MW United Natural Foods' stock soars 23% as health-food supplier delivers a surprise adjusted profit

By Ciara Linnane

Company raises guidance and says its three-year strategic plan is already working

United Natural Foods Inc.'s stock soared 23% Tuesday after the health-food supplier delivered a surprise adjusted profit for its fiscal first quarter and sales that easily beat estimates.

The company, which supplies Amazon.com Inc.'s Whole Foods, among other businesses, posted a net loss of $21 million, or a loss of 35 cents a share, for the quarter to Nov. 2, narrower than the loss of $39 million, or 67 cents a share, posted in the year-earlier period.

Adjusted for one-time items, per-share earnings came to 16 cents, well ahead of the FactSet consensus for a loss of 2 cents.

Sales rose 4.2% to $7.871 billion from $7.552 billion, ahead of the $7.612 billion FactSet consensus.

The numbers mirrored the company's fiscal fourth-quarter earnings when it also produced a surprise adjusted profit and narrowed its loss, sending its stock up more than 20%.

Chief Executive Sandy Douglas said the solid start to fiscal 2025 "serves as an early proof point of our recently introduced multi-year strategic plan predicated upon bringing value to our customers and suppliers while enhancing our efficiency, improving free cash flow and reducing net leverage."

In October, United Natural Foods $(UNFI)$ unveiled a three-year strategic plan that includes $150 million of cost cuts, as well as a reframing of its total addressable market, or TAM, and a network-optimization program.

The company raised its fiscal 2025 guidance for all metrics, apart from capital and cloud implementation expenditures.

It now expects sales to range from $30.6 billion to $31.0 billion, up from prior guidance of $30.3 billion to $30.8 billion.

It expects its net loss per share to range from 45 cents to 5 cents, compared with prior guidance of 65 cents to 5 cents.

Adjusted earnings per share is expected to range from 40 cents to 80 cents, narrowing the range from prior guidance of 20 cents to 80 cents.

CFRA reiterated its hold opinion on the stock but raised its 12-month price target to $33 from $23.

"The one negative this quarter was on the gross margin line, which contracted about 50 basis points year-over-year and 20 basis points quarter-on-quarter, a disappointment considering the last few quarters showed some margin stability," analyst Arun Sundaram wrote in a note to clients.

"Shares are surging, but we prefer to remain at hold until [United Natural Foods] shows more consistency in its results," Sundaram said.

The stock has gained 87% in the year to date, while the S&P 500 SPX has gained 27%.

-Ciara Linnane

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December 10, 2024 13:53 ET (18:53 GMT)

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