UNFI - Earnings call transcript Q1 2018 | United Natural Foods, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to the United Natural Foods Incorporated First Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Katie Turner for opening remarks.

Katie Turner

Thank you. Good afternoon and thank you for joining us on UNFI's First Quarter Fiscal 2018 Earnings Conference Call. have afternoon. copy should release the you this issued now, received of a earnings By release webcast website, press Investors This and section under are of the available the company’s at of www.unfi.com. today's call

Chief today are Chief Chairman Sean Mike On the Operating Steve and call Officer; Officer. and Spinner, CEO; Griffin, Financial Zechmeister,

projections would significant to assess everyone in call statements. results these and forward-looking forward-looking statements that the contain we from risks in may made by Before are forward-looking results involve like differ may release the begin, comments expectations, that estimates uncertainties. These company’s and plans, discussed materially we Actual risks and today’s remind might management during discussed filings. SEC These statements. earnings

the management financial GAAP These and explanation addition, financial section and measures. include of non-GAAP measures company’s turn GAAP leverage. will Investors and provide free the like In Spinner. earnings A the over today’s now to these the in measures changes cash on non-GAAP to call and EBITDA most to data release of EBITDA, And margin, and directly I’d Steve located reconciliation comparable reconciliation flow website. the is complete call, during

Steve Spinner

everyone. quarter excited and Mike Today, Good discuss our to first guidance. annual Katie. you, review our Thank business evening then and results highlights, we’re will financial

year out and expect fiscal year. very Sean, with will We're in throughout finished the our of we which of XXXX remarks. Mike, growth, I prepared gate fiscal Finally, first will continue take once your strong our questions to we our topline quarter

broadline XXX quarter. in units of business customer record $X.X first channels saw billion over and All quarterly broad-based million to a with significant of our sales growth our leading the UNFI shipping

is very what customer for base. very we broad-based our solutions, and increasing are demand We diverse UNFI provides to by and encouraged capabilities the see

shortly. and reflected We which year expect brick-and-mortar increased UNFI of address momentum excess are uniquely Wherever and positioned fiscal eCommerce, services; Mike service, across in believe guidance for in XXXX solution. for business food is as robust to the earnings We interest the an will this believe and and our industry is, continue relationships. preferred balance we sales the activity products retail, we international food of the demand better-for-you in and

adjusted outside As ability would meet our storage on did expenses, UNFI’s clock, how drivers a in plan ratios. and cost high execute quite dealing incur buyers, and who that would lower over work I management we quickly, quarter. in to associate QX, several could came really expense service to We aforementioned higher rise respond two from operational hurricanes the staff loaders manner we the case to disruptions like and with our they around minimize overall to higher customers our and including teams levels teams challenge. we productivity tirelessly Typically, momentum months and demonstrated and real-time. to salute to challenged our kind saw the selectors, service during the in need in and and ramp-up at than of advance normal was for in prepare low this time

quarter, staffing appropriate we made have and see facility move volume unit into are second shipping As and to we and sales the our adjustments. record continuing

to the fill associated approximately the XXXX Suppliers challenge. rates and million supplier year of fiscal versus unfavorable, a quarter equating with unexpected loss in additional our out quarter year prior almost the XXX demand, the inbound first basis continues was be $XX in same Additionally, in to sales. from partners points of were our stocks

on forward. supply improve demand the we service to teams working sure Our going and suppliers level chain are make closely aligned with signals are

operational and particularly improvement earnings share quarter in customer for diluted the associated the expense demand. meeting the We with of period versus $X.XX other also inventory, prior with unplanned first delivered profit the needs, solid light our year against of

investments for play add our of growth in Hogan, growth. exclusive continue shopping to opportunities. throughout are we continue demand retail many want driven infrastructure brick-and-mortar management specific by Wellness today, new focused our fiscal of and We necessary and we pursue eCommerce, and the all Consumers to differentiated we and and they variety, different leadership to Under new high and on insights, the data the from products, expect valuable for and realizing ways brands a VP private mutually more role attributes, opportunities merchandising, Kirsten category better are growth enabling label fuel As our technology solutions. retail. our XXXX, competition at an

and first than that our products more For of relationships. endless key focused and see We are and our and support our store" we opportunities up out in we the deep "building quarter, offer network which of believe the assortment distribution an like brands on customers quarter strategy. customer aisle eCommerce XX% our sales goals, of opportunity all many ahead. I to pillars these goals reiterate would our XXXX strategic the first the during were

this amount robust existing our an very for third, short deli, to gross a margin; our and our space; a and summary, distribution grow In incredible relationships believe win exceptionally value of our strong optimize finally across We balance customers new constituents. meat, drives in customers; organization our pipeline. all and our network; in sheet strategy M&A key expand period First, accomplished we've maintain eCommerce broadline cheese success second, with time. our with expand categories fourth, into to

the remain the demonstrated exciting positioned continues robust as customers products pipeline opportunities we and for enable will turn now remains leadership consistently very support to objectives. within recent us sell we to that to over long-term overview, As strategic achieve our that of better-for-you sourcing to together. capabilities, call growth our strong the taken strong has believe a leadership Mike. meet We our and has ahead. and our decisive have team our grow Consumer balance with sheet our demand With change we evolve, I’ll our steps of to acquisitions, distribution UNFI and industry so needs our well it,

