United Natural Foods (NYSE: UNFI) reported a 10% increase in earnings for the third quarter of 2019 helped by the benefit from the goodwill impairment charge adjustment and the contribution from Supervalu. The bottom line exceeded analysts’ expectations while the top line missed consensus estimates. The company narrowed its loss outlook for the full year.
Net income increased by 10% to $57.1 million and earnings grew by 10% to $1.12 per share. However, adjusted earnings plunged by 41% to $0.61 per share, reflecting higher interest expense and lower operating income, offset in part by net income from discontinued operations.
Net sales soared by 125% to $5.96 billion, including $3.24 billion from Supervalu. By customer channel-wise, net sales from Supernatural increased by 11.1% and that from Independents grew by 20.2%. Supermarkets sales soared by 420.6% and other sales rose by 36.5%.
For fiscal 2019, the company narrowed its net loss guidance to the range of $5.85 to $5.65 per share from the previous estimates range of $6.50 to $6.10 per share. This reflected the $38.3 million benefit from the goodwill impairment charge adjustment, and $10 million in expected higher restructuring, acquisition, and integration related expenses. Adjusted EBITDA is now predicted to be closer to the low end of the previous forecast range of $580 million to $610 million.
For the third quarter, gross margin declined to 13.22% from 15.41% in the previous year quarter. The largest driver of the decline in the gross margin rate was the addition of Supervalu at a lower gross profit rate. In addition, last year’s gross margin rate included the positive impact of a change in estimate of $20.9 million, which resulted from the company revising its calculation for its accrual for inventory purchases.
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During the third quarter, debt reduction was $21 million compared to the second quarter and was the result of the application of cash from operations and the proceeds from asset sales net of capital expenditures.
In the previous second-quarter, the food distributor reported better-than-expected earnings and sales driven primarily by Supervalu purchase. On a GAAP basis, the company recorded a loss compared to a profit a year ago, due to goodwill and asset impairment charges as well as restructuring expenses.
Shares of United Natural Foods ended Wednesday’s regular session down 1.73% at $10.23 on the NYSE. Following the earnings release, the stock inched up over 1% in the after-market session.
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