DAYVILLE, Conn. — United Natural Foods here said it has struggled with the integration of Millbrook Distribution, the specialty-foods purveyor it acquired last year.
In a conference call with analysts discussing its second fiscal quarter, United said it would take longer than the company had anticipated to realize the benefits of Millbrook.
“We had originally forecasted being able to restore historical gross margins at Millbrook, as well as reduce some initial overhead, to be neutral to our earnings within the first four to five months,” said Michael Funk, president and chief executive officer, United Natural, in the earnings call. “We now believe it will take another two quarters to establish the purchasing efficiencies and the leverage synergies with [United's] purchasing, transportation and operation department to fully reach this goal.”
The company also reported some delays in achieving efficiencies from its newest distribution centers and said that infrastructure costs in its private-label division have ramped up faster than revenue growth as it seeks out small acquisitions to add to its portfolio of product offerings.
United reduced its per-share earnings guidance for the year by 18 to 20 cents, to $1.12-$1.24, for the full fiscal year, and investors sent the company's stock down sharply in the wake of the report.
Andrew Wolf, an analyst for BB&T Capital Markets, Richmond, Va., said he expects it will take a few quarters for United to recover.
“I think they realized they had miscalculated a few things, and maybe they found that Millbrook will take a little longer to get it to where they need it to be,” he said.
United, which supplies natural and organic product to Whole Foods Market, independent natural foods stores and traditional supermarkets, acquired Millbrook last year to augment its offerings with more specialty and ethnic products.
Net income for the second quarter, which ended Jan. 26, fell 16.5%, to $9.1 million, on a sales increase of 24.2%, to $830.7 million. Through the first six months, net income slid 2.8%, to $22.7 million, on a sales increase of about 19%, to $1.57 billion.