Yahoo Finance United Natural's (UNFI) Transformation on Track Amid Challenges
United Natural Foods, Inc. UNFI is undergoing a thorough transformation journey that encompasses various strategic components. The leading food provider is experiencing growth on the back of its enhanced e-commerce solutions. However, the company faces a challenging industry landscape with consumers adjusting their spending habits.
Let’s delve deeper.
Advancing Growth Initiatives
The Zacks Rank #3 (Hold) company is progressing toward its transformation goals and is poised to fully realize the value of its platform. As part of this process, the company is rapidly implementing near term value-creation initiatives that are anticipated to enhance its operational efficiencies. A key aspect of the transformation strategy is the focus on maintaining operational and transformation momentum.
During the fiscal 2024, the company expects to incur nearly $400 million in capital and cloud implementation, which includes investments in transformation plans, with significant spending on network optimization and automation. The upgrade in the technology infrastructure is likely to drive higher efficiency. Management is on track with the automation project at the Centralia Distribution Center, which is expected to go live at the end of the fiscal 2024. UNFI is progressing with the realignment and optimization of the Northeastern Distribution Network. These investments are likely to drive operational savings, increase fulfillment accuracy and generate increased capacity.
It is also on track to improve its supply chain processes and management disciplines to fuel growth. In this regard, the company is achieving a major reduction in shrink, which is positively impacting its financial performance and operational efficiency. UNFI is also improving its commercial go-to-market programs to enhance supplier connections.
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Elevating E-commerce Capabilities
United Natural’s sales are benefiting from e-commerce strength, thanks to increased e-commerce solutions offered by the company. Several of the company’s Independents and Chains channels provide e-commerce solutions to their customers. It offers digital platforms and the support its customers need. In this regard, the company’s latest value-added supplier program, UNFI Insights, bodes well. Earlier, the company launched Community Marketplace — a business-to-business digital e-commerce solution. The platform is designed for emerging brands, which helps the company expand distribution with customers.
Volume Related Hurdles
United Natural is operating in a volatile environment, with consumers buying less to manage their budgets and shifting away from traditional grocery stores. The company’s second-quarter fiscal 2024 net sales inched down 0.5% due to lower unit volumes. Management anticipates a more prolonged recovery for volume.
Unimpressively, management recently lowered its net sales guidance for the fiscal 2024 thanks to a challenging operating environment. The company anticipates net sales in the range of $30.5-$31.0 billion compared with the prior view of $30.9-$31.5 billion. Focus on the upsides mentioned above is likely to keep aiding United Natural’s growth.
UNFI’s shares have lost 33.4% in the past three months compared with the industry’s decline of 1.5%.
3 Key Picks
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The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 18.7% and 30.5%, respectively, from the year-ago reported numbers.
Utz Brands Inc. UTZ manufactures a diverse portfolio of salty snacks, currently carrying a Zacks Rank #2. UTZ has a trailing four-quarter earnings surprise of 2.6% on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year earnings suggests growth of 19.3% from the year-ago reported numbers.
Celsius Holdings CELH, which offers functional drinks and liquid supplements, currently carries a Zacks Rank #2. CELH has a trailing four-quarter earnings surprise of 67.4%, on average.
The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales and earnings suggests growth of 41.6% each from the year-ago reported figure.
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United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report
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