UNFI Delivered ‘Strong Fiscal Year 2021’ Says New CEO Sandy Douglas

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New CEO of United Natural Foods Inc. (UNFI), J. Alexander “Sandy” Douglas, took part in his first earnings conference call with the company, which achieved increased sales for its 2021 fiscal year but exceeded the top of Wall Street’s earnings forecast.

For the fourth quarter ended July 31, net sales totaled $ 6.74 billion, down 0.5% from $ 6.77 billion a year earlier, when the food distributor announced an increase 0.4% (8% on a comparable basis) amid strong customer demand fueled by COVID-19, UNFI said Tuesday. Sales for the 2021 quarter were up 7.5% over a two-year stack, the company noted.

Net sales for the full year 2021 increased 1.5% to $ 26.95 billion, from $ 26.56 billion in 2020, which saw sales growth of 18.9% year on year thanks to pandemic-induced demand.

“I’ve been in the role for about seven weeks now and have spent most of my time meeting with clients, our management team and associates across the organization, focusing on growth opportunities for clients. and how we can all work. together to seize these opportunities in a very complex operating environment, ”Douglas told analysts on a conference call Tuesday morning.

“We have momentum in our business, and it is accelerating.” – Sandy Douglas, CEO of UNFI

“My first view is that there are significant opportunities to improve the way we serve existing and new customers and the ability to partner with vendors to provide customers with the most differentiated products and services. high quality that they want and need, ”said Douglas, who started as CEO of UNFI August 9, succeeding Steven Spinner. “It is important to note that while the COVID pandemic persists, our operating environment remains difficult. From our suppliers to UNFI to our customers, we all face challenges in manufacturing, moving and delivering products to our interrelated supply chains. So I will continue to focus on learning the full scope of this business and helping our team meet the challenges and execute our plans for the benefit of our incredible community of customers. “

Among UNFI’s customer channels, the supernatural category – made up of Whole Foods Market, the company’s biggest customer – led the way in Q4 2021 with net sales up 11.8% to 1, $ 25 billion (+ 15.4% over two years). However, sales are down for the distributor’s two biggest channels: chains fell 2.2% to $ 3.01 billion (+ 6.7% over two years), while independent retailers fell. from 6.2% to 1.67 billion dollars (+ 5.2% over two years). Sales at retail channels, including the company’s Cub Foods and Shoppers stores, fell 6% to $ 613 million in the quarter (+ 15.2% over two years). Sales in the Other channel – including international customers outside of Canada, foodservices, e-commerce, conventional military operations, and other sales – increased 0.7% to $ 572 million (+1 , 4% over two years).

“We believe our fourth quarter results reflect the work in progress as we begin to implement our Fueling the future strategy. Focusing on the fourth quarter, sales totaled just over $ 6.7 billion. This is a slight decrease from the fourth quarter of last year as we are now recycling the 2020 calendar months with the high levels of COVID-19 consumer demand at the start, ”said the President of UNFI, Christopher Testa, on call. “Anticipated sales declined in our Retail, Independent and Chain channels, which were the biggest winners a year ago, and were partially offset by growth in the Supernatural and Other channels. “

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Private labels were a bright spot for UNFI in the fourth quarter, including its Natural and Organic Woodstock label.

UNFI generated some sales momentum quarter over quarter, according to Testa.

“On a sequential basis, our business is growing, with fourth quarter sales increasing approximately 1.6% from the third quarter. About 80 [points] of the 160 basis point increase was the result of accelerating inflation within our business, which increased to approximately 2.4% in the fourth quarter. The remaining 80 basis points are the result of the underlying strength of our customers’ retail operations, our committed cross-selling success and the addition of new customers. A significant portion of the sequential increase came from our top 100 customers, whose sales grew 2.2% from the third to the fourth quarter, ”he said.