Michael Zechmeister

year increased channels. of was versus QX net quarterly Thanks, for X.X% company sales of resulted for good $XXX the and record This XXXX sales growth first Steve based to our across everybody. from last or significant billion. evening, million which the approximately $X.XX Net broad fiscal quarter

of our a of fiscal compared fiscal the into XX.X% a the and sales From X% As August XXXX. we XXXX our points, two quarter House net of of year comparability net last of May our fiscal closed acquisition sixth $XXX.X supernatural of of QX inflation QX over XX consecutive of [dollar up Haddon perspective, in headwind as channel on our last and and be of this House approximately reminder, were modest Guru consistent inflation modest closed first continues XXXX with acquisition of this year. the approximately deflation basis was fiscal which net sales]. Haddon sales into on year, did Gourmet and total they weeks from a QX acquisition in than or to last million quarter fiscal timing XX.X% represented marks sales approximately XXth two less which and to XX.X% weeks In QX versus last impact our quarter of year. year’s or this on QX of XXXX XXth experienced either relatively a inflation And meaningful a have to of the result of not QX the Guru, Gourmet results

in QX in As QX increased channel year for last and mentioned, sales Steve growth landed resulted total expected Independent net ramped at in versus products quickly year versus of Supermarket up in than grew represented the last X.X% demand our and higher total company X.X% we level QX. net quarter. of net sales. XX.X% and QX sales net sales XX.X% in QX channel

sales over the year. last increased net Foodservice X.X% Our quarter first

QX in due and growth Our with eCommerce XX.X% of decrease where grew increased net strongest the over net customers increase customers Gross with sales of The was quarter. and quarter XX lower customer XX.XX%, in growth margin outpaced last for point to representing margin was a by growth mix that an offset versus quarter first surcharge. a fiscal shift came sales last at other our fuel XXXX. – quarter consumer partially sales first year-over-year primarily year's decrease sales in year, basis our since

in storage, was primarily fixed sales. decrease our and of compared a incurred costs demand outside first sales, net net basis leveraging the costs point operating The XX costs. transportation This by over by year. first on our expenses to increased reduction XX.XX% decrease partially year-over-year increased unexpected the was fiscal to driven labor, products time including quarter the offset were for quarter Our of last fulfill

net sales XX increased of an in of QX QX to also our point first for basis the as last distribution points percent and sales. We Fuel cost year. distribution represented of increase fiscal versus experienced costs a net XXXX XXXX healthcare X basis QX fiscal quarter compared in

increased quarter quarter price gallon to compared last $X.XX approximately compared Our national the which the a Department year, for diesel average fuel X.X% per costs of in XX.X% first Energy’s gallon or of diesel to which per compares of the increased QX, to last first gallon year.

which or fuel fuel average in gallon XXXX, cost our diesel expired gallon. to the costs per XX.X% in of lower fourth due Compared of were to fuel reported per to fiscal quarter a primarily QX XXXX, year. Our locks up that gallon diesel was unfavorable fiscal compared national the $X.XX

diesel the basis end a year-over-year $X.X QX, a was in million expense of rate than a XX million $XX.X offset the $XX.X rate due $X.X in XX% compared approximately XX average first debt of X.X%. quarter XX of million last increase to exposure. year. had national floating to Department Interest of $X.X period, of compensation million For we last was an from points with basis year. million income of for our basis, up of approximately QX was the to XX% million, to Share-based in last compensation an share-based QX QX partially increase sales on fixed dollar leaving million Energy’s in points $X.X less $X.X and lower represented basis compared rates $X.X QX debt operating our million of up gallon At QX floating was the debt price exposure. interest of net point year. last On per in by QX in expense same expense year

approximately year. $X.X of For fiscal of to year. first over of the XXXX, the $X.XX earnings million compared QX increase income was last share last $X.XX an of company per in QX $XX.X of diluted net million, reported QX quarter

