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UN

UNITED NATURAL FOODS INC (UNFI)·Q3 2025 Earnings Summary

Executive Summary

  • UNFI delivered a solid Q3: net sales rose 7.5% to $8.06B, Adjusted EBITDA grew 20.8% to $157M, and Adjusted EPS increased to $0.44, while GAAP EPS was $(0.12) .
  • Results beat Street: revenue exceeded consensus ($8.06B vs $7.79B*) and Adjusted EPS beat ($0.44 vs $0.22*); Adjusted EBITDA was above consensus (~$157M vs ~$142M*) .
  • Guidance: maintained for net sales, Adjusted EBITDA, Adjusted EPS, FCF, and capex; lowered GAAP net income and EPS to reflect exit of Key Food and Northeast network optimization; management otherwise would have raised non-GAAP outlook but paused due to a cyber incident disclosed on June 9 .
  • Strategic catalysts: continued lean implementation (20 DCs), new business wins, working capital efficiency, deleveraging (net debt/Adj. EBITDA down to 3.3x); near-term watch item is cyber remediation and Allentown DC closure linked to Key Food exit .

Values retrieved from S&P Global (*).

What Went Well and What Went Wrong

What Went Well

  • “Seventh consecutive quarter of sequentially improving Adjusted EBITDA” with a higher YoY Adjusted EBITDA margin rate and increased free cash flow; lean daily management now in 20 of 52 DCs driving safety, quality, delivery, and cost benefits .
  • Wholesale natural products led growth (+12% YoY); wholesale unit volumes +4%; new business with existing and new customers supported top-line gains. “Our results reflect sales growth above the industry benchmark and adjusted EBITDA growth that was meaningfully higher than our sales growth” .
  • Deleveraging ahead of plan: net debt/Adj. EBITDA improved to 3.3x; liquidity ~$1.49B; subsequent $100M voluntary term loan prepayment reduces interest by ~$1M per quarter .

What Went Wrong

  • Gross margin rate fell 20–30 bps YoY to 13.4% on lower product margin rates and mix (partly offset by supplier programs and lower shrink) .
  • Guidance for GAAP net income and EPS reduced due to Key Food contract exit and optimization of Northeast network; expected Q4 recognition of $53M termination fee and $24M impairment recorded in Q3, plus ~$4M severance .
  • Cyber incident: unauthorized IT activity discovered June 5; management paused raising non-GAAP outlook pending impact assessment; short-term operational workarounds and potential elevated costs until systems are fully restored .

Financial Results

Quarterly performance vs prior quarters

MetricQ1 2025Q2 2025Q3 2025
Net Sales ($USD Billions)$7.871 $8.158 $8.059
GAAP Diluted EPS ($)$(0.35) $(0.05) $(0.12)
Adjusted EPS ($)$0.16 $0.22 $0.44
Adjusted EBITDA ($USD Millions)$134 $145 $157
Gross Margin %13.2% 13.1% 13.4%
Operating Expenses (% of Sales)12.9% 12.6% 12.7%
Net Cash from Operating Activities ($USD Millions)$(110) $247 $173

Q3 2025 results vs Wall Street consensus

MetricConsensusActual
Revenue ($USD Billions)$7.790*$8.059
Adjusted EPS ($)$0.22*$0.44
Adjusted EBITDA ($USD Millions)$142*$157

Values retrieved from S&P Global (*).

Segment sales mix

SegmentQ2 2025 ($USD Billions)Q3 2025 ($USD Billions)
Natural$4.021 $4.160
Conventional$3.861 $3.628
Retail$0.610 $0.573
Eliminations$(0.334) $(0.302)

KPIs and balance sheet

KPIQ1 2025Q2 2025Q3 2025
Free Cash Flow ($USD Millions)$(159) $193 $119
Net Debt / Adjusted EBITDA (x)4.2x 3.7x 3.3x
Total Liquidity ($USD Billions)~$1.17 ~$1.31 ~$1.49

Guidance Changes

MetricPeriodPrevious Guidance (Mar 11, 2025)Current Guidance (Jun 10, 2025)Change
Net Sales ($USD Billions)FY 2025$31.3–$31.7 $31.3–$31.7 Maintained
GAAP Net (Loss) Income ($USD Millions)FY 2025$(13)–$3 $(80)–$(55) Lowered
GAAP EPS ($)FY 2025$(0.15)–$0.05 $(1.30)–$(0.90) Lowered
Adjusted EPS ($)FY 2025$0.70–$0.90 $0.70–$0.90 Maintained
Adjusted EBITDA ($USD Millions)FY 2025$550–$580 $550–$580 Maintained
Capital & Cloud Implementation Expenditures ($USD Millions)FY 2025~ $300 ~ $300 Maintained
Free Cash Flow ($USD Millions)FY 2025> $150 > $150 Maintained

