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United Natural Beats Earnings; Gives FY14 View


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Specialty foods distributor, United Natural Foods, Inc. (UNFI - Analyst Report) delivered fourth quarter fiscal 2013 earnings of 65 cents per share, which beat the Zacks Consensus Estimate of 60 cents by 8.3%. Earnings surged 27.5% year on year from 51 cents, driven by solid top-line growth and improved gross margin.

Revenue and Margin Details

Net sales for the quarter increased 22.2% year over year to $1.64 billion compared with $1.34 billion in the prior-year quarter. Net sales marginally beat the Zacks Consensus Estimate of $1.63 billion. The results were driven by continuous increase in demand for the company’s organic and natural food products and one additional week in the fourth quarter. Excluding that additional week, sales improved 13.4% on a year-over-year basis.

Gross margin improved 11 basis points to 17.3% from the year-ago period, primarily due to improvements in purchasing and logistics efficiencies. The improvements more than offset the negative impact of the shift in customer mix to lower-margin conventional supermarkets, which has been affecting the company’s gross margins over the past several quarters.

The company’s productivity initiatives helped reduce operating expense ratio in the fourth quarter. As a result, operating income margin increased 22 basis points to 3.4% in the reported quarter.

Fiscal 2013 Results

In fiscal 2013, United Natural posted adjusted earnings of $2.20 per share, which increased 13.4% year on year from $1.94 per share and beat the Zacks Consensus Estimate of $2.16 by 1.9%. The increase in earnings was driven by top-line growth.

Net sales also climbed 15.8% year over year to $6.06 billion compared with $1.34 billion in the prior-year quarter. Net sales beat the Zacks Consensus Estimate of $6.05 billion. Excluding the additional week in the fourth quarter, sales improved 13.6% on a year-over-year basis.

Gross margin however declined 59 basis points from the year-ago period to 16.9%, primarily due to increased freight expenses as well as higher cost of maintenance of stocks. The company’s margins also suffered due to the shift in customer mix to lower-margin conventional supermarkets. Operating margin increased 10 basis points to 3.1% in fiscal 2013, owing to reduced operating expenses.


United Natural provided earnings and sales guidance for fiscal 2014. The company expects net sales in the range of approximately $6.65 to $6.78 billion, an increase of approximately 11.8% to 14.0% over fiscal 2013 (excluding the additional week). The company also expects reported earnings for fiscal 2014 in the range of approximately $2.40 to $2.50 per share, an increase of approximately 10.1% to 14.7% over fiscal 2013 reported earnings of $2.18 per share.

United Natural currently holds a Zacks Rank #2 (Buy). Other stocks in the food industry worth considering are Green Mountain Coffee Roasters, Inc (GMCR - Analyst Report), Dole Food Co. Inc. and Pinnacle Foods Inc (PF - Snapshot Report). While Green Mountain holds a Zacks Rank #1 (Strong Buy), Dole Food and Pinnacle Foods hold a Zacks Rank #2 (Buy).

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