minimal, the QX of Standards majority vast in be was vest of the During share-based $X.X first million effective earnings $X.XX net the from this last X.X% EBITDA the million, of company QX XXXX, million impacted of the item, sales, our the Update new QX. for the EBITDA This stock less of discrete was $XX.X fiscal headwind to year employee margin slightly and year in an standard the negatively X.XX% a Accounting tax awards as increase is $XX.X quarter last of Recorded XX versus by expected up company's share XXXX-XX, per down quarter to points improvement at capital accounting than quarter accounting. year, basis was to rest same adopted sales in working of end QX X.X% first $X.X year. rate last impact quarter. to our the compared on billion, the from as over net diluted growth the Total or of of period. QX X.X% in adoption the payment

the year. expenditures first were last from $X.X million net capital quarter decrease Our sales, or X.XX% in a the X.XX% approximately of net of quarter of for sales first

free As to shares $XX.XX. discount million share Board quarter, for up typically We quarter XXX,XXX stock. for quarter the demand. impact This preparation announced is negative in negative in inventory was by fiscal cash meaningful. XXXX was in in represents of Due a or $X.X the authorized we by QX shares quarter per the flow year. our first a diluted to cash our increase unexpected in significant repurchased our repurchase a a the compared increase on the exaggerated an program quarter price lowest share first of October our last of cash impact EPS million this to of on repurchased common reminder, average flow the X, Directors million In to million for demand. flow during free today. of driven not first in cost the year The of holiday timing $XXX we the approximately had $XX.X free our share that of the quarter, $XX.X first we of closing

of compared QX, of under Our than strong. lender end leverage were of to year. commitments expectations. performance our company's cash on to At down liquidity end leases including available UNFI’s was of $XXX full end year. At last Based the long-term provided facility At fiscal is of balance XXXX. X.XX million excluding first to-date the be approximately our credit on reserves basis for times, XXXX, and of sheet of points quarter equivalents. lower first a the turn previously the excluding the remainder liquidity higher the EPS with our million continues debt-to-EBITDA net XX the debt-to-EBITDA outlook which QX, sales increasing the its operating was $XXX last $XXX was was guidance, million, XXth which available approximately and leverage and Outstanding September was cash than quarter, our company the QX

to billion now in billion approximately we of a $X.XX. X.X% This previous share to estimate XXXX compared represents approximately July share $X.XX now X.X% fiscal X.X% the over fiscal increase at X.X% previous our guidance $X.XX increase XXXX XX, of for earnings fiscal X.X% sales X.X% per $XX.XX the sales. or $X.XX $X.XX over in range fiscal billion, range of approximately We over share. the ending $X.XX compared $X.XX to to or of billion to XXXX XXXX net per to to fiscal earnings $X.XX diluted midpoint of of the XXXX, net For at diluted of per $X.XX estimate growth to estimate XXXX to to net diluted sales the growth be an

a XX.X% consideration expenditures XX.X% to the We XX.X% At does to Capital over of previous tax U.S. operator are I'll not from our Operator? call session. X.X% the question-and-answer under to XXXX reform of impact flow remains for well sales the begin tax the to Congress. range the our This fiscal sales, guidance in expectations of point, estimated of any as free million. net this $XXX $XXX to percent at XX.X%. unchanged X.X% rate cash be of million range at compared reducing include in as to turn the to as to

Operator

[Operator first is Instructions] proceed Company. Rupesh with from question Please question. Our Oppenheimer Parikh, your &

Rupesh Parikh

I players at organic, point. all start pick to clearly really publically trends the out, seen the at maybe guess environment, this natural, So looking we’ve overall up traded

and point, do you sustainability? So pickup you is your just about what from curious advantage think the driving are how thinking that

Steve Spinner

traffic I competitive. about has a And the had think more think I the We've what price are and of bringing more gap and we mean, lot retail think, that's day, limited better-for-you it. is we've think of spent closing the conventional, become the that's the of which doing time long stores. isn't thinking products very We the gap, more between really healthy that question inflation. periods And environment a that I and the price into desirable. is

the the clear evidenced is our and UNFI so long-term the revision as by believe beneficiary the in in to guidance. And short-term we

look kind XX%. around if XX customers, of our you at when So also the at the But other overall, you of talked top about kind grew is, disclosure they comment at interesting growth - you supernatural. our look Mike other

across we're is most which for us. seeing of our customer lift And great channels, so news

that's think our happening. I what's So of view

Rupesh Parikh

again, you if but any organic or data, growth in not not rates sense of have actually have And increased the of terms I'm across guys sure industry? the whether

Steve Spinner

takes guess a Yes, because quarters the to get long I is access data But and we're two and nice or up that to quarter, aggregate mean, it going there. probably to it's would in it. next premature probably so, for the time pick see my we that

Rupesh Parikh

one And more quick question. then

was the greater there that EPS? the on those quantify quantify really I commented during the way impact expense or was any slip unexpected what what is increase just Is guess on quarter I - it demand. guess - SG&A the You expense, to

