DAYVILLE, Conn. — United Natural Foods Inc. here last week said expense controls and lower diesel-fuel costs helped drive profits up sharply in the fiscal third quarter, although sales in its core natural-and-organics business remained sluggish.
“While we were optimistic that current sales trends should improve, there has not been any meaningful evidence of change,” said Steven Spinner, president and chief executive officer, during a conference call with analysts.
The company said it planned to expand its distribution with additional SKUs during the next six months, especially in the perimeter of the store, to better service its independent customers.
“It's gourmet specialty cheeses; it's some conventional produce; it's some protein, which will initially be pre-sliced, antibiotic-free meats and cheeses,” Spinner said when asked about the new products. “[It's] foodservice items for those independents that have foodservice prep kitchens.”
The company also said it has been focused on expanding sales through its new specialty division, which recently began operating out of a new combined distribution facility in York, Pa.
Net income for the three-month period, which ended May 2, was up 29.2%, to $16.8 million, on sales of $889.5 million, an increase of 0.3%. Operating expenses as a percentage of sales decreased by 35 basis points in the quarter to 15.6%, vs. 15.9% in the third quarter of last year.
Net income through the first nine months was up 22.4%, to $43.65 million, on sales gains of 6%, to $2.6 billion, compared with year-ago levels.
The company said sales to the independent-store channel — the largest category of United's business with 42% of sales — rose 1.1% in the quarter. Sales to the super-natural channel increased by 4.7%, and now represent 33.4% of sales.
Andrew Wolf, an analyst with BB&T Capital Markets, noted that United's expenses as a percentage of sales were much better than he had projected, and that the company's operating margin of 3.42% was impressive.
“In our view, these results demonstrate the strength and resiliency of UNFI's high-variable-cost distribution model, and management's sharp execution during the period,” he said in a report.
Asked during the call about the fact that a major rival, Tree of Life, has been put up for sale by its Dutch parent company, Spinner said United Natural would “take a look” at the possibility of an acquisition, but declined to comment further.