United Natural Foods’ stock tanks after company swings to loss amid lower inflation benefits
United Natural Foods Inc.’s stock tumbled 16.5% Tuesday, after the grocery wholesaler swung to a fiscal fourth-quarter loss and posted sales that lagged estimates, while warning of continued weakness in 2024.
The Providence, Rhode Island-based company
UNFI,
had a net loss of $68 million, or $1.15 a share, for the quarter to July 29, after income of $39 million, or 63 cents a share, in the year-earlier quarter. It’s adjusted per-share loss came to 25 cents, narrower than the 39 cent loss consensus of FactSet analysts.
Sales rose to $7.417 billion from $7.273 billion, but were below the $7.467 billion FactSet consensus.
“While we grew sales across all of our customer channels, profitability declined primarily due to a decrease in inflation driven procurement gains and elevated shrink. We expect further headwinds as we continue to cycle elevated inflationary benefits during the first half of fiscal 2024,” CEO Sandy Douglas said in a statement.
Shrink can refer to damaged goods, caused by losses and spoilage, but has lately more often meant shoplifting and is a problem that many retailers have complained about this earnings reporting season. Many have said it’s being conducted by organized gangs and is costing millions of dollars a year.
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On a call with analysts, Chief Financial Officer John Howard said unit volumes remained lower but were up by about 100 basis points from the third quarter, and slightly better than Nielsen’s total US food volume changes which is representative of performance for the grocery industry as a whole.
Retail sales declined 2%, mostly due to lower unit volumes, partly offset by higher average unit retail prices.
“We’ve continued to experience pressure across our retail footprint primary located in the Minneapolis-St. Paul market, due in large part to tightening consumer demand, reductions in government support programs and more intense competition on price,” he told analysts, according to a FactSet transcript.
United Natural Foods is now expecting fiscal 2024 per-share earnings to range from a loss of 88 cents to EPS of 38 cents, compared with a FactSet consensus for EPS of $1.94.
Sales are expected to range from $30.9 billion to $31.5 billion, compared with a consensus of $31.1 billion.
“We’re also expecting ongoing near-term volume headwinds as consumers continue to adapt to higher costs across their household budgets,” said Howard.
Separately, the company said it’s adding three independent directors to its board to work on a transformation plan that aims to improve profitability and better serve its customers.
Effective Sept. 28, Lynn Blake, James “Jim” Loree and James C. Pappas will join UNFI’s Board as new independent directors.
Blake comes to the role after years of experience in the investment industry as a leader at State Street Global Advisors.
Loree has more than four decades of experience at global industrial and consumer products businesses, including Stanley Black & Decker
SWK,
and General Electric
GE,
For more, read: Dollar General’s stock tumbles after retailer misses earnings estimates and lowers guidance
Pappas founded JCP Investment Management in Houston in June 2009 and has spent much of his career at restaurant, food and retail businesses.
“We are taking decisive action to right size our cost structure,” Douglas said. “Alongside these step-change improvements to our business, we believe there may be additional actionable opportunities to focus our operations and create further value for shareholders,” he added.
The stock has fallen 51% in the year to date, while the S&P 500
SPX,
has gained 13%.
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