Dive Brief:

• United Natural Foods Inc. reported net sales of $2.34 billion in the fourth quarter of fiscal 2017, a 5.7% increase over the same period last year, according to a company release. On the year, UNFI reported $9.27 billion in net sales, up 9.5% from last year.
• UNFI’s revenue for the quarter totaled $38.9 million, up 12% from the same period last year, while revenue on the year reached $130.2 million, up 3.5% over 2016. 
• The wholesaler anticipates sales of $9.6 billion to $9.8 billion next year, an increase of 3.8% to 5.8%. “Our performance in fiscal 2017 demonstrated our steadfast focus on serving our customers and managing our business in a challenging and deflationary operating environment,” Steven L. Spinner, chairman and CEO of UNFI said in a statement. “We are optimistic about growth and the opportunities ahead of us, given the strength of our national supply chain as well as the breadth of our unique, better for you, fresh, organic and specialty product offerings.”

Dive Insight:

United Natural Foods’ strong results reflect some savvy acquisitions the company has recently made. Last year the wholesaler bought three companies that deepened its sourcing of high-margin fresh and specialty foods: Haddon House, Nor-Cal Produce and Gourmet Guru.

The company’s fresh focus should deliver returns in the months ahead, with the company predicting a bump in sales next year that would bring its sales to nearly $10 billion. However, questions linger about UNFI’s relationship with its biggest client, Whole Foods, in light of its acquisition by Amazon.

When the merger was first announced, UNFI shares plummeted 10%. Fears have cooled since then, and Amazon hasn’t made any changes to UNFI’s contract or indicated any future changes. In an earnings call with analysts yesterday, UNFI CEO Steven Spinner said Whole Foods remains committed to the purchasing minimums outlined in its contract with the wholesaler, which runs through September 2025.

"I am really excited about the opportunities I believe this combination brings to UNFI,” Spinner said.

Not everyone has such a rosy outlook. Ajay Jain, an analyst with Pivotal Research Group, believes that in its quest to cut costs and pass savings along to customers, Amazon will eventually look to direct sourcing from manufacturers — which would cut out UNFI.

"Over time, we would expect Amazon to streamline Whole Foods' existing supply chain,” Jain wrote in a research note. “This could very well include a higher percentage of goods sourced directly from manufacturers,"

UNFI has supplied Whole Foods for 19 years, and the specialty retailer makes up 35% of its wholesale business. Losing any of that business would be a major blow for the wholesaler. Could it happen? That’s hard to say at this point. For now, UNFI will continue with business as usual, driven by a revitalized Whole Foods.