- Net income of $18.7 million for the second quarter of fiscal 2011, a 19.6% increase over net income from the comparable fiscal 2010 period
- Diluted EPS of $0.39 for the second quarter of fiscal 2011, an 8.3% increase over diluted EPS for the second quarter of fiscal 2010
United Natural Foods, Inc. (Nasdaq: UNFI) reported that net income for the second quarter of fiscal 2011 ended January 29, 2011 increased by $3.0 million, or 19.6%, to $18.7 million, or $0.39 per diluted share including the dilutive effect from our equity offering completed in the first quarter of fiscal 2011, from $15.7 million, or $0.36 per diluted share for the second quarter of fiscal 2010. Net sales for the second quarter of fiscal 2011 totaled $1.11 billion, an increase of 24.1%, or $216.2 million, over net sales recorded in the second quarter of fiscal 2010 of $898.2 million. Excluding the impact of sales related to the Company's June 2010 Canadian acquisition and its October 2010 acquisition of certain inventory and distribution assets of Whole Foods Market, Inc. ("Whole Foods Market"), which generated combined estimated incremental net sales of approximately $87.6 million, second quarter fiscal 2011 net sales increased by 14.3%, or $128.7 million, to $1.03 billion.
"In the fiscal 2011 second quarter, we experienced an acceleration of our comparable sales growth to 14.3%, reflecting the sustained strength of the industry across all of our customer channels," said Steven Spinner, President and Chief Executive Officer.
Gross margin was 17.8% for the second quarter of fiscal 2011, which represents a 45 basis point decline from the gross margin of 18.3% for the first quarter of fiscal 2011. The lower gross margin compared to the prior sequential quarter was largely due to a continued shift in our customer mix during the second quarter.
Operating expenses as a percentage of net sales decreased to 15.0% for the second quarter of fiscal 2011, a decrease of approximately 50 basis points compared to the fiscal 2010 second quarter ended January 30, 2010. Operating income as a percentage of net sales decreased to 2.8% for the second quarter of fiscal 2011 from 3.1% for the second quarter of fiscal 2010, a decline of 22 basis points. Operating income as a percentage of net sales during the second quarter of fiscal 2011 was also negatively impacted by approximately $2.5 million in continued start-up inefficiencies related to our Lancaster, Texas facility, which commenced operations in September 2010.
First Half Fiscal 2011 Summary
Net sales for the first half of fiscal 2011 totaled $2.17 billion, a 21.6% increase over the prior fiscal year comparable period. Diluted EPS was $0.77 per share including the dilutive effect from our equity offering completed in the first quarter of fiscal 2011, a 6.9% increase over the first half of fiscal 2010. At 15.2% of net sales, operating expenses were 29 basis points lower than the comparable prior year period. Gross margin was 54 basis points less than the comparable prior year period, at 18.0% of net sales for the first six months of fiscal 2011.
"Building off of the success we achieved during fiscal 2010, UNFI has continued to gain market share and incremental business during the first half of fiscal 2011, leveraging our fully integrated specialty offering and our strategic expansion into Canada. We are now focused on managing efficiencies related to previously on boarded new business and our increased sales growth. UNFI Canada continues to perform in line with our expectations, and sales trends across all channels continue to improve, with the independent channel growing at 7.9%, excluding acquisitions, in the fiscal 2011 second quarter," added Mr. Spinner.
Updates to Fiscal 2011 Guidance
Based on the Company's solid performance through the first six months of fiscal 2011 and the current outlook for the remainder of the year, the Company is raising its net sales guidance for fiscal year 2011, ending July 31, 2011, to a range of $4.4 billion to $4.5 billion, which represents a 17.1% to 19.8% increase in total net sales over fiscal 2010. The Company had previously provided, on September 8, 2010, a net sales guidance target of $4.35 billion to $4.45 billion.
In addition, the Company is narrowing its earnings per share guidance for fiscal 2011 to a range of $1.65 to $1.71 per diluted share. The Company's revised earnings per share guidance reflects the impact of expected improvements in operating efficiencies and cost controls. The Company had previously updated its fiscal 2011 earnings per share guidance to $1.62 to $1.71 per diluted share on October 13, 2010 following the completion of its common stock offering.
The Company's second quarter 2011 audio webcast will available to the public, on a listen-only basis, via the Internet at www.earnings.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. (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.