Steve Spinner

mean, the to of close to less to increase, the can the using in we products we focused when get that to just kind give our of don't country, sure lot fact whether we freight. a to demand, be that have that words, whenever that that I dramatic typically other tell money We eyes of that lanes we increase kind going you quarter. to kind anecdotally, of access to disclosure. I are have have in service. you that do In that have on and kind you the making we customers our so it's efficient of product in And moving do around we're get this certainly it’d spend the move it, order something had

Michael Zechmeister

we going sense position I and But time, spend itself to a get like. put where Steve's would demand add the can got of a comments expense overtime handle the a that's outside then a we've unexpectedly, storage certainly doesn't as when period when and we're picks and we little to a more transportation on up longer in for present over headwind. that once it that that

of of Now, be additional back year, normal expense half that we certainly we demand expect run absorb the without to able by would would rate. kind this this over our flow

Operator

Our from question. with next Please Guggenheim your Securities. John question is Heinbockel, proceed

John Heinbockel

have then. just guess, work level. will more overtime back So a That costs to not been few months? yet down on storage able the following Steve, that more outside you take normal still up I to a and

Steve Spinner

continue see absolutely, probably we’ll the after Yes, that until holidays.

Sean Griffin

QX. would I say, early Yes.

John Heinbockel

back as costs, coming about the year putting a dip are that places? seeing the you And the had the you what there. fact seeing you'll a think you from see of we Are is capacity right is do get we little higher benefit? And demand that a the issue Or into all half benefit utilization, utilization? you in of aside - talked these - one-time

Sean Griffin

it we had to FY as in discussions certainly have regard. and in utilization, all of this capacity First XXXX relates

how plan the to of evaluating expense that historically we And here for in related our up leverage as to topline. DC model, of see for discuss off back timing we would But we’ll size with the our in of revenue centers, perspective the goes. model, so do leverage distribution and we we go. some present from expect the obviously the may the the the a of that make that to ramp capacity not in see see to changes begin expense terms we're - we year an we'll of So, up ratios the did type ramp the in half get increase

we where from can we So, go about good feel here.

Steve Spinner

And fiscal the still we're this important It's our note the revise back we’ll and year CapEx that, of through we that. not half to did we XXXX, new year, and consideration the additions with with comfortable do or get we for looking once to XXXX CapEx we at give we'll start guidance but where to need comfortable some XXXX. for we're construction, provided

John Heinbockel

are Amazon-Whole lastly, customer M&A did things or in Foods terms freeze - kind whole wins? making you we that where new pipeline-wise of people think then And and of the did the on And do no? dynamic, changes

Steve Spinner

not No, all. at

is M&A time new strong, Our did with for and of previously, as I four a lot ended. of lot for took our pipeline XX lot months, them within a within a spent acquisitions we customer we're people And the integrating satisfied said strong. where lifting, work of is it - we really pipeline lot company swallowed heavy a and

to we're back ready to really we’ve a balance sheet M&A so trail, on support And the got to it. get

delivering to M&A both XXXX. fiscal and I so, results throughout pipeline look some forward nice the And the customer

Operator

your next question. proceed is question Capital Andrew Please Loop with Markets. Our from Wolf,

Andrew Wolf

things? from commonality vendor it was is grocery perishable side there of any in like, there the the versus On more specialty shortages,

Sean Griffin

was actually talking generally that mind, categories. sudden the Keep we’re about. affected great a say so suppliers it it's that demand that would I specialty in many

that moderate. expect we So, to

XXXX $XX An sort the suppliers are in case, timeframe. under of for this meet or to a We demand our get towards expect doing majority will manufacturers note than their them and buyers [indiscernible] year. less that million important is, is so, instance deal QX-QX the legs

we have season. increase of the a subject heroic us to vast stocks during same produce lot of of they when produce need. to really had our to a you have and some smaller that the we do a just that But inventory could don't a So, the they of it. just suppliers did demand that the have majority supplier get demand suppliers were trying is that because don't great And ingredients, co-packers increased holiday out deal vast they There quickly to job that in the the issue enough. significant

Andrew Wolf

they really But out stays enough pipeline there's the ingredients demand able the if strong gap. or be to should that it there as meet close eventually, is

Sean Griffin

Without we a doubt agree.