“The fourth quarter also included an additional $ 80 million in cross-selling revenue as customers continue to benefit from UNFI’s unmatched product variety and the value that only we can add from it. consolidated purchases, ”noted Testa. “In fiscal 2021, over $ 700 million of our total revenue came from cross-selling made possible by the merger of our conventional and natural businesses. Selling more to existing customers represents an addressable $ 38 billion opportunity, and we believe that is UNFI’s unique advantage. With over 18,000 unit clients representing over 30,000 locations, UNFI has significant growth potential with the clients we already serve. New customers will also play an important role in our future growth, and our sales pipeline includes hundreds of opportunities to help us grow our market share within the addressable $ 140 billion market opportunity that we have. discussed previously.

For the year as a whole, Supernatural once again paced UNFI’s customer channels with net sales up 7% to $ 5.05 billion, followed by growth of 2.8% to 2 , $ 44 billion for retail sales and 0.8% to $ 12.1 billion for chains. Sales fell 0.9% to $ 6.64 billion for independent retailers and 1% to $ 2.3 billion in the Other channel.

Private labels remain a sales catalyst for UNFI, Testa told analysts. “Our three-pronged growth strategy is based on increasing penetration with our existing customers, bringing own brands to new customers and channels that currently do not offer them, and introducing innovative items that meet changing consumer needs. today, ”he explained. . “We are making progress on all three fronts as we now sell our own brand products to nearly 500 additional stores which were integrated in fiscal 2021. We also introduced approximately 100 new items to our portfolio of produced this year. and plans to introduce 150 more in FY2022, including more SKUs of herbal and functional ingredients. “

UNFI’s professional services business grew 12% in fiscal 2021, and the company expects another double-digit increase in fiscal 2022. The sales organization is actively pursuing ”Testa said. “In FY2021, we introduced 17 new services, and plan to launch a similar number this coming year, driven by current industry trends as well as customer feedback on the issues we can help them solve. “

Testa also singled out the bakery as a successful business. “Our bakery category saw double-digit growth in the fourth quarter,” he said. “Consumer demand has increased since the peak of the pandemic, and UNFI is uniquely positioned with a large portfolio of specialty items, including the majority of SKUs that we sell through our Tony’s Fine Foods portfolio. “

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UNFI sees a $ 38 billion opportunity to sell more to its existing customers.

Overall, fourth-quarter net income attributable to UNFI was $ 43 million, or 69 cents per diluted share, compared to $ 53 million, or 89 cents per diluted share, a year ago. Excluding $ 1.22 per diluted share of multi-employer pension expense and restructuring, acquisition and integration charges, among other costs, adjusted net earnings per share was $ 1.18 versus 1.06 $ in quarter 2020. Analysts, on average, had forecast adjusted EPS of 80 cents, with estimates ranging from 68 cents to 90 cents, according to Refinitiv.

Fiscal 2021 net income attributable to UNFI was $ 149 million, or $ 2.48 per diluted share, compared with a net loss of $ 274 million, or $ 5.10 per diluted share, in 2020. Adjusted EPS for 2021 was $ 3.88 compared to $ 2.72 in 2020. Excluded charges for 2021 include $ 2.49 per share in retirement and restructuring, acquisition and integration costs, among others elements. UNFI’s 2020 fiscal year reflected a goodwill impairment charge of $ 7.91 per share and $ 1.62 per share of restructuring, acquisition and integration charges, among other costs.

Wall Street’s consensus estimate was for adjusted EPS of $ 3.49 for fiscal 2021, with projections ranging from $ 3.40 to $ 3.63, according to Refinitiv.

Going forward, UNFI forecasts point to EPS of $ 3.60 to $ 3.90 and adjusted EPS of $ 3.90 to $ 4.20 for fiscal year 2022, over net sales of $ 27.8 billion to $ 28.3 billion. The analysts’ average projection is for adjusted EPS of $ 3.38, with estimates ranging from $ 2.34 to $ 4.05.

“Despite the challenges we are managing, we have momentum in our business, and it is accelerating. And I think our plans for the new fiscal year will build on that momentum, ”said Douglas. “Under the leadership of my predecessor Steve Spinner and our management team, we have had a strong 2021 year, and we expect this new year to be even better. We are starting fiscal 2022 with less debt, an improved debt ratio and plans for future growth, driven by a sincere desire to do all we can to serve our customers. “


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