United Natural Foods Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: John Heinbockel - Guggenheim Securities LLC - Analyst : Sandy, on the wholesale realignment and the new sales breakdown, one, can you touch on functionally the changes that have occurred how that will change your go-to-market day-to-day, right, interacting with your customers and the biggest benefit you see? And then just want to understand, natural and conventional, is that products -- natural products that are sold to any customer or all products that are sold to largely natural customers, the same thing for conventional?

Question: John Heinbockel - Guggenheim Securities LLC - Analyst : Okay. Well, then my first part of that, right? So how does this change? I guess it doesn't change that much in terms of how sales are interacting with the accounts.

Question: John Heinbockel - Guggenheim Securities LLC - Analyst : All right. And then just my last quick thing. You referenced four incremental areas of potential to the strategy of those four, which one or two are furthest along and you think are the most impactful if one or two stand out?

Question: Bill Kirk - Roth Capital Partners, LLC - Analyst : I had a couple of things related to the closure of the Fort Wayne DC. I guess, first, were there duplicate costs while it was still open that are now gone, is there a step down in depreciation expense with the closure? And how large would that be? And then finally, what did you learn in the process of closing that and rerouting that will help inform future facility closures and help inform the customer and facility kind of optimizations?

Question: Scott Mushkin - R5 Capital - Analyst : So I just want to go back to what John was talking about as far as the realignment of the business. When the merger was done, the idea was putting the two entity together -- long time ago now that there was leverage in putting those SUPERVALU together with UNFI the idea of one truck, one bill, maybe even one DC. It sounds like you guys are saying, hey, maybe that's not ideal. And I guess the question is, do the two assets belong together over time? Or is that something you guys will consider as the years go on?

Question: Scott Mushkin - R5 Capital - Analyst : Okay. So my second question is actually a really short one. The conventional was up, I think, 2.1% on revenues. I know there's some wins in there. Can you talk a little bit about kind of core sales growth core volumes with continuing customers kind of ex the wins?

Question: Mark Carden - UBS Investment Bank - Analyst : You guys put together strong results, brought up your guidance. At the same time, we've seen some pretty big shifts in consumer sentiment over the last few weeks. Are you seeing any changes in end customer behavior in the early weeks of 3Q across really any of your channels? Or has your momentum really been pretty much sustained?

Question: Mark Carden - UBS Investment Bank - Analyst : Great. That's helpful. And then related to tariffs, how much exposure do you guys have to imports overall? Would you expect to fully pass through them, pass through on a dollar or percentage basis? And then if we do see sustained tariffs, how do you think about the balance between incremental trade in from food away from home? And any potential demand disruption as consumers potentially control their own shrink, so to speak? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 11, 2025 / 12:30PM, UNFI.N - Q2 2025 United Natural Foods Inc Earnings Call

Question: Andrew Wolf - C.L. King & Associates - Analyst : I wanted to start, I guess, with Matteo on the lean principles in the nine new DCs being, I guess, at least you gave a productivity trend in the low single digits. And I think last quarter in the two pilots in Texas and Colorado was mid-single digits. So is there anything other than just timing, is sort of in the new -- in the nine? Or is there anything that we should know about? Or are your expectations kind of similar that they'll trend up?

Question: Andrew Wolf - C.L. King & Associates - Analyst : Got it. And just back to the top line that I think some folks have been asking about. You nice acceleration in volume and sequentially and you've talked about a lot of things. So some is supplier partnerships and how you changed some of the -- well, a big change in your addressing fees and so on and sharing data back to the suppliers to help them with their merchandising. And then I think, obviously, this realignment, I think Sandy referenced procurement, merchandising sales and so on. So how do you I could hear this in thinking in conventional, maybe that's more sophisticated suppliers using the data coming to you with programs and partnering that way. And then in the natural that's more internal, like, hey, we really got to put some resources against this. There's a lot of growth here we're leaving on the table. Is that kind of conceptually and qualitatively, is that accurate? Or is it a little more nuanced than I'm kind of portraying it, my takeaway. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 11, 2025 / 12:30PM, UNFI.N - Q2 2025 United Natural Foods Inc Earnings Call

Question: Andrew Wolf - C.L. King & Associates - Analyst : Okay. And if I could just sneak one on the gross margin. The contraction rate was a little better than last quarter, and I think I asked about the last quarter as well. So is there anything in particular? Or is that just sort of that in your own metrics? Or was it more realization or pricing? Or was it or mixed out better or shrink. Is there anything significant that improved the gross margin rate sequentially?

Question: Kelly Bania - BMO Capital Markets Equity Research - Analyst : Wanted to just ask what you're seeing with regard to demand for natural and organic by conventional retailers. I guess the idea several years ago was that the cross-selling opportunity was quite significant to get that kind of product into conventional retailers. Just wondering if you're seeing a change in their interest in kind of stepping into that further or if there's a change in even the marketing or sales effort to kind of do that cross-selling given just kind of the realignment that you're discussing? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 11, 2025 / 12:30PM, UNFI.N - Q2 2025 United Natural Foods Inc Earnings Call

Question: Kelly Bania - BMO Capital Markets Equity Research - Analyst : Okay. That's helpful. And just a couple more questions. If the lean daily management and Matteo, some of the figures you gave there, sounds like it's been implemented in the nine DCs. Are those more conventional DCs or natural DCs and is the opportunity different as you look at those two sides of the business with this initiative?

Question: Kelly Bania - BMO Capital Markets Equity Research - Analyst : Okay. And just one more, I guess, on the new customer additions that you mentioned, Matteo starting to cycle later this year. Any help you can give us on the magnitude of that, the channels that impacts and any insights into the pipeline for additional customer additions as we move forward?