United Natural Foods Announces 15% Earnings Increase

Third Quarter Highlights

  • Net sales increased 10.8% to $985.7 million compared with the third quarter of fiscal 2009
  • Fiscal 2010 sales guidance raised to a range of 6.5% - 7.5% year over year growth, or $3.68 billion to $3.72 billion

United Natural Foods, Inc. (UNFI) has reported net sales of $985.7 million for the third quarter of fiscal 2010, ended May 1, 2010, an increase of approximately $96.2 million, or 10.8%, from net sales of $889.5 million recorded in the third quarter of fiscal 2009.

"Our fiscal 2010 third quarter reflected the continuing rebound of the natural and organic industry as our growth accelerated during most of the quarter, resulting in both record revenues and net income," said Steven Spinner, President and Chief Executive Officer. "In addition, now that we have entered our fourth fiscal quarter, we have begun servicing all of our previously announced new customers."

Net income was $19.5 million, or $0.45 per diluted share, for the third quarter of fiscal 2010 compared with net income for the third quarter of fiscal 2009 of $16.8 million, or $0.39 per diluted share.

Gross margin was 18.5% for the third quarter of fiscal 2010, which represents a 46 basis point decline from gross margin of 19.0% for the third quarter of fiscal 2009, primarily due to the continued shift in growth in the Company's customer mix, and moderated inflation.

Operating expenses as a percentage of net sales decreased by 0.5% to 15.1% of net sales, or $148.6 million in the third quarter of fiscal 2010, compared to 15.6% or $138.3 million in the third quarter of fiscal 2009. Operating expenses were positively impacted by the growth in the supernatural and supermarket channels which in general have lower operating expenses, and the continued roll-out of process improvement programs across all UNFI divisions. The Company recorded $0.4 million in expenses during the quarter related to severance for a previously announced separation agreement, and $0.5 million in start-up costs associated with on-boarding of new customers.

In the third quarter of fiscal 2010, the supernatural channel experienced growth of 17.7%, the supermarket channel had growth of 12.2%, and the independent channel showed continued improvement with growth of 6.9%.

Fiscal 2010 Year to Date Summary

Sales for the first nine months of fiscal 2010 were $2.77 billion, a 6.4% increase over the prior fiscal year comparable period. Diluted EPS was $1.17 per share, a 14.7% increase over the first nine months of fiscal 2009.

At 15.3% of net sales, operating expenses were 0.7% lower than the prior fiscal year comparable period. Gross margin was 0.6% less than the first nine months of fiscal 2009, at 18.6% of net sales for the first nine months of fiscal 2010.

"In May, we announced the definitive agreement to acquire the Canadian food distribution assets of the SunOpta Distribution Group business, and we expect the transaction to close later this month," said Mr. Spinner. "This morning, in a separate press release, we announced the extension of our long-term partnership with Whole Foods Market for an additional seven years, resulting in an amended agreement to serve them for the next decade. We are well situated to continue our strategy to increase market share with both new and existing customers, drive operational excellence, operate as one company and further our sustainability and philanthropic causes which will serve as the primary vehicles for our long-term success."

Updates to Fiscal 2010 Guidance

Based on the Company's performance through the first nine months of 2010 and the current outlook for the remainder of the year including the proposed acquisition of certain assets of the SDG business, the Company is raising its net sales guidance for fiscal year 2010, ending July 31, 2010, to a range of $3.68 billion to $3.72 billion, which represents a 6.5% to 7.5% increase in total net sales over fiscal 2009. The Company had previously provided, on December 10, 2009, a net sales guidance target of $3.54 billion to $3.63 billion.

In addition, the Company is narrowing its earnings per share guidance for fiscal 2010 to a range of $1.55 to $1.58 per diluted share. The Company had previously announced earnings per share guidance of $1.48 to $1.58 per diluted share. The Company's revised guidance reflects the impact of improved operating efficiencies and cost controls.

Conference Call & Webcast

The Company's third quarter fiscal 2010 conference call and audio webcast will be held at 10:00 a.m. ET on June 2, 2010. The audio webcast of the conference call will be available to the public, on a listen-only basis, via the Internet at www.fulldisclosure.com or at the Investors section of the Company's website at 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 17,000 customer locations nationwide. 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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