Andrew Wolf

cohort help feed, mainly so Now, business was was that sales of customers reasonable existing with on from sales customer your more and just there that. new a sales,

Sean Griffin

was bit of a both. It little

Steve Spinner

as previously I discussed shipping relates we that new tell the And to it target would to you customers

Andrew Wolf

is in And the I kind costs, thing quick costs, manageable then just related the that is a think or up a one all healthcare have healthcare it’s that of just is - you’re the not follow-up side, it of other of something the of to costs surge necessarily year? last randomness expense but is care on a going that that's is and called that trend or nevertheless the health these demand to for

Michael Zechmeister

the company healthier acquire really plan made have significant instituted We a and educated year program that how about a wellness across four to workforce to terrific improvements an years, to years five workforce healthcare. ago about and every really,

than at particular, we're just of handful were so really quarter in doesn't. quarter, couple costs and I strong claims the the not, healthcare over were they healthcare they way higher you of And that really, going we years, in this or I'm if thought costs particular had a were to But Whether don't they continues look our be. last in our that just know, it it significant. brought we hopeful

Andrew Wolf

margin gross any or of operating was did these cost impact to through don’t to that at but sold goods that of flow them any quantify you rate any I precisely, of or were want of want necessarily impacting then all – excess nevertheless And expenses? them it did understand costs – the

Michael Zechmeister

had, difference think to of about be costs, surcharge have increased about we've have storage fuel for surcharge expense. expense, then medical expense, have margin, talked we overtime geography that needs outside gross operating the fuel increased a pay none was the we a the margin. in we costs enhances when and is in which but fuel When extra when we costs that we Well, you our transportation gross which noted

so at an and but to net us back out margin then income. we it gross And then nets but - get increased margin comes neutral

Sean Griffin

gross going comment But you take our on back did margin. other be. catch probably XXXX, make the inventory, for you capacity manage call. much When you're you everything properly should would your you're And another the greater plan time we’ll to if margin to to the margin our into look the a inbound One in I spending associated managing with scrambling to have when at you're gross that inventory and you gross job Andy and fiscal a buildings, than can power doing get we great inventory. the up managing less

we that's that to have to our get growth just in something get some overall so, once And we stability back number.

Operator

Our Chuck next proceed question Please comes Cerankosky, your question. from with Research. Northcoast

Chuck Cerankosky

better you with seeing quarter, you of rate - for I’m inflations any still are for earn previous the In flat or perhaps looking to some United opportunities the and looking margin? inside flattish, inflation at at getting

Michael Zechmeister

quarters recall some enjoy haven't trend for it now it within a as little is too. seen now a really year it Chuck, there we had that higher deflation we bit those in a but half very you of and modest we and is quarters there inflation a was, than six

where didn't little a a it. includes X.X% that So six rate over bit got quarters past have inflation these our it's XX-year and little we But is better. average

for head in the but it historical where back as future, going of guarantees sales tailwind would average it's dollars. no were to us that a So in certainly be the net if and EBITDA to

Chuck Cerankosky

them And so now back yeah. just another sort because then demand it, up the least the going vendors, it's of to on take size? quickly quarter We get their catch with can see at of

Steve Spinner

couple but mean early expect to I going QX, Yes. it’s another here take of periods. it's we improving

Chuck Cerankosky

on did finally saw months the Was quarter? that through then, you of of quarter? growth quarter, the uniform accelerated it in sort the And three how sales pace the over the

Steve Spinner

We acceleration whether to the exactly started quarter some know at then. be it. see going of mean was XXXX. to coming I was back to But the were happy end We continual we didn't ramp sustained. fourth sure really see acceleration a very from. the since We where weren't seen we've it

Operator

question. is next with Bank. Our Please from Deutsche question your Higgins, proceed Shane

Shane Higgins

then So you how nice and ramp add what looks the how that during to it in guys what said as eCommerce driving up that was quarter. to know was overall driving the and like color impacted a impacted you had Any that, margins?

Steve Spinner

strategic don't any the as You big the can of solution eCommerce, sales I both know in that for we on important to we all use know lines their doing you having to that margin. tell side. for is technology them we or of products focus retailers, a that deploy our give extensive across offer curate We're the very of well. very an a terms area aisle eCommerce us, eCommerce all. really can focused so consumers eCommerce We're to go us. about an of to we endless most really, directly brick-and-mortar all, the or an well eCommerce a it as be our work all so web-based of lot strong the rate That's growth really objective that's growth on for in we I really of whether but saw technology don't providers would disclosure them. on

Shane Higgins

of to of kind guys And you plus growth have growth? continue that year-over-year level do to handle that XX% the capacity

Steve Spinner

now. eCommerce DCs Yes, - the quarter fortunately, four through deployed of into our I mean, we've I DCs guess our of four we've

four to we’re we're as well segregated see some time. kind one. poised centers that opposed growth for volume continue that distribution of different to I to so pretty period And And of – think we in just into have now

Shane Higgins

me the for last that neutral net a fairly was on And benefit during just that to quarter? one to earnings sales or and hurricanes. then the Was

Steve Spinner

not some of claim expenses of and things, experienced as some Yes, associated with certainly headwind other of a and our make disruption some think net deductible in there expense that that definitely and But earnings. disruption. a We’ll We were net benefit. back and because quarter of the we some that. a insurance to under get

Shane Higgins

guys it material but call out? I it you that mean So wasn't then

Michael Zechmeister

Right.

