DAYVILLE, Conn. -- United Natural Foods here said last week it implemented a per-stop fuel surcharge the last week of May to offset some of the higher delivery costs it anticipates in the next few months.
"If fuel prices stay at current levels, we feel this will have offset the increases we've seen over the last year," Steven Townsend, chairman, president and chief executive officer of the natural foods distributor, told analysts during a conference call to discuss financial results for the third quarter and nine months ended April 30.
Fuel and energy costs reduced earnings per share by approximately 1.4 cents during the quarter, compared to the year-ago period, he noted. Townsend said the surcharge is designed to offset future increases, not to recoup costs incurred during the first three quarters of the year.
As of last week, the company said it had not yet seen any competitive response, "but given the magnitude of the charge on a per-stop basis, it would not put us into an unfavorable position on a competitive basis," Rick Puckett, vice president and chief financial officer, pointed out.
Sales rose 19% to $534.3 million for the quarter and 24% to $1.5 billion for the year to date, while net income climbed 24.2% to $10.7 million for the quarter and 32.9% to $29.8 million for the nine months. Comparable wholesale revenue growth was 14.6% for the quarter.
The company raised its guidance on sales for the year ending July 31 to between $2 billion and $2.05 billion, up from the previous guidance of $1.9 billion to $2 billion.
In other conference call highlights:
- Puckett said Select Nutrition, the Unionville, N.Y.-based distributor of health and beauty care items and neutraceuticals acquired by United last December, contributed $12.8 million to sales for the quarter. Townsend said United expects to complete implementation of its own information technology system at Select Nutrition by the end of the current fiscal year. The acquisition will have a neutral to small positive impact on fourth-quarter earnings, he added.
"Until we get Select onto the UNF system and we can begin to make some of the process improvements, I expect it will be a break-even business," Townsend explained.
- Townsend said United expects to open a 300,000-square-foot distribution center in late July in Greenwood, Ind., to increase capacity in the region while enabling the company to better balance sales among facilities in New Oxford, Pa., Iowa City and Atlanta; and to consolidate two Northern California distribution centers into a single new 400,000-square-foot facility in Rockland, Calif., during the first quarter of 2006 to support anticipated sales growth within the region.
- Implementation of the Roadnet routing system to drive costs out of the supply chain could lead the company to seek out backhaul opportunities, Townsend said. "[Roadnet] mixes not only our deliveries but also our pickups from vendors, and as we get a better feel for the use of Roadnet and how it impacts our business, we can begin to tie in not only the delivery but also the backhaul part of it," he explained.
- Whole Foods Market represents approximately 26% of United's total sales and Wild Oats Markets represents 11%, Townsend noted.
3RD QUARTER RESULTS
Qtr Ended: 4/30/05; 4/30/04
Sales: $534.3 million; $448.9 million
Net Income: $10.7 million*; $8.6 million
Inc/Share: 26 cents; 21 cents
39 Weeks: 2005; 2004
Sales: $1.5 billion; $1.2 billion
Net Income: $29.8 million*; $22.4 million
Inc/Share: 72 cents; 55 cents
*Including certain labor costs associated with the closing of a facility in Mounds View, Minn., and the scheduled opening of a facility in Greenwood, Ind., in late July 2005.