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United Natural (UNFI) Strengthens Partnership With Whole Foods

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United Natural Foods, Inc. (UNFI - Free Report) is focused on meeting consumers’ growing need for healthy at-home food amid the pandemic. Evidently, the company extended its primary wholesale grocery distribution relationship with Whole Foods Market. Notably, Whole Foods Market — a renowned natural and organic foods retailer — is a wholly-owned subsidiary of Amazon (AMZN - Free Report) .

Per the deal, the term of the primary distribution agreement between United Natural and Whole Foods is now extended till Sep 27, 2027. Well, the company in association with Whole Foods is committed to providing "better for you" foods across North America amid the coronavirus outbreak.

What Else is Working Well for United Natural?

United Natural is committed toward certain strategic targets that include plans such as building and optimizing its distribution channel network, expanding brand portfolio and augment its e-commerce business among others. In this regard, the company is on track with consolidating its distribution centers and making investment toward automation to enhance operational savings. Also, United Natural is focused on growing higher margin private brands, e-commerce and Retail Solutions businesses.


 

Additionally, the company is on track with improving margins, cash flow and revenue streams. Further, it strives to develop effective sourcing processes so as to better align supplies with demand and meet consumers’ needs more efficiently.

The company has been undertaking various acquisitions over the years to expand its distribution network and customer base as well as boost long-term growth. In this regard, United Natural completed the buyout of SUPERVALU in October 2018. The enhanced scale of the combined entities is driving United Natural’s performance. Moreover, the merger provided better competing grounds to the company in the grocery space by augmenting offerings.

Wrapping Up

In first-quarter fiscal 2021, United Natural incurred higher operating cost of around $20 million. This was caused by coronavirus-induced hurdles as well as expenses related to new distribution channel productivity growth. We note that rise in operating costs related to the start up of three distribution centers affected the company’s adjusted operating income during the quarter.

Nevertheless, we believe that the aforementioned upsides along with the extension of distribution partnership with Whole Foods are likely to help this Zacks Rank #3 (Hold) company to stay firm. Notably, shares of United Natural have surged 64.1% in the past three months compared with the industry’s 1.2% growth.

Some Top Food Picks

The Hain Celestial (HAIN - Free Report) , currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 26.7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Darling Ingredients (DAR - Free Report) , a Zacks Rank #2 stock, has a trailing four-quarter earnings surprise of 20.7%, on average.

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