Note: Management stated they would have raised key non-GAAP metrics absent the cyber incident currently under assessment .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
Lean daily management & efficiencyIntroduced as core of multi-year plan; DC optimization and early lean routines Continued execution; capex mix ~1/3 tech, ~1/3 safety/DC, ~1/3 automation Lean in 20 DCs; injury rate declines, ~75% improvement in out-of-stocks, throughput up; value stream mapping ahead Accelerating deployment and benefits
Network optimizationAnnounced closures (Bismarck, Billings; moving York to Manchester) Fort Wayne DC closure completed; deleveraging faster than expected Exit Key Food; close Allentown; $24M impairment in Q3; $53M termination fee expected Q4 Portfolio pruning to improve profitability
Deleveraging & FCFLiquidity ~$1.17B; net leverage 4.2x Liquidity ~$1.31B; net leverage 3.7x; FCF +$193M Liquidity ~$1.49B; net leverage 3.3x; FCF +$119M; $100M voluntary prepay Ahead of plan; target ~2.5x by FY26
Customer mix & sales growthNew business with existing customers; positive volumes Natural +8.2% YoY; wholesale volumes +3% Natural +12%; wholesale volumes +4%; new wins ~half of volume growth Strengthening natural-led growth
Cybersecurity incidentN/AN/AUnauthorized activity discovered June 5; workarounds; paused raising outlook pending impact Near-term operational risk; transparent remediation
Tariffs/macroN/AN/AModerate tariff impacts expected in balance of year; task force monitoring Managed headwind; low impact

Management Commentary

  • CEO Sandy Douglas: “Our customers helped us deliver another solid quarter of sales growth and our seventh consecutive quarter of sequentially improving Adjusted EBITDA… higher year-over-year adjusted EBITDA margin rate and increased free cash flow” .
  • On cyber remediation: “We are focused on diligently managing through the cyber incident… to rapidly and safely restore our capabilities, while helping our customers with short-term solutions” .
  • On strategic exits: “We came to a mutual agreement with Key Food to end our Northeastern distribution agreement… enables UNFI to exit an unprofitable relationship and further optimize our Northeast DC network by ceasing operations at our Allentown facility” .
  • CFO Matteo Tarditi: “Adjusted EBITDA… increased to 2%, the highest in two years… Adjusted EPS in the quarter of $0.44 compared to $0.10… Free cash flow $119M… net leverage to 3.3 turns” .
  • Capital priorities: Capex ~$300M annually with thirds to safety/DC, technology, automation; every dollar focused on deleveraging to ≤2.5x by FY26 before revisiting buybacks/dividends .

Q&A Highlights

  • Guidance stance: Management would have raised non-GAAP outlook but chose not to update due to cyber incident; reiterated non-GAAP metrics (sales, Adjusted EBITDA, FCF, capex) for now .
  • Key Food exit economics: ~$24M impairment in Q3, ~$4M severance; ~$53M termination fee expected in Q4; net cash impact mitigated by working capital release and expense reduction; projected payback ≈1 year .
  • Operations amid cyber incident: Shipping on a limited basis with customized solutions by market/customer; daily improvement; expect elevated costs but too early to quantify .
  • Lean benefits: Injury rates down, out-of-stocks improved ~75%, shrink down, throughput up ~5%; expanding lean and value stream mapping in FY26 .
  • Tariffs: Moderate impacts anticipated over the remaining seven weeks of the fiscal year, managed via a cross-functional task force .

Estimates Context

  • Q3 beats: Revenue $8.06B vs $7.79B*; Adjusted EPS $0.44 vs $0.22*; Adjusted EBITDA $157M vs $142M* .
  • FY25 tracking: Company maintained Adjusted EBITDA $550–$580M and Adjusted EPS $0.70–$0.90 despite cyber pause; Street FY25 revenue ~$31.72B* vs company $31.3–$31.7B .
  • Implications: Consensus likely revises GAAP EPS lower given Key Food exit charges; non-GAAP metrics may move higher if cyber impact proves limited and momentum persists.

Values retrieved from S&P Global (*).

Key Takeaways for Investors

  • Strong operational momentum with natural-led wholesale growth and disciplined cost control; Adjusted EBITDA margin trend improving and free cash flow ahead of plan .
  • Strategic pruning (Key Food exit, Allentown closure) should lift profitability and reduce complexity; near-term GAAP charges offset by working capital benefits and cost reductions .
  • Deleveraging faster than expected (3.3x → targeted ~2.5x by FY26) enhances equity value optionality (buybacks/dividends) once targets are met .
  • Cyber incident is the key near-term swing factor; watch for disclosures on operational normalization and cost impacts before quarter-end—management transparency and customer collaboration appear supportive .
  • Lean deployment and value stream mapping provide multi-year productivity tailwinds in safety, fill rates, shrink, and throughput; positive for margins into FY26 .
  • Top-line resilience supported by new business wins and customer execution; inflation modest (~1.5%); product mix adds ~200 bps to sales growth .
  • Trading lens: Favorable non-GAAP beats and deleveraging narrative, but headline risk from cyber and GAAP charges may create volatility; catalysts include restoration updates, Q4 fee timing, and potential FY26 leverage/allocations update this fall .
References: All figures and statements cited to SEC 8-K press release and Q3 2025 earnings call transcript as indicated.