Operator

is Please Ben Our from your question. Stephens with next Bienvenu, Inc. proceed question

Ben Bienvenu

quarter be margin, offer be You to this out on competitive Would appreciated. quarter. last inaccurate color pressure the gross can call in there it you Any infer but as not is a competition would sequentially? lessened in pricing that

Michael Zechmeister

Yes, quite but pricing you been can't in a pressure many a tell competitive Ben, many I out how we've for quite exactly, few. called quarters, is while it's

And this out so that came quarter. that,

at just gross made point, we and observation biggest point Your our didn’t that the I one trying feel is And like to were of notable we the the because margin of think drivers this accurate in to call-outs. overall. list is margin our

Ben Bienvenu

you leveraging another growth put it growth in have - pressure customers. the persists would would of resulting to shift incorrect mix from factor shift to think some persists, supernatural that margins, contributing and operating that impressive to x I and And this strong assume preclude this margin was it the way, you if lower mix margin the demand? of leveraged the is the obviously margins the wouldn't the a from lower operating ramp would fulfill

Steve Spinner

Yes, right I path. you think the are down going

Ben Bienvenu

to or work get heats to it when is have M&A off not free you million cash, guys And you the a flexibility a quick place, capital to share you of and turn particularly deal one have signal in want more could of purchase, it just that up? not program isn't a one. lot imminent, a a lot last of is leverage. then That's it this just then The $XXX put now,

Steve Spinner

for then M&A management. prefer a to that we need investment. our returns in believe that we To strength a to ourselves got we the extent in believe greater repurchase and share have help in a value up, do that for But have share sheet toolbox return to at teed is or way structure pipeline to use we've tool our as capacity wanted to repurchase we shareholders balance to out. price the investments extent that through then didn't those, have right that we Ben, in provide capital opportunistic the we

today. $XX so share under and pretty saw made some repurchase a And we quarter, at good about in we you the that feel share

Operator

your with Mandeville, from question. next Our Chris proceed is Please question Jefferies.

Chris Mandeville

I of primary mix gross quite earlier to my was margin the to customer? in actual magnitude, erosion what shift apologize But connection of just the on lower from poor drivers margin terms just order aside the were the Mike, the call.

Michael Zechmeister

shift. As mix the said, and we was only I’ve one that customer called out

You that, customer disclosure or little saw XX bit you in XX% also. heard our top rate if number top there. we one if Steve supernatural about was but customers excluding that our XX% growth certainly XX a But a growth more at our comment customers look you

a we real you from So good surmise growth headwind that margin a gross from standpoint margins. there. can was on that, that had But

Chris Mandeville

And anything the any the maybe of regarding margins color in from fuel actual FX? benefit terms and

Michael Zechmeister

but Yes, we translation points tell standpoint, tailwind didn't was talking call basis expense. to fuel XX the in out and standpoint level those specifically. on to operating that basis neighborhood a from of X FX I the margin about, points that you the from transaction. give then in the we From the can there roughly gross an back same

Chris Mandeville

bit bit the around what little confused caught sales I little but at more end am apologize, the give a off quarter. you ramp the just I a by context guard? still you in true surprise of Can then, us the back And

Michael Zechmeister

of whether weren't continued it sustained, knew XXXX, fiscal we fiscal sustained I be upon what going for based we to mean, fourth and was see fiscal up. We XXXX it Yeah, fiscal out in into only the but of was sure in to we our starting it towards then a and the to ramp budgeted our really got quarter, to weeks we the sales end first obviously, XXXX grow. as we started months and ramp not finished XXXX. couple

X% that you as period a with a just center very that and of X% short turns XX% workforce. for not into growth imagine, you in labor, volume so example actual. time And with budget budgeted prepared in distribution inventory with if the the might the We're

on And – tremendous a organization in a of ensure the have to so it order amount service. level we of puts that tends stress high

that’s And we're so what about. really talking

Sean Griffin

seen comments you more at look our you last quarters. for ex-inflation, growth couple to or just look five so there, add increasing the quarter-by-quarter four at a growth our core the impact, ex-acquisition if we've quarters core And growth,

we've so, increase. enjoyed that And

like - previously. of didn't captured have guidance year, that felt that acquisitions for X.X%, growth didn't this had seen X.X% that As we tailwind, the to the this at so we a we core we set impact as we year

without obviously the inflation and a without acquisitions. delivered benefit of X.X% Now we

numbers just So increase core expectation growth. that from saw that we rapid just shows on kind of in the you that

