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United Natural Foods, Inc. reports second quarter fiscal 2019 results

United Natural Foods, Inc., has reported financial results for the second quarter of fiscal 2019 ended January 26, 2019.

Second Quarter Fiscal 2019 Highlights

  • Net Sales Increased To $6.15 Billion, Including $3.47 Billion From SUPERVALU
  • Legacy UNFI Sales Increased 5.8%
  • Results Include $370.9 Million Non-Cash Goodwill Impairment Charge

“I’m pleased by the tremendous work and meaningful progress our team accomplished this quarter on the integration of SUPERVALU and the positioning of UNFI as the premier food distribution company in North America,” said Steven L. Spinner, Chairman and Chief Executive Officer.  “We know realizing all the benefits of this combination will take time, and we’re focused on executing against our plan for the long-term.  We experienced higher than anticipated costs, largely associated with our network realignment projects resulting primarily from SUPERVALU’s previous acquisitions, which we believe will be short-term in nature.  I’m confident we have the people and resources focused on this integration and remain optimistic about our drive towards operating as one company with the broadest product selection, services offering and scaled supply chain.”

Gross margin for the second quarter of fiscal 2019 was 12.39% of net sales and included an $8.6 million, or 0.14% of net sales, inventory fair value adjustment charge related to the acquisition of SUPERVALU. When excluding this charge, gross margin in the second quarter of fiscal 2019 was 12.53% of net sales compared to 14.70% of net sales for the second quarter of fiscal 2018.  The decline in the gross margin rate was driven by the addition of SUPERVALU at a lower gross profit rate as well as a shift in customer mix, including the faster growth of the supernatural channel relative to the other customer channels.

UNFI has elected to move onto the LIFO method of inventory valuation for certain product categories.  This, combined with a higher inflation assumption for the combined business, is expected to add an additional $10-$15 million in non-cash expense to fiscal 2019 results.

Operating expenses in the second quarter of fiscal 2019 were $751.9 million, or 12.23% of net sales, compared to $320.1 million, or 12.66% of net sales for the second quarter of fiscal 2018.  The decrease in operating expenses, as a percent of net sales, was driven by the benefit of acquisition synergies.

Restructuring, acquisition, and integration related expenses in the second quarter of fiscal 2019 were $47.1 million including certain charges related to the divestiture of retail banners.

To view the full financial release, click here.