Dive Brief:

• United Natural Foods, Inc. (UNFI) brought in net sales of $7.5 billion during the first quarter of fiscal year 2023, a 7.6% year-over-year increase that was due largely to inflation and new business, the grocery wholesaler and retailer reported Wednesday.
• Sales in UNFI’s supernatural business, which encompasses its business supplying products to Whole Foods Market, rose 9.8% during the period, to $1.5 billion.
• UNFI has committed to making significant investments in technology and plans to shave its debt load at it looks to expand its operations during the coming years, company executives said Wednesday during an earnings call.

Dive Insight:

UNFI announced earlier this year that it plans to direct significant amounts of capital toward upgrading its systems, and CEO Sandy Douglas emphasized during Wednesday’s call that the company expects that spending to play a key role in helping it grow.

“We expect technology and automation investments that we introduced on our last call to be a meaningful growth and profitability enabler in the years ahead,” Douglas said. “These investments are expected to help us [benefit from] the anticipated higher volumes that we plan to capture as we gain an increasingly larger portion” of the grocery market.

UNFI will begin implementing the new systems during the fiscal year 2023 and intends to roll out additional technology during the following years — assuming it sees signs that the “strong returns” it anticipates from the investments are coming to fruition, Douglas added. 

The company plans to devote $350 million to capital projects during the current fiscal year, with an undisclosed portion of that sum going toward automation, Chief Financial Officer John Howard said during the call.

UNFI added $378 million to its debt load during Q1, which ended Oct. 29, to help it add inventory ahead of the holiday season, but expects that its total net debt at the end of the current fiscal year will be less than its debt level at the end of fiscal year 2022, according to Howard.

Howard also affirmed UNFI’s forecast that it will bring in between $29.8 billion and $30.4 billion in net sales during its current fiscal year, which ends July 29, 2023.

Asked if UNFI’s purchase earlier this year of three supermarkets in Maryland was an indication that it intends to step up its retail operations, Douglas said the company has not changed its strategy, but didn’t want to miss a chance to bolster its Shoppers banner. “We saw a growth opportunity and then we decided to act upon it. But our strategy for optimizing retail for profitability, and also as a learning lab for our business, has not changed at all,” he said.

UNFI’s private label portfolio, Douglas added, performed “very strongly” in the quarter and outgrew private brands at other retailers, but he did not provide specifics. He noted that the company has been able to bring on additional staff to support its private brands and has “made it a significant priority to make that program significantly more competitive.”

In addition, UNFI has nearly finished construction of its largest rooftop solar array at its distribution center in Howell, New Jersey, and expects the power-generation system to be in operation by the end of the year, Douglas said. The company plans to publish its next report on its environmental, social and governance activities in early 2023, he said.