United Natural Reports In Line

United Natural Foods, Inc. (UNFI - Analyst Report) reported adjusted earnings of 43 cents per share in the fourth quarter of fiscal 2011, which were in line with the Zacks Consensus Estimate. However, it grew 7.5% year over year.

During the reported quarter, earnings in the fourth quarter of 2011 included the additional dilutive effect of the company's common stock offering completed in the first quarter of fiscal 2011.

However, the adjusted earnings exclude the pre-tax expenses of $6.3 million recognized in connection with the previously announced restructuring of the company's UNFI Specialty Distribution Services division ("UNFI Specialty"), which included the $5.8 million non-cash impairment charge related to the company's Harrison, Arkansas facility and other expenses incurred in connection with the divestiture of the company's general merchandise and conventional non-food lines of business.

Earnings per share declined 12.5% year over year to 35 cents in the fourth quarter of 2011, including restructuring expenses.

Adjusted earnings in fiscal year 2011 grew 7.0% year over year to $1.68 per share, lagging the Zacks Consensus Estimate of $1.69. However, earnings, including restructuring expenses, increased 1.9% to $1.60 per share.

Sales and Margins Details

Net sales for the quarter increased 17.2% year over year to $1.16 billion, exceeding the Zacks Consensus Estimate of $1.15 billion. Net sales climbed 20.6% to $4.53 billion over the prior fiscal year 2010, which also surpassed the Zacks Consensus Estimate of $4.52 billion.

Gross margin was consistent with the prior year quarter’s margin at 18.6%, which was primarily the result of higher fuel surcharge revenues in the current year quarter, partially offset by the continued shift in the United Natural Foods' customer mix. Operating margin increased 42 basis points (bps) to 3.1% in the fourth quarter of 2011, excluding restructuring expenses.

However, gross margin was 34 basis points lower than the comparable prior year period, at 18.2% in fiscal 2011. This was primarily due to the continued shift in customer mix, and start-up costs related to inventory issues and incremental freight and service costs incurred during the first half of fiscal 2011 in connection with the initial period of operations of the company's new Lancaster, Texas distribution facility, which costs were partially offset by higher fuel surcharge revenue. Excluding the restructuring expenses, operating margin was 3.0% in fiscal 2011.

Other Financial Details

The company exited the year with cash and cash equivalents of $16.9 million compared to $13.8 million in fiscal 2010. Long-term debt was $0.9 million at the end of the fiscal year 2011. Capital expenditure at the end of July 30, 2011 was $40.8 million, lower than $55.1 million at the end of July 31, 2010.

Guidance

Concurrent with the earnings release, management provided guidance for its first quarter and fiscal 2012 results. United Natural Foods expects net sales to grow in the range of $5.0 billion to $5.1 billion, representing an increase of approximately 10.4% to 12.6% compared with fiscal 2011.

For fiscal 2012, the company expects its GAAP earnings to increase approximately 9.4% to 16.9% over fiscal 2011 in the range of approximately $1.75 to $1.87 per share, as the company also expects United Natural Foods to incur approximately $4.5 million to $6.2 million in additional expenses associated with its previously announced restructuring of UNFI Specialty. The company also expects start-up expenses associated with the company's recently announced new national customer during fiscal 2012.

Excluding the restructuring expenses impact, United Natural Foods expects its adjusted earnings to lie in the range of approximately $1.83 to $1.93 per share in fiscal 2012, an increase of approximately 8.9% to 14.9% over fiscal 2011 earnings of $1.68.

For the first quarter of 2012, the company expects GAAP earnings to be in the range of 33 cents to 36 cents per share.  Excluding the restructuring impact in the first quarter of fiscal 2012 ending October 29, 2011, the company expects adjusted earnings to be in the range of 39 cents to 41 cents per share.

Capital expenditures are expected to be in the range of approximately 1% of revenues, or $47 million to $52 million during fiscal 2012.

United Natural Foods 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. However, it fears competition from Nash Finch Co. (NAFC - Analyst Report).

Read the full analyst report on NAFC

Read the full analyst report on UNFI