United Natural Foods, Inc. (the "Company") today reported financial results for the first quarter of fiscal 2014 ended November 2, 2013.
"Continued demand and UNFI's focus on its core strategies delivered strong results during the first quarter of fiscal 2014," said Steven Spinner, President and Chief Executive Officer.
Net sales for the first quarter of fiscal 2014 increased 13.6% to $1.6 billion from $1.4 billion in the first quarter of fiscal 2013. Gross margin was 16.9% for the first quarter of fiscal 2014, a 20 basis point increase from gross margin of 16.7% for the first quarter of fiscal 2013. Compared to the fourth quarter of fiscal 2013, gross margin decreased 39 basis points primarily due to the continued shift in customer mix to the conventional supermarket and supernatural channels.
Total operating expenses were 13.9% as a percentage of net sales for the first quarter of fiscal 2014, a decrease of 21 basis points compared with the first quarter of fiscal 2013. Total operating expenses increased $23.8 million, or 11.9%, to $223.2 million in the first quarter of fiscal 2014 as compared to $199.4 million in the first quarter of fiscal 2013, primarily due to higher sales volume. Total operating expenses for the first quarter of fiscal 2013 included $1.6 million of expenses related to the termination of a licensing agreement and the write-off of the associated intangible asset. Excluding these expenses from the first quarter of fiscal 2013, total operating expenses for the first quarter of fiscal 2014 increased 12.8%, or $25.4 million, compared to the first quarter of fiscal 2013. Total operating expenses in the first quarter of fiscal 2013 also included $1.0 million of expenses related to the labor action at the Company's Auburn, Washington facility.
On a GAAP basis, operating income increased 31.3%, or $11.5 million, to $48.0 million for the first quarter of fiscal 2014 compared to $36.6 million for the first quarter of fiscal 2013. Operating income as a percentage of net sales for the first quarter of fiscal 2014 increased 41 basis points to 3.0% compared to the first quarter of fiscal 2013. Adjusting operating income for the first quarter of fiscal 2013 to exclude expenses associated with the write-off of the intangible asset, operating income for the first quarter of fiscal 2014 increased 25.7%, or $9.8 million, from $38.2 million for the first quarter of fiscal 2013. Operating income as a percentage of net sales increased 29 basis points from adjusted operating income as a percentage of net sales of 2.7% for the first quarter of fiscal 2013.
GAAP net income for the first quarter of fiscal 2014 increased $6.2 million, or 28.9%, to $27.8 million, or $0.56 per diluted share, from $21.5 million, or $0.43 per diluted share, for the first quarter of fiscal 2013. Other expense, net for the first quarter of fiscal 2013 included $4.9 million in expense associated with an agreement to settle a multi-state unclaimed property audit. When adjusting net income for the first quarter of fiscal 2013 for this expense and the expenses associated with the write-off of the intangible asset, partially offset by a net discrete tax benefit of $2.7 million primarily related to the reversal of reserves for uncertain tax positions, net income for the first quarter of fiscal 2014 increased $5.0 million, or 21.8%, from $22.8 million, or $0.46 per diluted share, for the first quarter of fiscal 2013.
"As we grow into new facilities, channels and geographies, UNFI is well positioned to continue its growth," concluded Mr. Spinner.
Affirmed Fiscal 2014 Guidance
Based on UNFI's performance to date and the current outlook for the remainder of fiscal 2014, UNFI is affirming its previous guidance for fiscal 2014 provided on September 12, 2013. For fiscal 2014, ending August 2, 2014, which is a 52-week fiscal year compared with the 53-week fiscal 2013, the Company expects net sales in the range of approximately $6.65 to $6.78 billion, an increase of approximately 9.7% to 11.8% over fiscal 2013. Adjusting for the 53rd week in fiscal 2013, sales growth for fiscal 2014 is expected in the range of approximately 11.8% to 14.0%. The Company estimates GAAP earnings per diluted share for fiscal 2014 in the range of approximately $2.40 to $2.50 per share, an increase of approximately 10.1% to 14.7% over fiscal 2013 GAAP earnings per diluted share of $2.18.
