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Transformation Aids United Natural (UNFI), Drab Volumes Hurt
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United Natural Foods, Inc. (UNFI - Free Report) embarked on a comprehensive transformation journey that involves several strategic elements. The company is making progress in managing shrink and improving supply chains amid a challenging industry backdrop. Strength in the e-commerce business is also an upside.
Let’s delve deeper.
Transformation Efforts on Track
United Natural is on track to transform and realize the total value of its platform. As part of this process, the company is rapidly implementing near term value-creation initiatives that are expected to contribute significantly to its operating efficiencies. In this regard, the company actioned $150 million in run-rate savings.
During fiscal 2024, the company expects to incur nearly $400 million in capital and cloud implementation, which includes investments in transformation plans, with significant spending on network optimization and automation. The upgrade in the technology infrastructure is likely to drive higher efficiency. Management is on track with the automation project at the Centralia Distribution Center, which is expected to go live at the end of the fiscal 2024. United Natural is progressing with the realignment and optimization of the Northeastern Distribution Network. These investments are likely to drive operational savings, increase fulfillment accuracy and generate increased capacity.
Image Source: Zacks Investment Research
Enhancing Supply Chain
United Natural is on track to improve its supply chain processes and management disciplines to fuel growth. In this regard, the company is achieving a major reduction in shrink, which is positively impacting its financial performance and operational efficiency. In the second quarter of fiscal 2024, net shrink, as a percentage of sales, declined year over year and sequentially from the fiscal first quarter. The company is also improving its commercial go-to-market programs to enhance supplier connections.
E-commerce Strength
United Natural’s sales are benefiting from e-commerce strength, thanks to increased e-commerce solutions offered by the company. Several of the company’s Independents and Chains channels provide e-commerce solutions to their customers. Further, United Natural offers digital platforms and the support its customers need. In this regard, the company’s latest value-added supplier program, UNFI Insights, bodes well. Earlier, the company launched Community Marketplace — a business-to-business digital e-commerce solution. The platform is designed for emerging brands, which helps the company expand distribution with customers.
What’s Hurting United Natural?
United Natural is operating in a volatile environment, with consumers buying less to manage their budgets and shifting away from traditional grocery stores. The company’s second-quarter fiscal 2024 net sales inched down 0.5% due to lower unit volumes. Moreover, management anticipates a more prolonged recovery for volume.
The company is bearing the brunt of weakness in the Retail business, which continued in the fiscal second quarter. Retail segment sales fell 4.4%, thanks to challenges posed by the broader macroeconomic and industry environment, reflecting a significant decline in government assistance.
That being said, the company’s upsides mentioned are likely to keep offering respite. Shares of this Zacks Rank #3 (Hold) company have lost 29% in the past three months against the industry’s growth of 4.5%.
The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal year sales and earnings suggests growth of 8.7% and 4.7%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter average earnings surprise of 155.4%.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 18.6% and 35.6%, respectively, from the year-ago reported numbers.
Utz Brands Inc. (UTZ - Free Report) manufactures a diverse portfolio of salty snacks, currently carrying a Zacks Rank #2. UTZ has a trailing four-quarter earnings surprise of 2.6% on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year earnings suggests growth of 15.8% from the year-ago reported numbers.
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Transformation Aids United Natural (UNFI), Drab Volumes Hurt
United Natural Foods, Inc. (UNFI - Free Report) embarked on a comprehensive transformation journey that involves several strategic elements. The company is making progress in managing shrink and improving supply chains amid a challenging industry backdrop. Strength in the e-commerce business is also an upside.
Let’s delve deeper.
Transformation Efforts on Track
United Natural is on track to transform and realize the total value of its platform. As part of this process, the company is rapidly implementing near term value-creation initiatives that are expected to contribute significantly to its operating efficiencies. In this regard, the company actioned $150 million in run-rate savings.
During fiscal 2024, the company expects to incur nearly $400 million in capital and cloud implementation, which includes investments in transformation plans, with significant spending on network optimization and automation. The upgrade in the technology infrastructure is likely to drive higher efficiency. Management is on track with the automation project at the Centralia Distribution Center, which is expected to go live at the end of the fiscal 2024. United Natural is progressing with the realignment and optimization of the Northeastern Distribution Network. These investments are likely to drive operational savings, increase fulfillment accuracy and generate increased capacity.
Image Source: Zacks Investment Research
Enhancing Supply Chain
United Natural is on track to improve its supply chain processes and management disciplines to fuel growth. In this regard, the company is achieving a major reduction in shrink, which is positively impacting its financial performance and operational efficiency. In the second quarter of fiscal 2024, net shrink, as a percentage of sales, declined year over year and sequentially from the fiscal first quarter. The company is also improving its commercial go-to-market programs to enhance supplier connections.
E-commerce Strength
United Natural’s sales are benefiting from e-commerce strength, thanks to increased e-commerce solutions offered by the company. Several of the company’s Independents and Chains channels provide e-commerce solutions to their customers. Further, United Natural offers digital platforms and the support its customers need. In this regard, the company’s latest value-added supplier program, UNFI Insights, bodes well. Earlier, the company launched Community Marketplace — a business-to-business digital e-commerce solution. The platform is designed for emerging brands, which helps the company expand distribution with customers.
What’s Hurting United Natural?
United Natural is operating in a volatile environment, with consumers buying less to manage their budgets and shifting away from traditional grocery stores. The company’s second-quarter fiscal 2024 net sales inched down 0.5% due to lower unit volumes. Moreover, management anticipates a more prolonged recovery for volume.
The company is bearing the brunt of weakness in the Retail business, which continued in the fiscal second quarter. Retail segment sales fell 4.4%, thanks to challenges posed by the broader macroeconomic and industry environment, reflecting a significant decline in government assistance.
That being said, the company’s upsides mentioned are likely to keep offering respite. Shares of this Zacks Rank #3 (Hold) company have lost 29% in the past three months against the industry’s growth of 4.5%.
Other Solid Food Bets
The Chef’s Warehouse (CHEF - Free Report) , which engages in the distribution of specialty food products, currently carries a Zacks Rank #2 (Buy). CHEF has a trailing four-quarter earnings surprise of 3.2%, on average. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal year sales and earnings suggests growth of 8.7% and 4.7%, respectively, from the year-ago reported numbers.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter average earnings surprise of 155.4%.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 18.6% and 35.6%, respectively, from the year-ago reported numbers.
Utz Brands Inc. (UTZ - Free Report) manufactures a diverse portfolio of salty snacks, currently carrying a Zacks Rank #2. UTZ has a trailing four-quarter earnings surprise of 2.6% on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year earnings suggests growth of 15.8% from the year-ago reported numbers.