Chris Mandeville

then what with? And just with the greater been or is a you've may historically in of customer. you factor servicing move somewhat providing expanding volume SKU on result with the the Was more simply be a of them outsized with Or lower-margin them set? that sales increase and the quarter them driving the of that itself

Steve Spinner

generally it's It's expansion the category inside. higher it's it's on board. rest traffic than And a base. of the lift, later, the a new higher rather contracts, think coming expansion It's speaking, customers velocity the general just that generally than think customer I former existing stores effect the an they're at of some we into But a of improvement I at service. speaking, expanding stores.

Sean Griffin

And of we that there think I that's the really sell. higher into and has there translated volumes. the up space is a attention lot of consumer And kind and picked out in excitement products the

Chris Mandeville

the have the in to for on the kind million then the not as one available? of relative it been been quarter? so Would that buyback it had capital? in demand just on itself you incremental just $X million small have of And here, for the the I'm greater quarter, $XXX was working curious to last me why

Steve Spinner

you If at didn't approval of the October. look start program till the at,

quarter out primary have didn't the reason. probably full be there we a and the benefit then the yeah, that's to So, and - – of

Operator

Vincent with question. from Stanley. question next your Please Sinisi, is Morgan proceed Our

Vincent Sinisi

with once and to balance go wanted the the margin again just of sales to just So, the back kind here. dynamics

larger effect that for shift competitive kind of that customers customers dynamics the it. customers, the the growth the question a smaller mentioned front had trying have customers just on guess that XX% growth coming the of status volume, XX you seeing top is, XX a commentary in get get the competitive or greater. you to nice Is totally to not? like it may So reverse of obviously is as fair maybe the it That on out, mix on had and that, kind say quo it the margin. is But had I your versus ones similar sense kind where fair changed between hard difference say growth, smaller the or are that the industry rates in to

Steve Spinner

a quarter. X% observation I a which independents, growth the are certainly growing I in really faster But over larger I than still customers good larger we was mean Yes, directionally, believe we that's that have think pretty our customers are But faster. respectable percent the the smaller. think, that growing

Michael Zechmeister

that at not products I channels. And that largest to with think our customers the the the expense our testament and a rate Steve our other the most than of that of point that's that's growth grew it's all customers fact And a stronger come significant good growth did at quarter independents popularity is across making the of X.X%, before. the

Vincent Sinisi

kind normally sales case for understand capacity should was physically. outside if come a a mentioned more just just - didn't was that? case And of sure kind and have would to of to advanced areas expenses, some follow-up a planned that of just planning you geography, case allow DC’s more earlier make you some it varied timing ramp the more just of had but of have fast as on to it of in where of in the How you that the or some not the the about maybe was with by think it with a we when did that we storage you more had the

Steve Spinner

an continue It capacity. long certainly versus challenges others certain as centers is upside the leverage opportunity, of that perspective, certainly short geography, and of the the and as we some that a couple of it have we sort irons or we’ll prep prepare. have we In a by. the afford so described that out But the distribution best planning up could. distribution would in had instance, contiguous and did we included to to levels QX, gain distribution that is goes year done And adding and And center if not that. it afford ramp instance, typically volume it a times into execution center, that kind would not that months to we expansion from this several that against in of space saw digest and we we've that we would execute have would out

Operator

Mushkin, Wolfe Research. question proceed Please is from with next Our Scott your question.

Scott Mushkin

none XX for the independent I thought to XX bucket, apologize and the top - But my maybe that. of in the that I'm there? some, were cell clarification, one on top clients or I independent mistaken I’m there clients be bucket

Steve Spinner

not XX independent, true obviously. they the top about are talking top the you're in some… customers, in If But singular are reflected XX

Sean Griffin

single that scale. entity national in a that as significant are customers Significant scope have aggregated and are

Steve Spinner

Customers natural that we multi-unit are would operator. consider

Scott Mushkin

But they're not in that guys us? independent you bucket give

Sean Griffin

not. they're No,

Scott Mushkin

Okay.

Steve Spinner

that not true. Is true, that’s

Sean Griffin

of some them in are Yes, independent the channel.

