Dive Brief:
- United Natural Foods, Inc.’s net sales continued to dip, dropping 2.6% in its second quarter to $7.9 billion, the company reported Tuesday.
- UNFI’s natural product segment’s net sales remained in the green, growing 6.7% year-over-year, while its conventional and retail segments continued to decline.
- Despite the overall drop in net sales, UNFI said its Q2 results proved the ongoing success of its “value creation strategy,” as it delivered growth in profitability and free cash flow ahead of projections, CEO Sandy Douglas told investors.
Dive Insight:
UNFI updated its outlook for the year, lowering expectations for full-year sales to reflect the “optimization work that is ahead of schedule as well as some declaration in food retail sales trends,” CFO and President Matteo Tarditi said during the Tuesday morning earnings call.
“[W]e expect the cycling of larger optimization actions in Q1 2027 will allow our business to return to growth in fiscal 2027, and we remain confident in our longer-term expectations to deliver low single-digit average sales growth from fiscal 2026 through fiscal 2028,” Tarditi added.
Net sales for UNFI’s conventional and retail segments have been on a downward trend, and haven’t posted positive sales growth since fiscal year 2025’s third quarter.
UNFI anticipated its net sales would decrease in Q2 due to the closure of an Allentown, Pennsylvania, distribution center, which led to a decrease in conventional sales, according to a press release. The closure of this facility also negatively impacted the company’s Q1 net sales for that product segment.
UNFI’s operating expenses continue to decline, coming in at $972 million — 12.2% of net sales — compared to over $1 billion, or 12.6% of net sales, this time last year. The company increased distribution center productivity by over 6%.
“This performance reflects ongoing benefits from our effectiveness and efficiency initiatives, including multiple projects overseen by our value delivery office, network optimization, automation and incremental productivity gains from lean daily management as it continues to expand across our network,” Tarditi said.
UNFI is also continuing the rollout of Relex, an artificial intelligence cloud-based inventory system that can quickly detect demand, Douglas said. He noted that UNFI’s natural distribution centers have implemented the AI system and that the company aims to implement the system in all of its conventional product warehouses by the end of this year.
