Categories Analysis, Retail

United Natural Foods (UNFI): Here are three areas of strength for the food wholesaler

In the second quarter, ecommerce sales jumped 97% helped by new business and sales growth

Shares of United Natural Foods Inc. (NYSE: UNFI) have gained over 131% since the beginning of this year. The company reported year-over-year increases in both sales and earnings for the second quarter of 2021, with the bottom line surpassing estimates. The top line, however, fell short of expectations.

United Natural benefited from increased demand during the COVID-19 pandemic last year as people stocked up on groceries and food products and the company expects this demand to continue through the most part of 2021. There are three key areas where the company witnessed particular strength during its just-ended quarter:

Cross-selling

United Natural sees vast opportunity in cross-selling. In Q2, the company generated incremental sales of approx. $90 million from cross-selling. This brings its total revenue generated from this initiative since the Supervalu acquisition to around $500 million.

Looking ahead, the company believes cross-selling is capable of yielding $1 billion in revenue by the end of FY2022. United Natural believes there is a $140 billion addressable market, which includes $38 billion of upside opportunity from cross-selling and expansion of business with existing customers.

Ecommerce

Like its peers, UNFI has benefited from the rapid acceleration in ecommerce. In the second quarter, ecommerce sales jumped 97% helped by new business and sales growth. Strong growth in ecommerce helped UNFI offset the weakness in its foodservice business.

A large number of new customers have started using the company’s ecommerce platform since the onset of the pandemic and many more are in the pipeline. The company is planning to roll out a new platform called Community Marketplace which will provide customers with a broader assortment of items, flexible order sizes as well as the option to order from multiple sources.

New customer acquisition

During the second quarter, UNFI recorded a 7% growth in net sales versus the prior year. This was partly driven by revenue from new customers. The company has seen gains across all its categories including fresh, frozen, grocery and general merchandise.

On its quarterly conference call, UNFI said it benefited from changes in consumer behavior during the pandemic where people shifted their grocery purchasing to stores closer to home. The company’s portfolio and distribution footprint positions it well to serve its new and existing customers.

Looking ahead, UNFI expects the trend of working from home to continue in the near term and believes it will benefit from at-home food consumption in 2021. The company is investing in new product offerings and the expansion of its distribution network to provide better service to its customers and drive growth.

Click here to read the full transcript of United Natural Foods Q2 2021 earnings conference call

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