UNFI Sales Rise in 1Q11

PROVIDENCE, R.I.United Natural Foods Inc. (NASDAQ: UNFI) reported its financial results for the first quarter of 2011 (1Q11), ended Oct. 30, 2010. Net income for the quarter rose 12 percent compared to 1Q10, hitting $17.4 million or $0.39 per diluted share. Net sales for 1Q11 were up even more, rising 19 percent, or $168.2 million, to $1.053 billion; it is the first time UNFI has achieved more than $1 billion in net sales during a quarter. The figures include the impact of sales related to the companys June 2010 Canadian acquisition and its October 2010 acquisition of certain inventory and distribution assets of Whole Foods Market Inc.

"The operating results for our fiscal 2011 first quarter reflect the sales strength we continue to achieve across our distribution channels," said Steven Spinner, president and CEO. "In addition, we closed on our previously announced transaction with Whole Foods Market in October and began to serve Whole Foods Market as their primary grocery distributor in both their Rocky Mountain and Southwest regions."

Gross margin was 18.3 percent for 1Q11, which represents a 33 basis point decline from the gross margin of 18.6 percent for 1Q10. The lower gross margin compared to the prior year was largely due to start-up costs as well as unanticipated expenses associated with inventory issues and incremental freight and service costs incurred as UNFI experienced operating challenges during the initial period of operations of its new distribution facility in Lancaster, Texas. The gross margin was also negatively affected by the continued shift in the mix of sales by channel.

Operating expenses as a percentage of net sales decreased to 15.4 percent for 1Q11, a decrease of approximately 0.1 percent compared to the fiscal 2010 first quarter ended Oct. 31, 2009. Operating expenses increased by $25.3 million, or 18.4 percent, to $162.7 million, compared to 1Q10, which had operating expenses of $137.4 million. The estimated non-recurring costs related to the initial period of operations of UNFIs Lancaster, Texas facility, including both planned start-up expenses as well as additional unanticipated costs, aggregated approximately $3.8 million.

"During the quarter, we successfully on-boarded all of our previously announced new specialty and organic business," Spinner said. "In addition, UNFI Canada is progressing positively against our anticipated results, and sales trends across all channels continue to improve. We also remain committed to the continued implementation of UNFI's supply chain technology, which began during the quarter in Lancaster, Texas."

Based on the performance during the first three months of this fiscal period, UNFI is confirming net sales guidance for fiscal 2011, ending July 30, 2011, in the range of $4.35 billion to $4.45 billion, which is a 15.8 percent to 18.4 percent increase in total net sales over fiscal 2010.