Scott Mushkin

want make sure, sure. I so, I just wanted make to and to I thought just

and through The Foods prices comprise, roof. the there's been gone stock second through issues just I I Amazon the question mean, there fault, Amazon it's at again roof, really think - buys I the had they’ve some volumes Whole would I goes Whole volumes been is financial cutting don't Foods, and you're think

it’s I but in more prepared see problem they it’s if have, mean, research. to continue about we are you how this well being they're very guys So to to again a with and and that, problem a do stores great aggressive deal

So it would how or to challenge to is to CapEx to might do some spend, forward pull with because you things you with if possible of likely they have is operate guys be to this other deal deal it. continue expectation this way, And persist? your my this,

Steve Spinner

or result history one our a new comment customer of as channel. where We inflation. volume any we in customer see We've obviously on had periods or a ramping either wouldn’t

some and we having so deal with it. And know used how we're growth in lumpy our to history to

on we We we throughout how the the to know entire built know And our most sophisticated the bit we service way so get distribution we pain like North with one how in incredible the goal we're most a of level execution a workforce and of buy to America. level we and when we that country know got do. as have finest like regardless product, and to we customer of across the cost, network have And our network, we'll very very how challenges and through neck. move a We've But bumps to of in our our out hurricane, provide get is the work is around a chain to deal really know what the we deliver we an do. service of a that high our or result that’s how always short-term function, little that's focused it. it base it supply

Scott Mushkin

is the they the vendors what their to Home we to expect and you of question tax of and came well reduce potential do My last the expect regarding your kind to get do cuts the Day up, and cuts Depot Analyst said, yesterday cuts, to question pricing share. the tax them

taking you thinking my And wonderful so your through are of vis-à-vis, and be us maybe how partners you play may can maybe that questions? you and big the cuts about how some guys walk retail would for out, thank that tax

Michael Zechmeister

a can't do the or we’re any of signed and on that rate But result just would to flow, a impact as reform all provide may increase to that but until you I and been contemplated reform the can't how EPS. we're tell free net the our see had speak I'll that suppliers, evaluating the reform significant aspects law, certainly of we public to tax meaningful into for lead the cash assurances about what UNFI. tax disclaimer, tax tax potential customers made for income, And, said, as reductions a and it. effective thinking to we

to Now, that or be rate benefit see tax benefit and an more $XX as well. $XX we million cash XX% additional if does you assume corporate expect tax would book happen, for then million that would $XX million the to example

signed bill tax we as overall, state do impact the of a get the occur bit into timing the in certainly effect if changes the business any rates, quite the go where positive. see well. is to a when when and is what and we various Now, subject But changes of

the able what in terms suppliers with customers on on or impact happen that has now. not again of Now, might to it comment

Operator

Our Sachs. question Chris your is Goldman from with question. Please Prykull, next proceed

Chris Prykull

is where sales online and you above that or your question, supernatural quarter report? saw ups the follow the increases quarter? any customer few that done it you and the has, sales you're cadence is reflected for into Just the fair strength categories a assume reported running first growth. that given the second by on A, Are just you you probably item large described the that eCommerce to an continued are accounting in there reflected then in line And number specific

Steve Spinner

do we side, categories respond in the but the are sales broad the not last I not the that is mean, would we the and of handle generally in which of say the in terms speak on based. distribution eCommerce channel sales question channel reflected so would calculated I by it But because category it's Well, communicate our all eCommerce, customer. are looking our growth, growth. and Number the two, I at

there, Chris, third just there remember don’t think in was what is. I I it

Chris Prykull

was first cadence second the assume described from of above you strength the fair running continued in just of that trying Is quarter? what gather probably the for that it that sort I printed to I has to quarter from XQ growth sales you're just today. you to and guess

Steve Spinner

Yes.

we for guidance. a upward our don't quarterly We we're and comfortable disclosing. that number obviously year guidance revised get that's So just the so

Chris Prykull

would and to does CapEx. to one it last one revenue have on of or to look like you What go go closer number And needs scenario the would up that CapEx then higher? just where your of X% sort back be

Michael Zechmeister

we've is that our X% long-term what guidance Chris, of on sales. is said CapEx

past new here that, warehouses. we existing than years haven’t few Now on because put lighter but over that's onto expansions or seen warehouses certainly is the what you

back up. you warehouses, years as the look If percent we you new that that go CapEx pops where in of at opened history see a our sales you and

it's above this we've forward, again the we we So, affirmed as in so we in, this go we go put contemplate have capacity that historical expansion CapEx But year, as for to that to don't and see our if year. likely happening average. guidance

Operator

like end call to we would gentlemen, the and have question-and-answer closing I remarks. Steve Ladies the And for back session. of reached to Spinner the turn

Steve Spinner

in of happy ran evening. safe queue didn't this we season that Thanks time we'll healthy out and have to, conversations to couple talk you everybody a to Have know a joining we just that were and people I us next and for Yes. the of we're there's you. get year. holiday with one-on-one

Operator

This concludes today's conference.

disconnect time. at your you this participation. may Thank You lines for your

United Natural Foods (UNFI) 7 Dec 172018 Q1 Earnings call transcript