Executive Summary

Q2 FY2025 delivered steady top-line growth and better profitability: net sales rose 4.9% to $8.16B, Adjusted EBITDA grew 13.3% to $145M, and Adjusted EPS improved to $0.22, while GAAP EPS was $(0.05) .
Mix and efficiency were the story: natural products grew 8.2%, wholesale unit volumes rose ~3%, gross margin rate eased 20 bps YoY to 13.1% on mix and strategic investments, but OpEx leveraged 40 bps to 12.6% of sales, lifting EBITDA and cash generation .
Deleveraging accelerated: free cash flow was $193M in the quarter; net debt/EBITDA fell to 3.7x, the lowest since fiscal 2020, with liquidity of ~$1.31B and net debt of ~$2.05B .
Guidance raised again: FY25 outlook increased for net sales ($31.3–$31.7B), Adjusted EBITDA ($550–$580M), Adjusted EPS ($0.70–$0.90), and free cash flow (> $150M), reflecting execution momentum and higher customer retention amid network optimization .
Potential stock catalysts: continued margin rate expansion in 2H, deleveraging progress, network optimization benefits (Fort Wayne DC closure completed), and the wholesale realignment into two product-centered divisions to sharpen commercial execution .

What Went Well and What Went Wrong

What Went Well
- Natural product-led growth: Natural sales up 8.2% YoY; wholesale unit volume +~3% YoY, with positive volume trends cited as validation of UNFI’s role and customer strength .
- Operating leverage and lean execution: OpEx improved 40 bps to 12.6% of sales; lean daily management rolled out to 9 DCs with early low single-digit productivity gains and lower shrink, supporting EBITDA growth .
- Cash flow and balance sheet: Free cash flow of $193M (up ~$77M YoY); net leverage down to 3.7x; ~$1.31B liquidity .
What Went Wrong
- Gross margin rate pressure: Consolidated gross margin declined 20 bps YoY to 13.1% on lower wholesale margin rate and mix, partially offset by supplier programs, lower shrink, and higher retail GM rate .
- Retail softness: Retail net sales fell 3.3% YoY on 5 store closures; same-store sales were down ~40 bps though sequentially improved vs Q1 .
- Ongoing transformation costs: Restructuring and business transformation expenses persisted (e.g., $9M restructuring, $8M transformation costs), and strategic investments in commercial initiatives pressured wholesale margin rate by ~10 bps YoY .

Financial Results

Headline comparisons (oldest → newest)

Metric	Q2 FY2024	Q1 FY2025	Q2 FY2025
Net Sales ($USD Billions)	$7.775	$7.871	$8.158
GAAP Diluted EPS ($)	$(0.25)	$(0.35)	$(0.05)
Adjusted EPS ($)	$0.07	$0.16	$0.22
Gross Profit ($USD Billions)	$1.035	$1.038	$1.072
Gross Margin %	13.3%	13.2%	13.1%
Operating Expenses ($USD Billions)	$1.010	$1.015	$1.031
OpEx % of Sales	13.0%	12.9%	12.6%
Adjusted EBITDA ($USD Millions)	$128	$134	$145
Free Cash Flow ($USD Millions)	$116	$(159)	$193
Interest Expense, net ($USD Millions)	$40	$36	$38
Net Debt / Adjusted EBITDA (x)	4.3x	4.2x	3.7x

Segment revenue breakdown (updated categorizations; prior year recast)

Segment Net Sales ($USD Billions)	Q2 FY2024	Q2 FY2025	YoY %
Natural	$3.715	$4.021	8.2%
Conventional	$3.783	$3.861	2.1%
Retail	$0.631	$0.610	(3.3%)
Eliminations	$(0.354)	$(0.334)	(5.6%)

KPIs and operating drivers

KPI	Q1 FY2025	Q2 FY2025	Notes
Wholesale unit volume growth (YoY)	~+2%	~+3%	Outperformed key Nielsen benchmarks, aided by new customer additions
Inflation (sequential)	—	~1.5%	Largely unchanged vs Q1
Lean daily management DCs	2 pilots prior	9 DCs	Early low single-digit productivity gains; shrink near multi-quarter lows
Liquidity ($B)	$1.17	~$1.31	Cash $44M; ABL unused capacity ~$1.27B
Net debt ($B)	$2.23	~$2.05	Down ~$182M QoQ
Retail comps (ID sales)	~flat at Cub in Q1	~−0.4% consolidated IDs; Cub positive	Sequential improvement

Notes: Management disclosed Adjusted EBITDA margin of “nearly 1.8%” in Q2, the highest since Q3 FY2023, and +13 bps YoY; wholesale margin rate down ~10 bps YoY but offset by OpEx leverage .

Guidance Changes

Metric	Period	Previous Guidance (Dec 10, 2024)	Current Guidance (Mar 11, 2025)	Change
Net Sales ($B)	FY2025	$30.6 – $31.0	$31.3 – $31.7	Raised
Net (Loss)/Income ($M)	FY2025	$(31) – $(3)	$(13) – $3	Raised
GAAP EPS ($)	FY2025	$(0.45) – $(0.05)	$(0.15) – $0.05	Raised
Adjusted EPS ($)	FY2025	$0.40 – $0.80	$0.70 – $0.90	Raised
Adjusted EBITDA ($M)	FY2025	$530 – $580	$550 – $580	Raised (low end)
Capital + Cloud ($M)	FY2025	~ $300	~ $300	Maintained
Free Cash Flow ($M)	FY2025	> $100	> $150	Raised

