UNITED NATURAL FOODS INC Q2 FY2025 earnings call

• Increasing value for customers and suppliers: Identified new areas to add value, including improving customer and supplier experience, expanding services for underserved customer groups, elevating merchandising capabilities, and investing in private brands. • Lean daily management: Extended to nine distribution centers, with reductions in shrink to the second lowest level in 10 quarters. • Network optimization: Consolidated Fort Wayne distribution center, Billings DC under contract for sale, and actively marketing other closed DCs. • Progress on multi-year plan: Adjusted EBITDA grew nearly 14% in the first half, free cash flow generation climbed nearly $250 million, and net leverage reduced to 3.7 turns.

Second quarter sales grew nearly 5% to $8.2 billion. The natural products business saw sales increase by over 8% compared to the prior year's second quarter, driven by higher sales and category penetration with existing customers. The conventional products business was up just over 2% due to new business wins and new customers. Retail business sales were down about 3% primarily from five store closures over the past 12 months. On an ID basis, same-store sales were down about 40 basis points, a sequential improvement from Q1.

• Net sales guidance: Range of $31.3 billion to $31.7 billion, a 3.6% full-year increase at midpoint. • Adjusted EBITDA: Range raised to $550 million to $580 million, more than an 11% increase over the last year at midpoint. • EPS and adjusted EPS: Expected to fall within $0.70 to $0.90 per share. • Full-year free cash flow: Expected to be at least $150 million, an increase from prior outlook.

• Forward-looking statements involve significant risks and uncertainties, as actual results may differ materially from forward-looking statements. Risks are discussed in the company's earnings release and SEC filings.

Q: On the wholesale realignment and its impact on customers and the biggest benefit, and clarification on natural and conventional products.

A: Sandy Douglas explained that the wholesale business is aligned into two product center divisions for focused product expertise. Natural products are represented by natural people, and conventional by conventional people, with transversal across customers.

Q: Regarding the closure of the Fort Wayne DC, impact on OpEx and learnings.

A: Matteo Tarditi said there's a step down in depreciation expense, and the customer experience was a top priority during closure.

Q: On whether the two assets (SUPERVALU and UNFI) belong together over time.

A: Sandy Douglas stated scale is good where it's good and specialization where it's good, with synergy in supply chain and IT.

Q: Changes in core sales growth for conventional excluding wins.

A: Matteo Tarditi said conventional was roughly flat in volume but outpaced many conventional peers.

Q: Impact of consumer sentiment changes on end customer behavior.

A: Sandy Douglas said no significant change seen yet.

Q: Exposure to imports and pass-through of tariffs.

A: Sandy Douglas said teams are agile, and it's early to tell on food at home vs away from home.

Q: Lean daily management in nine DCs and productivity trends.

A: Matteo Tarditi said expectations are mid-single-digit plus productivity gains, with timing being a factor for newer implementations.

Q: Demand for natural and organic by conventional retailers.

A: Sandy Douglas said there's still a significant cross-selling opportunity with broad consumer trend towards better-for-you products.

Q: Magnitude of new customer additions starting to cycle.

A: Matteo Tarditi discussed second half growth considerations and Sandy Douglas added the pipeline is strong across the addressable market.