United Natural Foods, Inc. Announces Q2 Fiscal 2025 Financial Results
United Natural Foods, Inc. (NYSE: UNFI) (the “Company” or “UNFI”) has released its financial results for the second quarter of fiscal 2025, covering the 13-week period ending February 1, 2025. The company demonstrated solid growth, improved financial performance, and continued execution of its strategic initiatives.
Second Quarter Fiscal 2025 Performance
Compared to the second quarter of fiscal 2024, UNFI reported:
- Net sales of $8.2 billion, marking a 4.9% increase.
- Net loss of $(3) million, with a loss per diluted share (EPS) of $(0.05).
- Adjusted EBITDA of $145 million, up 13.3%.
- Adjusted EPS increased to $0.22.
Recent Financial and Operational Highlights
- Outlook Raised: UNFI has raised its fiscal year 2025 outlook for all metrics except capital and cloud spending, marking the second consecutive quarter of improved guidance.
- Operational Efficiency: A focus on stakeholder value creation and lean management contributed to 13.3% Adjusted EBITDA growth and an approximately $77 million improvement in free cash flow compared to the prior year quarter.
- Strategic Execution: The company remains committed to its multi-year strategy aimed at strengthening partnerships and increasing value for customers and suppliers.
- Fort Wayne Distribution Center Closure: Completed in February as part of a broader effort to streamline operations.
- Product-Centered Realignment: UNFI is continuing its previously announced realignment to improve specialization and service customization.
- Deleveraging Progress: The company has made significant progress in reducing its debt, with a net debt to Adjusted EBITDA ratio declining to 3.7x, an improvement of 0.6x over the past 12 months.
CEO’s Perspective
Sandy Douglas, UNFI’s CEO, emphasized the company’s ongoing progress:
“During the second quarter, we delivered solid sales growth and our sixth consecutive quarter of sequentially improving Adjusted EBITDA. We also continued to execute against our multi-year strategic plan focused on creating sustainable value for our customers and suppliers while enhancing our profitability and free cash flow generation and reducing net leverage. Our continued positive volume trends serve as an indicator of the strength of our customer base and the unique role UNFI plays in the food distribution supply chain.”
Douglas also highlighted ongoing efforts to complete the product-focused realignment of the wholesale business, which is designed to offer more tailored service to customers and suppliers. Looking ahead to the second half of the fiscal year, UNFI remains committed to executing its strategy, identifying new opportunities for growth, and continuing to strengthen its financial position.
Financial Performance Details
Revenue and Gross Profit
- Net Sales: Increased 4.9% year-over-year, driven by a 3% rise in wholesale unit volumes, expansion of business with new and existing customers, and the impact of inflation. Growth was particularly strong in natural product categories.
- Gross Profit: Increased by $37 million (or 3.6%) to $1.1 billion compared to the second quarter of fiscal 2024.
- Gross Profit Rate: Declined slightly from 13.3% to 13.1%, primarily due to lower product margin rates and business mix changes, partially offset by supplier programs, lower shrink, and improved retail gross margin rates.
Operating Expenses and Profitability
- Operating Expenses: Totaled $1,031 million (or 12.6% of net sales), compared to $1,010 million (or 13.0% of net sales) in the second quarter of fiscal 2024.
- The decline in operating expenses as a percentage of net sales was driven by higher sales volume and cost-saving initiatives.
Interest Expense and Tax Rate
- Interest Expense: $38 million, down from $40 million in the prior-year period, reflecting lower average outstanding debt balances.
- Effective Tax Rate: A 60.0% benefit on pre-tax loss, compared to 26.3% in fiscal 2024. This increase was primarily due to higher discrete tax benefits from employee stock award vesting in the current quarter.
Net Income and Adjusted EBITDA
- Net Loss: Improved significantly to $(3) million, compared to $(15) million in the second quarter of fiscal 2024.
- EPS: Reported at $(0.05) per diluted share, compared to $(0.25) per diluted share in fiscal 2024.
- Adjusted EPS: Increased to $0.22, up from $0.07 in the prior-year quarter.
- Adjusted EBITDA: Grew to $145 million, marking a 13.3% year-over-year increase.
Capital Allocation and Financing Overview
Free Cash Flow
- Second Quarter Fiscal 2025 Free Cash Flow: $193 million, a significant increase from $116 million in the second quarter of fiscal 2024.
- Cash Flow Components:
- Net cash provided by operating activities: $247 million
- Capital expenditures: $54 million
Debt and Leverage
- Total Outstanding Debt (net of cash): $2.05 billion, a $182 million reduction compared to the end of the first quarter of fiscal 2025.
- Net Debt to Adjusted EBITDA Leverage Ratio: Improved to 3.7x, reflecting ongoing deleveraging efforts.
Liquidity
- Total Liquidity: Approximately $1.31 billion as of February 1, 2025, consisting of:
- $44 million in cash
- Approximately $1.27 billion in unused capacity under the asset-based lending facility
