DAYVILLE, Conn. — Wholesaler United Natural Foods here expects only a “minor” sales impact as the result of the merger of its two largest customers, Whole Foods and Wild Oats.
“We believe that most of the consumers in the closed stores will begin shopping in other accounts that we service,” Michael Funk, chief executive officer, said in an earnings conference call, days after Whole Foods acquired its rival. Whole Foods is expected to sell off the Henry's and Sun Harvest divisions of Wild Oats to Smart & Final, Los Angeles. Those divisions comprised approximately 20% of the Wild Oats business, Funk said.
United will retain the Henry's business as Smart & Final's distributor for those stores, Funk said. He added he was unsure of what additional divestitures Whole Foods would make but said he expects that the Wild Oats stores the retailer retains will begin to see comparable-store sales increases within a year, helping to minimize the long-term sales impact of the merger.
Those expectations were “baked in” to United's forecast of 11% to 14% sales growth for fiscal 2008, Funk said, adding that the amount of divested Wild Oats stores could determine whether the wholesaler meets the high end or low end of those expectations. The fiscal year began in July.
The sales guidance also includes expectations that United can add new business during the year, Funk said. He said the company would be on the lookout for acquisitions both of branded goods for its private-label program and for distribution accounts that can grow its business particularly in the supermarket and food-service sectors.
“We will be opportunistic,” Funk said.
Capital expenses for the year are expected to be $50 million to $55 million, including costs for launching new distribution facilities in Sarasota, Fla., and Portland, Ore.
United Natural reported $2.75 billion in sales in fiscal 2007, a 13.2% gain. Sales in the fourth quarter improved 14% to $706.8 million, Funk added. Quarterly net income of $13.1 million, or 31 cents a share, improved 3.5% from the same period a year ago. Annual earnings of $50.2 million represented a 15.9% increase.