After Slashing Profit Guidance, United Natural Foods Stock Slumps

March 8, 2023

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UNITED NATURAL FOODS, a food distributor, plunged over 23% in early trading on Wednesday after the company slashed its profit forecast for 2023 and declined to set long-term financial goals for the company.

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Earlier this week, the company (Ticker: UNFI), which sells organic and natural foods to retailers such as Whole Foods Market and other grocery stores, reported earnings for its fiscal second quarter that fell short of expectations.

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It is estimated that adjusted earnings per share declined by 43% year over year to 78 cents in the 13 weeks to January 28, below analysts' expectations of $1.45 a share. Sales grew 5% to $7.8 billion, which was a little bit ahead of expectations by a narrow margin. As a result of the deceleration in inflation as well as lower gains on inventory, the company's gross profit rate fell to 13.7% of net sales, from 14.5% in the same period last year, which the company said was a result of decelerating inflation and lower gains on inventory.

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“We struggled to achieve profits during the second quarter of the year as we were not able to maintain the significant level of procurement gains that we achieved from rapidly accelerating inflation and inventory gains, due to the volatility of the supply chain, that we had achieved in the second quarter of last year,” Sandy Douglas, CEO, said.

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Consequently, he explained that as a result, the company has reduced its profit expectations for 2023 and has withdrawn its target for fiscal 2024 entirely, as a result.

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For the fiscal year ending July 29, 2023, United Natural Foods UNFI -27.01 percent now expects adjusted earnings per share to range between $3.05 and $3.90 per share. This represents a 28% cut from its previous forecast for adjusted EPS of $4.85 to $5.15, and below Wall Street expectations for $5, according to FactSet data.

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As a result, the company is now expecting net sales of between $30.1 billion and $30.5 billion, an increase of 5% from the previous guidance.