United Natural Foods Inc. (UNFI) delivered better-than-expected second quarter 2012 earnings of 45 cents per share, exceeding the Zacks Consensus Estimate by a penny. The earnings also surpassed the prior-year earnings by 6 cents.
Sales and Margins Details
Net sales for the quarter increased 15.5% year over year to $1.29 billion, exceeding the Zacks Consensus Estimate of $1.26 billion. Higher consumer demand for food and the addition of a new national customer credited the strong sales growth.
Gross margin plummeted 48 basis points to 17.3% from the year-ago period, which was primarily the result of continued shift in customer mix to the supermarket channel and higher inventory levels.
However, operating margin climbed 6 basis points to 2.9% in the reported quarter, on the back of productivity initiatives taken up by the company and reduced operating costs.
Guidance
Based on the second-quarter earnings and the current environment, United Natural expects an increase of about 12.8% to 14.1% in the total sales for fiscal 2012 to reach in the range of $5.1 billion to $5.2 billion. The sales guidance increased from the previous target of $5.0 billion to $5.1 billion.
In addition, the company expects its fiscal 2012 reported earnings guidance to shrink to a range of $1.79 – $1.86, compared with the guidance range of $1.75 – $1.87 per share provided previously. The guidance includes approximately $6.5 – $7.0 million operating expenses for fiscal 2012 related to the previously announced divestiture of conventional non-foods and general merchandise lines of business and the start-up expenses associated with the new national customer.
Excluding these expenses, United Natural expects its fiscal 2012 operating earnings to come in the range of approximately $1.88 – $1.94 per share, reflecting an increase of approximately 11.9% to 15.5% over fiscal 2011 operating earnings of $1.68 per share.
United Natural carries and distributes more than 60,000 products to more than 23,000 customer locations throughout the United States and Canada. The company also serves a wide variety of retail formats including conventional supermarket chains, natural product superstores, independent retail operators and the food service channel.
The company, which competes with Nash Finch Co. (NAFC), currently holds a Zacks #2 Rank that translates into a ‘Buy’ Rating. On a long-term basis, we provide a Neutral recommendation on the stock.
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