Growing consumer preference for organic and natural food products has directed investor’s attention on companies such as United Natural Foods, Inc. (UNFI - Free Report) . Notably, the company has been riding on robust consumer demand across its sales channels along with sturdy growth initiatives. Courtesy of these factors, shares of this leading distributor of specialty food products have surged close to 27.9% in the past six months, comfortably outperforming the industry’’s rally of 4.6%.
So, let’s delve deeper into United Natural Foods’ strategic endeavors and see if there’s more room for growth for this Zacks Rank #2 (Buy) stock.
Expanding E-commerce Capabilities
United Natural has been actively responding to consumers’ rising preference for online shopping. To this end, the company strives to strengthen e-commerce space by investing in technology and infrastructure. Owing to such efforts, e-commerce sales jumped more than 30% in the first quarter of fiscal 2018, wherein the food service e-commerce sales recorded highest quarter of year-over-year growth. Further, United Natural’s efforts to expand online operations have encouraged management to project robust opportunities in this space in fiscal 2018.
Efforts to Widen Network and Portfolio
United Natural has been carrying out various acquisitions over the years to enhance brand portfolio, distribution network and customer base and boost long-term growth. In this regard, buyouts of Haddon House and Gourmet Guru in 2016 have proved to be lucrative, as they have been driving top-line growth. The Gourmet Guru deal helped the company in finding and cultivating emerging fresh and organic brands. It also expanded United Natural’s presence in key urban markets. The acquisition of Haddon House provided greater operating scale and resources to augment product and service offerings.
Other notable buyouts include Nor-Cal Produce, Inc (in 2016), Tony’s Fine Foods (in 2014) and Trudeau Distributing Company (in 2013). Further, we believe that United Natural will continue boosting portfolio and business reach through such strategic acquisitions.
Focus on Organic food products
United Natural commands a strong line-up of organic and specialty food products in the United States and Canada. In the face of rising demand in the specialty foods market, the company has accelerated distribution of specialty food items including ethnic, kosher and gourmet products and have expanded into a number of high-growth business markets. This has not only allowed the company to capture market share but also provided an opportunity to conduct business with a number of conventional supermarkets.
Driven by the aforementioned strategic efforts, United Natural delivered a stellar start to fiscal 2018, wherein top and bottom lines improved year over year and surpassed estimates. During the first-quarter conference call, management stated that it continued to witness record sales and shipping unit volumes in the second quarter. For fiscal 2018, management continues to be committed toward achieving core strategic objectives, including plans to enhance customer base, improve gross margin and broaden distribution channel by adding new products and businesses.
Encouraged by these factors, management also raised its previously issued sales and earnings view for fiscal 2018. United Natural expects net sales for fiscal 2018 to grow in the range of 6.2-7.8%, while earnings are expected to increase in the range of 6.3-9.4%.
All said, the company is likely to continue with its sturdy performance and be in investors’ good books.
Do Consumer Staples Stocks Interest You? Check These
Investors interested in the same sector may also consider stocks such as Estee Lauder Companies Inc (EL - Free Report) , Kimberly-Clark Corporation (KMB - Free Report) and Church & Dwight Company Inc. (CHD - Free Report) , all carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Estee Lauder came up with an average positive earnings surprise of 18% in the trailing four quarters. It has a long-term earnings growth rate of 12.5%.
Kimberly-Clark pulled off an average positive earnings surprise of 2% in the trailing four quarters. Also, it has a long-term earnings growth rate of 6.2%.
Church & Dwight delivered an average positive earnings surprise of 6.8% in the trailing four quarters. It has a long-term earnings growth rate of 8.9%.
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