Shares of United Natural Foods Inc. closed down 26 percent Wednesday after the major food wholesale distributor reported fourth-quarter adjusted earnings that were below Wall Street expectations.
Based in Providence, R.I., the company (NYSE: UNFI) said adjusted earnings for the quarter ended Aug. 3 were $0.44 a share, missing analysts estimates by 10 cents.
Fourth quarter revenue was $6.4 billion, which was also below analysts estimates by about $10 million.
Gross margin for the fourth quarter was 12.8 percent of net sales compared to 14.5 percent in last year’s fourth quarter. The decrease in the gross margin rate was driven by the addition of Supervalu at a lower gross profit rate.
UNFI had closed on its acquisition of major food wholesaler SuperValu Inc. for $2.3 billion in October 2018.
Adjusted EBITDA for the fourth quarter was $165.5 million compared to $85.1 million for the same period last year, with the increase predominantly driven by the addition of Supervalu.
UNFI sells products in a variety of sales channels including conventional supermarkets, independent retailers, supernatural – which consists solely of Whole Foods Market, UNFI’s largest customer, and the channel “Other,” which includes foodservice, e-commerce and international customers outside of Canada, as well as sales to Amazon.com, which owns Whole Foods.
UNFI has been the primary distributor to Whole Foods for more than 20 years, and its distribution agreement with the organic and natural food grocery giant is not set to expire until 2025.
Sales to Whole Foods grew 19 percent in the fourth quarter to $1.2 billion. Fourth quarter sales in the “Other” channel grew 56 percent to $371 million.
Meanwhile, for the full fiscal year 2019, UNFI reported adjusted EPS of $2.08 on revenue of $21.4 billion. FY2019 sales to Whole Foods grew by 17 percent to $4.4 billion, and comprised 21 percent of UNFI’s total FY2019 net sales.
CEO Steve Spinner said during a conference call with analysts after the market closed Tuesday that “leveraging our pioneering strength in higher margin natural and organic products into our conventional customers is our focus.”
UNFI’s shares have a 52-week trading range between $6.75 and $30.29. The company has a market cap of $430.6 million and a P/E ratio of 2.89.
UNFI’s FY2020 guidance put EPS between $1.22 and $1.76 for the year, and full-year sales between $23.5 billion and $24.3 billion.