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United Natural Foods, Inc. (UNFI - Analyst Report) delivered fourth quarter fiscal 2012 earnings of 51 cents per share, in line with the Zacks Consensus Estimate. Reported earnings jumped 18.6% from prior-year earnings of 43 cents. The year-on-year upside was driven by improved operational efficiency.

Net sales for the quarter increased 16.0% year over year to $1.34 billion compared with $1.2 billion in the prior-year quarter. Net sales came in marginally ahead of the Zacks Consensus Estimate of $1.31 billion. The results were driven by continuous increase in demand for the company’s products.

Gross margin plummeted 137 basis points to 17.2% from the year-ago period, which was primarily the result of purchasing and logistics inefficiencies and continued shift in customer mix to lower-margin conventional supermarkets.

However, operating margin climbed 12 basis points to 3.2% in the reported quarter on the back of productivity initiatives taken up by the company and reduced operating expense as a percentage of sales.

Fiscal 2012 Details

Fiscal 2012 earnings of $1.94 per share surpassed the prior-year earnings of $1.68 by 15.5% on the back of improved operational efficiency.

Net sales for the quarter increased 15.6% year over year to $5.2 billion compared to $4.5 million in the prior year period. The results were driven by continuous demand for United Natural’s products and services.

Gross margin plummeted 72 basis points to 17.5% from the year-ago period, which was primarily the result of continued shift in customer mix.

However, operating income climbed 19% to $161.8 million in the reported quarter, on the back of productivity initiatives taken up by the company and reduced operating expense as a percentage of sales.

Guidance

Along with the fourth quarter results, United Natural also announced its guidance for fiscal 2013, ending August 3, 2013.

The company expects GAAP earnings per diluted share for fiscal 2013 to increase in the range of 15.1% to 20.4% over fiscal 2012 GAAP earnings per diluted share of $1.86. United Natural expects fiscal 2013 earnings to be in the range of approximately $2.14 to $2.24 per share.

The Company expects net sales to increase approximately 12.3% to 14.2% over fiscal 2012 and be in the range of $5.88 to $5.98 billion.

Capital expenditures incurred for fiscal 2013 are estimated to be in the range of $70 million to $80 million. 

Zacks Rank

The company, which competes with Nash Finch Company , currently holds a Zacks #2 Rank (short term Buy rating). On a long-term basis, we provide a Neutral recommendation on the stock.

United Natural carries and distributes more than 60,000 products to more than 23,000 customer locations throughout U.S. 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.

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