United Natural Foods (UNFI) Q3 2024 earnings summary

Executive summary

• Q3 FY24 net sales were $7.5 billion, down 0.1% year-over-year, with a net loss of $21 million and EPS of $(0.34); adjusted EBITDA declined 18.2% to $130 million, and adjusted EPS dropped to $0.10.

• Gross profit for Q3 increased 2% to $1.02 billion, with gross margin rising to 13.6% from 13.3% year-over-year.

• Profitability improved sequentially for the third consecutive quarter, driven by cost reductions and supply chain efficiencies.

• The company extended its Whole Foods Market agreement through May 2032 and amended its term loan maturity to May 2031, enhancing capital structure flexibility.

• A multi-year strategic plan will launch in FY25, focusing on resource reallocation, high-margin services, and free cash flow growth.

Financial highlights

• Q3 sales were $7.5 billion, flat year-over-year, with improving volume trends and decelerating inflation.

• Gross margin rate (excluding LIFO) improved 30 bps sequentially, flat year-over-year; wholesale margin up 10 bps, retail margin down 100+ bps.

• Adjusted EBITDA for Q3 was $130 million, down from $159 million in Q3 2023; sequential improvement attributed to disciplined expense management.

• Free cash flow for Q3 FY24 was $49 million, reducing net debt by $30 million.

• Operating expenses rose to $992 million, mainly due to higher incentive compensation.

Outlook and guidance

• Fiscal 2024 Adjusted EBITDA guidance raised to $490–$520 million; capital and cloud investment outlook reduced to $370 million.

• Fiscal 2025 free cash flow expected to approach $100 million, with plans to reduce net debt and capital investments by ~$70 million.

• Multi-year plan targets net leverage reduction to 2.5x or less and ROIC increase to higher historical levels by FY27.

• FY24 net sales expected at $30.5–$31.0 billion; net loss guidance widened to $(109)–$(85) million.

• 53rd week expected to add ~$600 million in sales and $9 million in adjusted EBITDA.