Management noted sales growth decelerating to ~3% in 2H as new customer wins begin to cycle, but with expected ~10 bps margin rate acceleration in 2H vs 1H’s 1.74% .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY2024, Q1 FY2025)	Current Period (Q2 FY2025)	Trend
Lean/Operational efficiency	Structural efficiency initiatives (~$150M) in FY2024; sequential EBITDA improvement; network optimization underway	Lean Daily Management at 9 DCs; early low single-digit productivity gains; shrink near multi-quarter lows	Improving execution, scaling lean
Network optimization	Billings/Bismarck DC closures; FY2025 Fort Wayne planned	Fort Wayne DC closure completed; owned real estate sales progressing; customer-first approach to transitions	Executing closures, monetizing assets
Commercial model & mix	Updated multi-year strategy; go-to-market evolution	Realigned wholesale into two product-centered divisions (Conventional vs. Natural/Organic/Specialty/Fresh) to deepen product expertise; Natural +8.2% YoY	Specialization to support growth
Gross margin vs OpEx	Q1: gross margin 13.2% (down YoY); OpEx 12.9% (better YoY)	Gross margin 13.1% (−20 bps YoY) on mix/investments; OpEx 12.6% (−40 bps YoY); EBITDA margin near 1.8%	Margin rate pressure offset by OpEx leverage
Deleveraging & FCF	FY2024 net debt 4.0x; FY2025 outlook FCF ~>$100M	Q2 FCF $193M; net leverage 3.7x; FY25 FCF >$150M	Faster deleveraging, higher FCF
Macro/tariffs	—	No major behavior shifts; prepared to manage tariff risks via diversification and supply resiliency plays learned from COVID	Monitoring, agile playbook

Management Commentary

Strategic direction: “We delivered another quarter of improving financial results and operational execution… and again raised our full year outlook… remain firmly on track to deliver our longer-term fiscal 2027 targets” – Sandy Douglas, CEO .
Product-centered realignment rationale: “Product expertise was a principal focus… we aligned the wholesale business into 2 product centered divisions… Natural vs. Conventional… supported by enterprise scale in supply chain and IT” – Sandy Douglas .
Lean and efficiency: “Several of the newer implementations have already seen initial low single-digit productivity gains… adjusted EBITDA… nearly 1.8%… highest since Q3 FY2023” – Matteo Tarditi, CFO .
Cash and deleveraging: “Free cash flow… $193 million… lower our net leverage to 3.7x… first time below 4x since fiscal 2023” – Matteo Tarditi .
Outlook cadence: “Expect adjusted EBITDA dollars in Q3 to decline marginally sequentially from Q2 given seasonality, while margin rate improves and YoY EBITDA grows” – Matteo Tarditi .

Q&A Highlights

Commercial realignment execution: Specialization deepens product expertise by division while maintaining enterprise centers of excellence; intent is better pricing/promo in Conventional and faster innovation in Natural .
Fort Wayne DC closure implications: Some duplicate costs in Q2, benefits to flow through rest of year; step-down in D&A expected; priority is smooth customer experience in any optimization .
Volume and category trends: Natural growing faster; Conventional volumes roughly flat but sequentially improving and slightly better than traditional grocery benchmarks .
Macro/tariffs: No notable change in consumer behavior early in Q3; agile supply playbook if tariffs evolve; potential shift in “food at home vs away” watched but too early to call .
Pipeline: New business pipeline “very strong” across $90B addressable market; guidance reflects high-confidence baseline .

Estimates Context

Wall Street consensus from S&P Global (EPS and revenue for Q2 FY2025) was unavailable at the time of this analysis due to request limits; as a result, we cannot quantify beats/misses vs consensus for this quarter [GetEstimates error]. Where estimates comparisons are not shown, it reflects unavailability from S&P Global at time of request.

Key Takeaways for Investors

Mix-driven growth with operational discipline: Natural’s +8.2% growth and lean-driven OpEx leverage are offsetting modest gross margin rate pressure, producing double-digit Adjusted EBITDA growth .
Deleveraging ahead of plan: Q2 free cash flow and asset actions reduced net leverage to 3.7x; sustained FCF and property monetization could further compress leverage through FY2025 .
Guidance credibility improving: Second consecutive raise across sales, Adjusted EBITDA (low end), Adjusted EPS, and FCF signals confidence in execution and customer retention despite cycling of new wins in 2H .
Watch the 2H cadence: Seasonal Q3 step-down in dollars but higher margin rate expected; monitor how wholesale margin rate trends vs OpEx gains as realignment and supplier programs mature .
Strategic specialization: The two-division wholesale structure should sharpen pricing/promo (Conventional) and innovation speed (Natural), supporting category share and mix over time .
Retail stabilization: Retail sales declined on closures, but comps improved sequentially with Cub positive; broader narrative remains wholesaledriven .
Risk checks: Tariff/macro uncertainties remain; management highlights supply chain resiliency and optionality learned from COVID disruptions .

Additional Q2 Context: Other Relevant Press Releases

UNFI announced a wholesale business realignment into two product-centered divisions to improve customer service and commercial effectiveness (Jan 8, 2025) .

Appendix: Cross-Quarter Context (Prior Two Quarters)

Q1 FY2025: Net sales $7.87B (+4.2%); GAAP EPS $(0.35); Adjusted EPS $0.16; Adjusted EBITDA $134M; gross margin 13.2%; OpEx 12.9% of sales; raised FY25 outlook .
Q4 FY2024: Net sales $8.16B (+10.0% including 53rd week; +2.1% comparable 13-week); GAAP EPS $(0.63); Adjusted EPS $0.01; Adjusted EBITDA $143M; introduced FY2025 outlook and multi-year plan; network optimization initiated .

Citations: Press release and 8-K: ; Q2 press: ; Q1 press: ; Q4 press: ; Q2 call: ; Realignment release: .

UNITED NATURAL FOODS INC (UNFI)·Q2 2025 Earnings Summary