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United Natural Foods, Inc. Reports Third Quarter Fiscal 2025 Results

1. UNFI's Q3 net sales rose 7.5% to $8.1 billion. 2. Adjusted EBITDA improved by 20.8%, highlighting effective operations. 3. Net loss decreased to $(7) million from $(21) million YoY. 4. Free cash flow significantly increased to $119 million. 5. Company faces short-term challenges due to a cyber incident.

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$25.9406/10 07:08 AM EDTEvent Start
$23.306/11 05:45 AM EDTLatest Updated
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FAQ

Why Bullish?

Despite a net loss, UNFI posted strong sales and EBITDA growth, indicating operational strength. Similar scenarios in the past show resilience post-earnings improvement.

How important is it?

The reported growth figures and free cash flow show strong operational health, crucial for investor confidence.

Why Short Term?

The ongoing cyber incident may cause immediate operational disruptions, affecting short-term investor sentiment. However, long-term metrics remain strong.

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PROVIDENCE, R.I.--(BUSINESS WIRE)--United Natural Foods, Inc. (NYSE: UNFI) (the “Company” or “UNFI”) today reported financial results for the third quarter of fiscal 2025 (13 weeks) ended May 3, 2025. Third Quarter Fiscal 2025 Performance (comparisons to third quarter fiscal 2024) Net sales increased 7.5% to $8.1 billion Net loss of $(7) million; Loss per diluted share (EPS) of $(0.12) Adjusted EBITDA(1) increased 20.8% to $157 million Adjusted EPS(1) increased to $0.44 Recent Financial and Operational Summary Continued focus on stakeholder value creation and lean management delivered 20.8% Adjusted EBITDA growth and approximately $70 million free cash flow(1) improvement compared to the prior year quarter Net debt to Adjusted EBITDA ratio(1) declined to 3.3x, lowest in past two fiscal years Solid new business wins and operational execution continuing to drive high confidence in multi-year strategy Continued to add profitable new business while rationalizing unprofitable business Realignment of wholesale business producing customer and supplier benefits Lean daily management now implemented in 20 out of 52 distribution centers; creating safety, quality, delivery and cost benefits “During the third quarter, our customers helped us deliver another solid quarter of sales growth and our seventh consecutive quarter of sequentially improving Adjusted EBITDA. I’m pleased that our focus on becoming a more efficient and effective value-adding partner for our customers and suppliers is leading to steady margin improvement, including a higher year-over-year adjusted EBITDA margin rate and increased free cash flow,” said Sandy Douglas, UNFI’s CEO. “In the near term, we are focused on diligently managing through the cyber incident we announced yesterday to rapidly and safely restore our capabilities, while helping our customers with short-term solutions wherever possible.” Third Quarter Fiscal 2025 Summary Net sales increased 7.5% in the third quarter of fiscal 2025 compared to the same period in the prior year, primarily driven by a 4% increase in wholesale unit volumes, including the benefit of new business with existing and new customers, as well as inflation. This performance was led by natural product growth. Gross profit in the third quarter of fiscal 2025 was $1.1 billion, an increase of $62 million, or 6.1%, compared to the third quarter of fiscal 2024. The gross profit rate in the third quarter of fiscal 2025 was 13.4% of net sales compared to 13.6% of net sales in the third quarter of fiscal 2024. The decrease in the gross profit rate was primarily driven by lower product margin rates and business mix partly offset through supplier programs and lower shrink. Operating expenses in the third quarter of fiscal 2025 were $1,025 million, or 12.7% of net sales, compared to $992 million, or 13.2% of net sales, in the third quarter of fiscal 2024. The decrease in operating expenses as a percentage of net sales was driven by the leveraging impact of higher sales and the benefits from cost saving initiatives. Interest expense, net for the third quarter of fiscal 2025 was $36 million compared to $37 million for the third quarter of fiscal 2024 driven by lower average outstanding debt balances. Effective tax rate for the third quarter of fiscal 2025 was a benefit of 56.3% on pre-tax loss compared to a benefit of 23.1% on pre-tax loss for the third quarter of fiscal 2024. The change from the third quarter of fiscal 2024 was primarily driven by the impact of a partnership investment entered into in the third quarter of fiscal 2025 and a discrete tax benefit for prior year adjustments. Net loss for the third quarter of fiscal 2025 was $(7) million. Net loss for the third quarter of fiscal 2024 was $(21) million. Net loss per diluted share was $(0.12) for the third quarter of fiscal 2025 compared to net loss per diluted share of $(0.34) for the third quarter of fiscal 2024. Adjusted EPS was $0.44 for the third quarter of fiscal 2025 compared to $0.10 in the third quarter of fiscal 2024. Adjusted EBITDA for the third quarter of fiscal 2025 was $157 million compared to $130 million for the third quarter of fiscal 2024. Capital Allocation and Financing Overview Free Cash Flow – During the third quarter of fiscal 2025, free cash flow was $119 million compared to $49 million in the third quarter of fiscal 2024. Free cash flow for the third quarter of fiscal 2025 reflects net cash provided by operating activities of $173 million less payments for capital expenditures of $54 million. Leverage – Total outstanding debt, net of cash, was $1.93 billion at the end of the third quarter of fiscal 2025, reflecting a decrease of $118 million compared to the end of the second quarter of fiscal 2025. The net debt to Adjusted EBITDA leverage ratio was 3.3x as of May 3, 2025. Liquidity – As of May 3, 2025, total liquidity was approximately $1.49 billion, consisting of $52 million in cash, plus the unused capacity of approximately $1.44 billion under the Company’s asset-based lending facility. Subsequent to the third quarter of fiscal 2025, on May 5, 2025, the Company made a voluntary prepayment of $100 million on the Term Loan Facility funded with incremental borrowings under the ABL Credit Facility. Fiscal 2025 Outlook (1) The Company is updating its full-year outlook for GAAP net (loss) income and EPS to reflect costs and charges associated with exiting a customer contract and optimizing the Company’s distribution network in the Northeast. Due to the ongoing assessment of the impact of the unauthorized activity on certain of the Company’s information technology systems, which was discovered on June 5, 2025 and disclosed on June 9, 2025, the Company is not updating its outlook at this time for all other metrics in spite of its underlying business momentum and third quarter out-performance: Conference Call and Webcast The Company’s third quarter fiscal 2025 conference call and audio webcast will be held today, Tuesday, June 10, 2025 at 8:30 a.m. ET. A webcast of the conference call (and supplemental materials) will be available to the public, on a listen only basis, via the internet at the Investors section of the Company’s website www.unfi.com. The call can also be accessed at (888) 660 - 6768 (conference ID 1099581). An online archive of the webcast (and supplemental materials) will be available for 120 days. About United Natural Foods UNFI is North America’s premier grocery wholesaler delivering the widest variety of fresh, branded, and owned brand products to more than 30,000 locations throughout North America, including natural product superstores, independent retailers, conventional supermarket chains, eCommerce providers, and foodservice customers. UNFI also provides a broad range of value-added services and segmented marketing expertise, including proprietary technology, data, market insights, and shelf management to help customers and suppliers build their businesses and brands. As the largest full-service grocery partner in North America, UNFI is committed to building a food system that is better for all and is uniquely positioned to deliver great food, more choices, and fresh thinking to customers. To learn more about how UNFI is delivering value for its stakeholders, visit www.unfi.com. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding the Company’s business that are not historical facts are “forward-looking statements” that involve risks and uncertainties and are based on current expectations and management estimates; actual results may differ materially. The risks and uncertainties which could impact these statements are described in the Company’s filings under the Securities Exchange Act of 1934, as amended, including under the section entitled “Risk Factors” in the Company’s annual report on Form 10-K for the year ended August 3, 2024 filed with the Securities and Exchange Commission (the “SEC”) on October 1, 2024 and other filings the Company makes with the SEC, and include, but are not limited to, our dependence on principal customers; the relatively low margins of our business, which are sensitive to inflationary and deflationary pressures and intense competition, including as a result of the continuing consolidation of retailers and the growth of consumer choices for grocery and consumable purchases; our ability to realize the anticipated benefits of our strategic initiatives; changes in relationships with our suppliers; our ability to operate, and rely on third parties to operate, reliable and secure technology systems, and the effectiveness of the Company’s business continuity plans in response to an incident impacting the Company’s technology systems, such as the unauthorized incident on its technology systems; labor and other workforce shortages and challenges; the addition or loss of significant customers or material changes to our relationships with these customers; our ability to realize anticipated benefits of strategic transactions; our ability to continue to grow sales, including of our higher margin natural and organic foods and non-food products; our ability to maintain sufficient volume in our wholesale distribution and services businesses to support our operating infrastructure; our ability to access additional capital; increases in healthcare, pension and other costs under our single employer benefit plan and multiemployer benefit plans; the potential for additional asset impairment charges; our sensitivity to general economic conditions including inflation, tariff policy and changes in disposable income levels and consumer purchasing habits; our ability to timely and successfully deploy our warehouse management system throughout our distribution centers and our transportation management system across the Company and to achieve efficiencies and cost savings from these efforts; the potential for disruptions in our supply chain or our distribution capabilities from circumstances beyond our control, including due to lack of long-term contracts, severe weather, labor shortages or work stoppages or otherwise; moderated supplier promotional activity, including decreased forward buying opportunities; union-organizing activities that could cause labor relations difficulties and increased costs; our ability to maintain food quality and safety; and volatility in fuel costs. Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. The Company is not undertaking to update any information in the foregoing reports until the effective date of its future reports required by applicable laws. Any estimates of future results of operations are based on a number of assumptions, many of which are outside the Company’s control and should not be construed in any manner as a guarantee that such results will in fact occur. These estimates are subject to change and could differ materially from final reported results. The Company may from time to time update these publicly announced estimates, but it is not obligated to do so. Non-GAAP Financial Measures: To supplement the financial information presented on a U.S. generally accepted accounting principles (“GAAP”) basis, the Company has included in this press release the non-GAAP financial measures Adjusted EBITDA, adjusted earnings per diluted common share (“Adjusted EPS”), adjusted effective tax rate, free cash flow, net debt to Adjusted EBITDA leverage ratio and Capital and cloud implementation expenditures. Adjusted EBITDA is a consolidated measure which the Company reconciles by adding Net (loss) income including noncontrolling interests, less Net income attributable to noncontrolling interests, plus Non-operating income and expenses, including Net periodic benefit income, excluding service cost, Interest expense, net and Other (income) expense, net, plus (Benefit) provision for income taxes and Depreciation and amortization all calculated in accordance with GAAP, plus adjustments for Share-based compensation, non-cash LIFO charge or benefit, Restructuring, acquisition and integration related expenses, Goodwill impairment charges, Loss (gain) on sale of assets and other asset charges, certain legal charges and gains, and certain other non-cash charges or other items, as determined by management. Adjusted EPS is a consolidated measure, which the Company reconciles by adding Net income attributable to UNFI plus the LIFO charge or benefit, Goodwill impairment benefits and charges, Restructuring, acquisition, and integration related expenses, gains and losses on sales of assets, certain legal charges and gains, surplus property depreciation and interest expense, losses on debt extinguishment, the impact of diluted shares when GAAP earnings is presented as a loss and non-GAAP earnings represent income, and the tax impact of adjustments and the adjusted effective tax rate, which tax impact is calculated using the adjusted effective tax rate, and certain other non-cash charges or items, as determined by management. The adjusted effective tax rate is calculated based on adjusted net income before tax and excludes the potential impact of changes to uncertain tax positions, valuation allowances, tax impacts related to the vesting of share-based compensation awards and discrete GAAP tax items which could impact the comparability of the operational effective tax rate. Free cash flow is defined as net cash provided by operating activities less payments for capital expenditures. Net debt to Adjusted EBITDA leverage ratio is defined as the total carrying value of the Company’s outstanding short- and long-term debt and finance lease liabilities less net cash and cash equivalents, the sum of which is divided by the trailing four quarters Adjusted EBITDA. Capital and cloud implementation expenditures is defined as the sum of payments for capital expenditures and cloud technology implementation expenditures. The reconciliation of these non-GAAP financial measures to their comparable GAAP financial measures and the calculation of net debt to Adjusted EBITDA leverage are presented in the tables appearing below, where practicable. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for any measure prepared in accordance with GAAP. The Company believes that presenting Adjusted EBITDA and Adjusted EPS aids in making period-to-period comparisons, assessing the performance of the Company’s business and understanding the underlying operating performance and core business trends by excluding certain adjustments not expected to recur in the normal course of business or that are not meaningful indicators of actual and estimated operating performance. The Company believes that providing the adjusted effective tax rate gives investors a meaningful, consistent comparison of the Company’s effective tax rate on ongoing operations. The inclusion of free cash flow assists investors in understanding the cash generating ability of the Company separate from cash generated by the sale of assets. Net debt to Adjusted EBITDA leverage ratio is a commonly used metric that assists investors in understanding and evaluating the Company’s capital structure and changes to its capital structure over time. The Company believes that providing capital and cloud implementation expenditures provides investors with better visibility into the Company's total investment expenditures. The components of capital and cloud implementation expenditures for fiscal 2025 will be primarily dependent on the nature of certain contracts to be executed. Management utilizes and plans to utilize these non-GAAP financial measures to compare the Company’s operating performance during fiscal 2025 to the comparable periods in fiscal 2024 and to internally prepared projections. These non-GAAP financial measures may differ from similarly titled measures of other companies. More News From United Natural Foods, Inc.

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