UNFI Earnings: Adjusted EBITDA Jumps 21% Amid Strategic Overhaul
- Hardik Shah
- Jun 10
- 4 min read
TLDR
EBITDA Outpaces Sales: Adjusted EBITDA grew 20.8% YoY to $157M—its highest margin in two years.
Cash Flow Surges: Free cash flow rose 143% YoY to $119M, enabling debt reduction and early loan repayment.
Guidance Held Despite Cyber Incident: UNFI maintained most FY25 guidance, citing business momentum but withheld a broader update due to an ongoing IT breach.
Business Overview
United Natural Foods, Inc. (NYSE: UNFI) is North America’s largest full-service grocery wholesaler, delivering natural, organic, conventional, and specialty products to more than 30,000 locations. Its key customer segments include natural product superstores, independent grocers, supermarkets, eCommerce players, and foodservice providers. Beyond distribution, UNFI offers value-added services such as data analytics, shelf management, and marketing.
UNFI Q3 FY25 Earnings
In Q3 FY25 (ended May 3, 2025), UNFI delivered:
Net Sales: $8.1B (+7.5% YoY), led by 12% growth in the natural product segment.
Adjusted EBITDA: $157M (+20.8% YoY), reflecting the highest margin rate in two years at 2.0%.
Adjusted EPS: $0.44 (vs. $0.10 in Q3 FY24).
Net Loss: $(7)M; GAAP EPS of $(0.12), narrowed from $(0.34) last year.
Free Cash Flow: $119M, up from $49M—a 143% jump.
Net Leverage: 3.3x, down from 4.6x a year ago.
“This performance demonstrates that our new, more focused and efficient product-centered wholesale structure is helping us better meet our customers’ and suppliers’ needs in a highly dynamic market.” – Sandy Douglas, CEO
Forward Guidance
Despite strong YTD performance, UNFI revised its GAAP net income and EPS outlook downward due to costs tied to exiting the Key Food contract and a cybersecurity incident discovered June 5.
FY25 Net Sales: $31.3B–$31.7B (unchanged)
Adjusted EBITDA: $550M–$580M (unchanged)
Adjusted EPS: $0.70–$0.90 (unchanged)
Free Cash Flow: >$150M (unchanged)
GAAP EPS: Revised to $(1.30)–$(0.90) from $(0.15)–$0.05
“We would have raised our key non-GAAP financial outlook metrics if not for the unauthorized activity on certain of our IT systems.” – Matteo Tarditi, CFO
Operational Performance
Lean Management Rollout: Implemented at 20 of 52 DCs, showing measurable gains in throughput, fill rates, and safety.
New Business Wins: Accounted for roughly half of UNFI’s volume growth; unit volumes rose 4% YoY.
Key Food Exit: UNFI mutually ended its Northeastern supply deal, incurring a $53M contract termination fee but exiting an unprofitable relationship.
Shrink and Fill Rates: Improvements driven by better procurement, inventory controls, and lower waste.
“Across the DCs where lean is beyond the ramp-up stage, we’ve seen injury rates decline significantly, out-of-stocks improved by about 75%, and throughput improved.” – Matteo Tarditi
Market Insights
UNFI outpaced Nielsen industry benchmarks for volume growth, reflecting strong execution and customer demand for its differentiated offering. The macro backdrop—marked by inflation moderation (1.5%) and consumer caution—hasn’t derailed UNFI’s growth, especially in natural, organic, ethnic, and specialty foods.
The company noted shifting consumer preferences toward at-home eating and value-conscious shopping—trends that benefit its natural product portfolio and eCommerce-aligned partners.
Cybersecurity Incident Update
On June 5, 2025, United Natural Foods, Inc. (UNFI) detected unauthorized activity on certain of its IT systems, prompting the company to immediately activate its incident response plan. By late June 6, UNFI shut down its network as a precaution and began working with third-party cybersecurity experts to investigate and contain the breach.
UNFI disclosed the incident publicly via an 8-K filing before market open on June 9, stating that the company is working to safely restore its systems and resume normal operations. While specifics of the breach remain under assessment, management emphasized their prioritization of transparency, customer service continuity, and data integrity throughout the process.
“We are managing the incident capably with a very strong team of inside and outside professionals, including specialized experts.”— Sandy Douglas, CEO
Despite the disruption, UNFI has maintained partial distribution capabilities through creative workarounds and is actively assisting customers with short-term logistics solutions, including in some cases coordinating with other distributors. While the full financial impact is yet unknown, management chose not to raise full-year non-GAAP guidance (Adjusted EBITDA, EPS, and Free Cash Flow) due to lingering uncertainty from the incident, even though Q3 performance exceeded expectations.
“Each day is better… but still a work in progress. We’re partnering with customers in various short-term modes to serve their needs.”— Sandy Douglas, CEO
The company has also engaged relevant regulatory and law enforcement authorities, including the FBI, and emphasized that it is treating the situation as a defining moment in how it builds and maintains long-term trust with stakeholders.
Strategic Initiatives
UNFI’s multi-year transformation plan continues to deliver results:
Network Optimization: Closing inefficient facilities like Allentown while expanding more strategic sites like Manchester.
Cost Reduction: Operating expenses down 50 bps YoY as % of sales due to automation, lean principles, and mix optimization.
Cash Discipline: Working capital improvements including a 3-day YoY reduction in inventory days on hand.
Future plans include expanding lean management, advancing digital capabilities, and further refining customer and supplier profitability.
Capital Allocation
Debt Repayment: Voluntary $100M term loan repayment expected to save ~$1M in quarterly interest.
Facility Sales: Sold the Billings DC; exploring asset sales in Bismarck and Fort Wayne.
Liquidity: $1.49B in total liquidity, including $52M in cash and $1.44B available on credit lines.
The Bottom Line
UNFI's Q3 FY25 earnings highlight the company’s disciplined execution and successful transformation amid external challenges. Adjusted EBITDA growth outpaced revenue gains, and free cash flow surged, enabling debt paydown and balance sheet strengthening. However, the recent cyberattack and the Key Food contract exit prompted a downgrade to GAAP profit outlook. Investors should monitor progress on IT systems recovery, continued lean deployment, and the company’s ability to sustain volume gains in a cautious consumer environment.
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