United Natural Foods Inc. (NYSE:UNFI) saw its shares fall more than 11% in premarket trading on Tuesday after reporting quarterly revenue below analyst expectations and issuing full-year guidance that came in slightly under Wall Street forecasts, despite delivering earnings in line with consensus estimates.
For the 13-week period ended May 2, the grocery distributor generated revenue of $7.72 billion, a decline of 4.2% from the prior year and below analyst expectations of $7.80 billion. Adjusted earnings per share were $0.77, matching the consensus forecast.
The company’s revised outlook for fiscal 2026 also failed to impress investors. United Natural Foods projected full-year earnings per share of between $2.40 and $2.60, compared with analyst expectations of $2.58. Revenue is expected to range from $31.10 billion to $31.30 billion, slightly below the consensus estimate of $31.31 billion.
According to the company, the decline in sales was largely attributable to weaker performance in its Conventional and Retail divisions. Revenue in the Conventional segment fell 13.6% to $3.14 billion, while Retail sales declined 10.1% to $515 million. These decreases were partially offset by 4.4% growth in the Natural segment, which generated revenue of $4.34 billion.
Management noted that approximately 450 basis points of the overall sales decline resulted from strategic network optimisation initiatives, including the closure of its distribution centre in Allentown, Pennsylvania.
Profitability improved despite lower sales. Gross profit margin expanded to 13.6% of net sales from 13.4% a year earlier. Operating expenses decreased to $954 million, representing 12.4% of net sales, compared with $1.03 billion, or 12.7% of sales, in the prior-year period. The improvement was supported by insurance proceeds and ongoing cost-reduction measures.
Adjusted EBITDA increased 16.6% to $183 million from $157 million a year earlier. The company also returned to profitability, reporting net income of $33 million compared with a net loss of $7 million in the same quarter last year.
Free cash flow declined significantly, falling 54.6% to $54 million from $119 million a year ago. Net cash generated from operating activities decreased to $98 million from $173 million, primarily due to higher working capital requirements. Despite the weaker quarterly performance, the company maintained its full-year free cash flow target of approximately $330 million.
United Natural Foods continued to strengthen its balance sheet during the quarter. Net debt was reduced to $1.63 billion from $1.93 billion a year earlier, lowering the company’s net leverage ratio to 2.5 times. The company also repurchased 82,233 shares during the quarter at an average price of $48.64 per share.