United Natural Foods, Inc. Q4 FY2025 earnings call

• Progress on refresh strategy: Focused on adding value for customers and suppliers, including customized solutions, improved category merchandising, expanded digital and professional services, and a revamped commercial go-to-market program for suppliers.
• Becoming more effective and efficient: Network optimization with distribution center consolidations and expansions, cost efficiency through SG&A management and process streamlining, working capital improvement by reducing inventory days and improving fill rates, and lean management implementation in distribution centers to enhance performance metrics.
• Fiscal 2026 plans: Continue progress in network optimization, cost efficiency, and working capital management, focus on capability building and incremental initiatives to accelerate long-term profitable growth, and build a strategic road map for technology investments.

In the fourth quarter, Natural segment growth was 9% on a comparable 13-week basis. Conventional segment sales declined 6%. For full year 2025, net sales rose 4.6%, volumes grew 1.4%, inflation was about 1.8%, and a favorable mix shift accounted for the balance. The Natural segment outperformed the market, while the Conventional segment was affected by the lapping of a large new customer addition and the optimization transition out of Allentown.

• Fiscal 2026 sales expected to be in the range of $31.6 billion to $32 billion.
• Adjusted EBITDA expected to be in the range of $630 million to $700 million, representing a year-over-year increase of about 20%.
• Adjusted EPS range of $1.50 to $2.30 per share.
• Capital spending outlook around $250 million.
• Target to reduce net leverage to around 2.5x by end of fiscal 2026 and under 2x by end of fiscal 2027.

• Cyber incident impacted adjusted EBITDA in the fourth quarter of fiscal 2025. Actual results may differ materially from forward-looking statements due to significant risks and uncertainties discussed in the company's earnings release and SEC filings.

Q: Sandy, do you want to start with Natural merchandising initiatives, capabilities? Where do you see the biggest opportunity there?

A: I think of it as really 3 pieces depending on the customer segment. First, as you suggest, innovation is very important to Natural retailers who are positioned that way. And so a lot of the merchandising work we're doing there is to simplify the experience for emerging suppliers and to facilitate more innovation through multiple platforms to our customers. On the more conventionally positioned side, our Natural agenda is more about the road map to deepen their involvement in the categories. And depending on the region of the country and the development of the categories, we manage that specifically on a customer-by-customer basis. I think the punchline is that we think there's a significant opportunity for UNFI to help our customers merchandise their products and be more successful regardless of their positioning.

Q: So to start on your updated 3-year guidance, you're boosting your sales growth expectations to low single-digit range. And you talked a bit about the stronger-than-anticipated organic growth. Are you guys -- any shifts to how you're approaching planned customer attrition or any assumptions for new account growth going forward?

A: Our view is that as we migrate to our addressable market of $90 billion, we've done some optimization, particularly in the Conventional side, which has been a headwind to overall growth. But beyond that, inside the addressable market, we've seen solid growth in our customer file, both from a new customer and expanding categories with existing customer perspective. And I'd say the thing that's changed is the organic tailwind in natural organic and higher levels of customer file growth and customer retention. And our strategy on the whole for the various segments hasn't changed at all. We're just performing slightly better than we expected when we originally guided last year.