DAYVILLE, Conn. — United Natural Foods Inc. here last week said the Millbrook specialty-foods business was still a drag on earnings in the first quarter, but the company expects the year-old acquisition to begin paying off soon.
Net income for the quarter, which ended Nov. 1, was down abut 3%, to $13.2 million, but would have been up about 8.1%, to $14.7 million, excluding the impact from Millbrook.
Steven Spinner, who recently stepped in as president and chief executive officer, UNFI, said the company sees the combined specialty and organic and natural business as “one of the most significant opportunities” the company has for growth, particularly with conventional supermarkets and mass marketers.
“That is where we are putting a lot of effort, to significantly grow our share in those categories of customers,” he said. “We feel pretty optimistic that we're doing a great job with the customer base that we have, and we're talking to a lot of customers on the natural organic side about adding specialty to our mix as well as taking on new customers that are not currently with UNFI.”
He said the company expects to open its first “fully integrated” distribution center carrying both specialty and organic and natural product in York, Pa., in April, and follow that with integration of the technology at the Sarasota, Fla., depot. The goal is to integrate all of the specialty DCs within 18 months, Spinner said.
In the quarter, the company said most of its sales growth came from traditional supermarkets and independents. Total sales were up 17.4%, to $864.2 million, including an 11.5% gain in sales to conventional supermarkets and a 56.2% gain to independents.
Greg Badishkanian, an analyst with Citigroup, New York, said the results were better than expected, especially given the weakening performance of Whole Foods Market, a significant customer of United Natural.
“Sales were encouraging, given the tough consumer environment and soft comps at Whole Foods,” he wrote in a research report.
The earnings per share total of 31 cents — beating analysts' estimates by a penny — also was encouraging.
Inflation for the quarter was 7.48%, primarily driven by increases in bulk grains, pasta, and dairy and perishables, the company said, adding that it expects inflation to abate in the coming quarters.