Lancaster, Texas distribution facility, which costs were partially offset by higher fuel surcharge revenue. Total operating expenses as a percentage of net sales for fiscal 2011 were 15.3%, compared to 15.5% for the prior fiscal year. Excluding the restructuring expenses, total operating expenses were 15.2% of net sales for fiscal 2011, 28 basis points lower than the prior fiscal year. Operating income increased $14.8 million, or 12.9%, over fiscal 2010 to $129.7 million, resulting in an operating margin of 2.9%. Excluding the restructuring expenses, operating income increased $21.0 million, or 18.3% over fiscal 2010 to $136.0 million, resulting in an operating margin of 3.0% as a percentage of net sales. Diluted earnings per share were $1.60 for fiscal 2011, a 1.9% increase over fiscal 2010. Excluding the restructuring expenses, earnings per diluted share were $1.68, a 7.0% increase over fiscal 2010. Earnings per diluted share for fiscal 2011 also included the additional dilutive effect of the Company's common stock offering completed in the first quarter of fiscal 2011.

"Fiscal 2011 was a transitional year for UNFI, as we generated over 20% sales growth, and record net income," commented Steven Spinner, President and Chief Executive Officer. "As we look forward to fiscal 2012, we plan to continue the roll-out of our new warehouse management system, while focusing on increasing service levels and operational productivity."

Introduction of Fiscal 2012 Guidance

The Company also has provided its financial outlook for fiscal 2012, ending July 28, 2012.

For fiscal 2012, the Company expects net sales in the range of approximately $5.0 to $5.1 billion, an increase of approximately 10.4% to 12.6% over fiscal 2011.

The Company expects GAAP earnings per diluted share for fiscal 2012 in the range of approximately $1.75 to $1.87 per share, an increase of approximately 9.4% to 16.9% over fiscal 2011 GAAP earnings per diluted share of $1.60. The Company expects to incur approximately $4.5 million to $6.2 million in additional expenses associated with its previously announced restructuring of UNFI Specialty and start-up expenses associated with on-boarding the Company's recently announced new national customer during fiscal 2012. Excluding the impact of the aforementioned expenses, the Company expects earnings per diluted share for fiscal 2012 in the range of approximately $1.83 to $1.93 per share, an increase of approximately 8.9% to 14.9% over fiscal 2011 earnings per diluted share of $1.68 excluding expenses associated with the restructuring of the UNFI Specialty division.

The Company expects GAAP earnings per diluted share for its first quarter of fiscal 2012 ended October 29, 2011 to be in the range of $0.33 to $0.36 per share. Excluding the portion of the aforementioned expenses that occur in the first quarter of fiscal 2012 ending October 29, 2011, the Company expects earnings per diluted share to be in the range of $0.39 to $0.41 per share.

Capital expenditures are expected to be in the range of approximately 1% of revenues, or approximately $47 million to $52 million during fiscal 2012.

Webcast

The audio webcast of the conference call is available to the public, on a listen-only basis, via the Internet at http://www.earnings.com or at the Investors section of the Company's website at http://www.unfi.com. The online archive of the webcast will be available on the Company's website for 30 days.

About United Natural Foods

United Natural Foods, Inc. (http://www.unfi.com) carries and distributes more than 60,000 products to more than 23,000 customer locations throughout the United States and Canada. The Company serves a wide variety of retail formats including conventional supermarket chains, natural product superstores, independent retail operators and the food service channel. United Natural Foods, Inc. was ranked by Forbes in 2005 as one of the "Best Managed Companies in America," ranked by Fortune in 2006 - 2010 as one of its "Most Admired Companies," winner of the Supermarket News 2008 Sustainability Excellence Award, and recognized by the Nutrition Business Journal for its 2009 Environment and Sustainability Award.

For more information on United Natural Foods, Inc., visit the Company's website at www.unfi.com.

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