United Natural Foods Sees Demand Flourish in Fiscal First-Quarter 2013, Expects to Finish Acquisitions in Coming Months

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Researched by Industrial Info Resources (Sugar Land, Texas)--United Natural Foods Incorporated (NASDAQ:UNFI) (UNFI) (Providence, Rhode Island), a leading food distributor in the U.S. and Canada, saw modest improvements in the first quarter of the company's 2013 fiscal year, as solid customer demand continued to drive growth, including the implementation of recent acquisitions. Net income for the quarter was reported to be $21.54 million, a 42.09% increase from fiscal first-quarter 2012.

Net sales came in at $1.41 billion, a 15.82% increase from the same period last year. Among the highlights that were discussed by UNFI executives in a conference call were the Albert's Organics division, which saw quickly rising demand from health-conscious customers and continued to expand UNFI's organics business, and the Select Nutrition division, which saw strong Web-based demand for natural supplements and personal care products.

Both divisions are now incorporating certain assets of Purity Organics (San Francisco, California), the industry leader in sourcing and marketing of organic produce, and Honest Green (New York City, New York), which is expected to further enhance the company's Web-based business. The Purity Organics assets were acquired in August this year, and Honest Green was acquired in September. The integrations of these businesses are expected to be completed by the end of fiscal third-quarter 2013.

Capital expenditures were reported to be $4.57 million in the quarter, compared with $7.8 million in fiscal first-quarter 2012, and consisted primarily of maintenance-related costs.

Industrial Info is tracking progress at five active UNFI food and produce warehouses and distribution centers. They are located in Rockville, California; Dayville, Connecticut; Atlanta, Georgia; Iowa City, Iowa; and Chesterfield, New Hampshire. Industrial Info also is tracking the two-phase, $47 million construction of a food distribution center in Aurora, Colorado. The project involves constructing a 545,596-square-foot distribution center in the first phase, which is expected to be completed in May 2013, and an additional 177,000 square feet in the planned second phase, which is expected to begin in June 2015 and to be completed in December 2015.

"During the first quarter, UNFI saw, for the first time, a significant increase in the rate of supplier out-of-stocks, causing negative pressure on our gross margin and top-line sales," said Steven Spinner, the president and chief executive officer of UNFI, said in the conference call. "The higher out-of-stocks were caused primarily by ingredient shortages and high demand to support the holiday season. While difficult to manage, we're confident that the higher [out-of-stocks] will subside and return to a more normalized rate over the next several months."

He added that increased in-bound freight costs also proved to be a major expense for UNFI. Together, the out-of-stocks, the higher freight costs, and measures taken to maintain stronger service levels made up a significant portion of the company's expenses.

Spinner said that UNFI remains "bullish" on customer demand for its products and services, although net sales growth is expected to moderate by 3% to 4% in the remaining three quarters of the year. Of course, growth during the holiday season is expected to be particularly strong.

"We are on target to build three new centers over the next several years, and continue to target the Northeast, Midwest and Pacific regions in order to accommodate growing demand," Spinner said in the conference call.

For more information, visit Industrial Info's North American Food & Beverage Industry Project Database.

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