Research Update: United Natural Foods Inc. Rating Lowered To 'B' From 'B+' On Lower Margins, Reduced Visibility; Outlook Negative

U.S.-based grocery distributor and wholesaler United Natural Foods Inc.'s (UNFI) margin deteriorated through the first three quarters of fiscal 2023 on fewer forward-buy opportunities than in 2022. As a result of compressed margins and unclear benefits from prior-year procurement gains, we expect S&P Global Ratings-adjusted leverage to breach and remain above 5x in the next 12 months. We lowered our issuer credit rating on UNFI to 'B' from 'B+'. We also lowered the rating on the term loan to 'B+' from 'BB-' and the rating on the senior unsecured notes to 'CCC+' from 'B-'. The recovery ratings are unchanged at '2' and '6', respectively. The negative outlook reflects limited visibility into UNFI's profitability over the next 12 months, with an

...- U.S.-based grocery distributor and wholesaler United Natural Foods Inc.'s (UNFI) margin deteriorated through the first three quarters of fiscal 2023 on fewer forward-buy opportunities than in 2022. - As a result of compressed margins and unclear benefits from prior-year procurement gains, we expect S&P Global Ratings-adjusted leverage to breach and remain above 5x in the next 12 months. - We lowered our issuer credit rating on UNFI to 'B' from 'B+'. - We also lowered the rating on the term loan to 'B+' from '##-' and the rating on the senior unsecured notes to '###+' from 'B-'. The recovery ratings are unchanged at '2' and '6', respectively. - The negative outlook reflects limited visibility into UNFI's profitability over the next 12 months, with an expectation for adjusted EBITDA margins to remain compressed in the mid- to high-2% range and S&P Global Ratings-adjusted debt to EBITDA to stay elevated in the low-5x area through 2024....

Research Update