United Natural Foods, Inc. Announces Fiscal 2026 Second-Quarter Financial Results
United Natural Foods, Inc., one of North America’s largest publicly traded grocery wholesalers and a key distributor of natural, organic, and specialty foods, has released its financial results for the second quarter of fiscal year 2026. The reporting period covered 13 weeks ending January 31, 2026, and the company highlighted a mix of improved profitability, stronger operational efficiency, and increased free cash flow despite a modest decline in overall sales.
The quarter reflected the company’s ongoing efforts to refine its distribution network, streamline operations, and strengthen financial performance as it continues to pursue long-term growth in a rapidly evolving grocery retail landscape. Executives noted that strategic optimization initiatives and disciplined cost management helped offset revenue declines linked to earlier structural changes within the company’s logistics network.
Revenue Performance and Sales Trends
During the second quarter of fiscal 2026, UNFI generated net sales of approximately $7.9 billion, representing a 2.6% decline compared with the same quarter in fiscal 2025. According to the company, a significant factor in the year-over-year decrease was the impact of its ongoing network optimization program. These strategic actions accounted for nearly 500 basis points of the sales decline, meaning that without the restructuring efforts, revenue would have shown a stronger underlying performance.
A major contributor to the lower sales figure was the expected reduction in conventional product distribution following the company’s transition away from its distribution center in Allentown, Pennsylvania. That facility was exited earlier in fiscal 2026 as part of the broader effort to improve operational efficiency and align the distribution network with long-term demand trends.
While the transition reduced short-term revenue, company leadership emphasized that the optimization program is designed to strengthen the business by improving cost structure, enhancing service reliability, and supporting sustainable growth across the organization’s large addressable market.
Profitability and Gross Margin
Despite the slight revenue decline, UNFI demonstrated improved profitability metrics during the quarter. Gross profit reached $1.0 billion, representing a $26 million decrease, or 2.4% lower than the same period last year. However, the gross profit margin showed modest improvement.
The gross profit rate increased to 13.2% of net sales, compared with 13.1% in the second quarter of fiscal 2025. This improvement reflects the positive effects of several operational factors, including:
- Continued benefits from the company’s distribution network optimization efforts
- A more favorable customer mix
- Higher procurement gains, driven by improved sourcing strategies and supplier relationships
These advantages helped offset some pressure on margins that arose from lower gross margin performance within the company’s Retail segment.
Operating Expense Reductions
Another key highlight of the quarter was UNFI’s ability to reduce operating expenses while maintaining service performance and productivity.
Total operating expenses during the quarter were $972 million, equivalent to 12.2% of net sales. This compares with $1.03 billion, or 12.6% of net sales, in the second quarter of fiscal 2025.
The nearly 6% reduction in operating expenses was driven by multiple efficiency initiatives implemented across the company’s distribution network and internal operations. Key drivers included:
- Cost-saving programs introduced through network optimization initiatives
- Improvements in distribution center productivity
- Expanded use of lean operational processes
- Implementation of high-impact technology solutions
The combination of these measures reduced the company’s operating expense rate by approximately 40 basis points, demonstrating meaningful progress toward improving overall cost efficiency.
Earnings and EBITDA Growth
UNFI’s profitability gains were also reflected in its earnings and adjusted earnings metrics.
For the second quarter of fiscal 2026, the company reported net income of $20 million, marking a significant improvement compared with the $3 million net loss recorded in the second quarter of fiscal 2025.
Diluted earnings per share also improved accordingly. Net earnings per diluted share were $0.31, compared with a net loss per share of $0.05 during the same period last year.
Adjusted metrics showed even stronger performance. The company reported adjusted EBITDA of $179 million, representing a 23.4% increase compared with $145 million in the prior-year quarter.
Similarly, adjusted earnings per share rose to $0.62, up sharply from $0.22 in the second quarter of fiscal 2025. The strong growth in adjusted earnings reflects improvements in operational efficiency, disciplined expense management, and stronger underlying profitability across the company’s business segments.
Interest Expense and Tax Impact
UNFI also benefited from reduced financing costs during the quarter. Net interest expense totaled $32 million, compared with $38 million in the same period last year.
The reduction in interest costs was primarily due to lower average outstanding debt balances, reflecting the company’s efforts to strengthen its balance sheet and reduce leverage.
Meanwhile, the company reported an effective tax rate of 13.0% on pre-tax income, compared with a tax benefit rate of 60.0% on a pre-tax loss in the prior-year quarter. The change in tax treatment was largely driven by the shift from a loss position in fiscal 2025 to positive earnings in fiscal 2026.
Strong Cash Flow Generation
Cash generation was another bright spot in the company’s quarterly performance. Net cash provided by operating activities totaled $283 million, compared with $247 million in the second quarter of fiscal 2025.
The improvement was driven by both higher profitability and more efficient working capital management, demonstrating stronger financial discipline across the organization.
During the quarter, UNFI invested $40 million in capital expenditures, down from $54 million during the same period last year. The reduction primarily reflected the timing of large-scale capital projects, including investments in automation technologies.
After accounting for capital expenditures, the company generated free cash flow of $243 million, an increase from $193 million in the second quarter of fiscal 2025. This higher free cash flow provides additional flexibility for debt reduction, share repurchases, and strategic investments.
Debt Reduction and Balance Sheet Strength
UNFI made notable progress in improving its financial position during the quarter. Total outstanding debt, net of cash, stood at $1.68 billion at the end of the quarter.
This figure represents a $219 million reduction compared with the end of the first quarter of fiscal 2026, as well as a $368 million decrease compared with the same quarter last year.
As a result of these improvements, the company’s net leverage ratio declined to 2.7x, marking the lowest level recorded since fiscal 2023.
Management now expects the ratio to fall further to approximately 2.3x by the end of fiscal 2026, which would represent a stronger position than the company’s earlier target of no more than 2.5x by year-end.
Liquidity Position
The company also maintained a strong liquidity position. As of January 31, 2026, UNFI reported total liquidity of approximately $1.34 billion.
This consisted of $52 million in cash and approximately $1.29 billion in available borrowing capacity under the company’s asset-based lending facility. The robust liquidity level gives UNFI the ability to fund operations, invest in growth initiatives, and navigate market volatility.
Share Repurchase Activity
During the quarter, the company also returned capital to shareholders through its share repurchase program. UNFI repurchased 742,622 shares of its common stock at an average price of $33.66 per share, representing a total investment of approximately $25 million.
Share buybacks are part of the company’s broader capital allocation strategy, which focuses on strengthening the balance sheet while delivering value to investors.
Strategic Outlook and Leadership Commentary
Chief Executive Officer Sandy Douglas highlighted the company’s progress in executing its value creation strategy and strengthening financial performance.
Douglas noted that disciplined execution enabled UNFI to exceed internal expectations for profitability and free cash flow during the quarter. These gains have allowed the company to reinforce its balance sheet while improving financial flexibility.
He also emphasized the importance of UNFI’s addressable market, which the company estimates at approximately $90 billion. By focusing on serving independent and differentiated retailers, UNFI aims to support customers seeking growth opportunities in the competitive grocery marketplace.
Looking ahead, the CEO stated that the company’s pipeline of new business opportunities remains strong, providing confidence in future expansion.
Management also plans to continue improving operational efficiency through:
- Further distribution network optimization
- Expanded adoption of lean operational processes
- Deployment of advanced technology solutions
- Ongoing improvements in productivity and service performance
These initiatives are expected to help the company achieve its updated financial outlook while building stronger capabilities for long-term growth.
Positioning for Future Growth
Although sales declined modestly during the quarter due to strategic restructuring, UNFI’s results demonstrate progress in improving the overall quality of its earnings and financial position. The company’s combination of cost discipline, operational improvements, and stronger cash flow generation has created a more stable foundation for growth.
By continuing to streamline its network, invest in technology, and deepen relationships with suppliers and retailers, UNFI is positioning itself to capture opportunities in the growing natural and organic foods market.
With improving profitability metrics, declining leverage, and a solid liquidity base, the company believes it is well positioned to deliver sustainable value to its customers, suppliers, employees, and shareholders in the years ahead.
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