UNFI - Earnings call transcript Q4 2018 | United Natural Foods, Inc.

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Operator

Good afternoon. My name is Cheryl, and will be your conference operator today. At this time, I would like to welcome everyone to the United Natural Foods Inc. Fourth Quarter Fiscal Year 2018 Results Conference Call. [Operator Instructions] Thank you. Investor may of your Director Freiha, Relations, begin you conference. Faten

Faten Freiha

conference Thank Cheryl. fourth joining earnings earnings you release Good of you, afternoon. a you have quarter By received should evening, XXXX issued Foods Thank the Natural everyone. for copy now, United us fiscal this call. on

the SUPERVALU the periodically webcast remarks. prepared The investors SUPERVALU release, the In be a available Investors presentation during referring addition, under management to related tab. company's section acquisition slide today's presentation call, acquisition are of and of to under pending website will to related the pending the www.unfi.com at press the

our me Griffin, and Integration; Steve Mike Joining a Chairman well and Sean additional the performance integration our as management's designated Officer; on Spinner, Zechmeister, our remarks plans XXXX, in about outlook the CEO business the related provide Head of fiscal provide year quarter, the Chief pending once are Chris UNFI. an Sean SUPERVALU today's as SUPERVALU. closes, conclude. questions take of for update update after Financial Testa, of President Steve deal your will speak and prepared Officer; acquisition. and We'll for Chief provide and will Executive to on information the SUPERVALU Mike call the

materially turn Events estimates, release discussed refer call, may non-GAAP differ results I'd the These included and in the company's that to projections uncertainties. call company's These filings. point discussed begin, I'd and Investors today's during on release to to from forward-looking under Steve. in contain comparable of now measures. in made the risks the the GAAP plans, these call and statements. SEC to Actual Reconciliations are like today's remind significant like during statements. over management lastly, expectations, the out we to on tab. statements by are Before website everyone that earnings schedules results might may press measures I'll management comments most risks and the forward-looking forward-looking involve our section certain financial that financial And the will include

Steve Spinner

Faten. thank evening, joining for tonight. everyone, Good Thank you, you our and call

going begin, we and who thank that to centers on region, associates, any second color not Today, Hurricane associates. two I'm by been fourth in anyone with and give will Florence. a quarter affected affected our our on damage, the customers, our take few and on comments our to SUPERVALU. the in to did time we to have and like a stakeholders report else or I'd both have situation closely, loss, then the thankful we're We're we'll Before more building them for just spend full-year. Carolinas some the the you storm, by start very injury distribution product at monitoring and Mike and results, the

As as posted noted today's help acquisition. in a SUPERVALU Faten mentioned, we have discussion on our release, pending and to the with presentation

and new performance, an talk will plans. choices are existing really a integration and new. to as this reach, significant about premier Mike leverage, planning, about and then update capital year-one leading food a stronger with for transformative Sean create We excited transaction will allocation and on and provide scale, wholesaler business customer’s and

January deeper all XX when of of company combined review with Orlando, are be remarks all a on While We'll Wednesday, a answer our questions. to information than hold operational our your of prepared little Investor financial this in and Florida. will we on longer sure Day usual, we build the

to full-year Turning and results. QX

continue fiscal see grew We in for strong our XXXX. to growth X% channel. Supermarkets supernatural year

to quarter fourth the in slowed growth However, X.X%.

but for net store to sales was below customers margin hyper-competitive XXXX, market the quarter, margin costs, result in and continued our XX% we in of expected. inbound down gross our the higher shift at what The did specifically year, customer captive because closures, distribution, within we freight lower quarter base, from that experience mix, than retail. XX.X% and maintained a fourth brand of While and is customer loss we growth XXX grew expectations, faster the more basis have points

As a full-year range. our guidance was below our result, revised EPS

During would costs we our through overly third call, and in more fiscal year. the abate our pass a quarter freight inbound we XXXX guidance these way. hindsight, could optimistic raised were expeditious for In that we costs

of we decision demand, but could areas timing, increased right these fourth the meet Despite benefit. result, growth. not the XX%, Our over expectations grew reform excluding proud this tax EPS time. and the adjusted as XXXX focus during our numbers. quarter short remained in I'm Tough X%, our just fiscal on XX% of result, support managing our to and a period Sales grew or

XXXX versus compared As unfavorable, quarter supplier degradation in quarter in fill quarter of pressured unfavorable, in approximately were basis discussed XXX the demand fiscal higher we points the past, and see we inbound chain, Supplier third supply as the fiscal continue prior the basis our to out-of-stocks points in approximately fourth to the year, same of XX rates. XXXX.

dedicated We alignment working to with continue suppliers our on and demand signals. enhance to to be

While business short-term faced fourth nature. we're disappointed quarter, the the they're we acute in headwinds do we during with believe

manage we our timing we lag. one-to-two-quarter more costs, headwinds, XXXX, expect can freight that fiscal freight as of these the particularly despite For through to we pass believe expense, better

our total, overview, As robust the Thanks, remains in our Mike. some service freight we you I'll marketplace, and provide better-for-you to on over already opportunities numbers look for and to customer Mike color evolving the far for we to expected, quarter. seeing an turn additional With UNFI's forward call products growth. we're continued now that overall this demand very compelling In so year. improvement inbound in

Mike Zechmeister

were XXXX, results. for our Thank SUPERVALU. you, Steve. with capital related SUPERVALU XXXX fourth quarter outlook some I'll financial expectations. to our of quarter, approximately call, the leverage, plans, million, last $XXX Starting basis additional sales on continued year. experience XX.X%, quarter acquisition, fiscal on increase of and and excluding allocation Good In an billion, modest perspective a us. or XX performance, inflation Net we points, fiscal provide compared $X.XX evening, QX approximately to slightly I quarter's the This was or the UNFI's joining thank near-zero year-one last you higher compared and our marks which fourth for average deflation of basis XX consecutive also points. details tonight's inflation, to modest fourth everyone, XX-year ninth of will to inflation speak On provide than either pending quarter X.X%. of

XX.X% retail July as primarily the Origins' our at of The perspective, by of quarter. net sales grew and accelerated Earth remainder Given are year, Supermarket over the business Earth plus From last growth. independents QX net during lack that customer X.X% of market quarter supernatural channel and percentage year, banner. independent our to markup, we The of natural On our QX result Origins be remaining headwind channel historic under contracts dollar net a levels channel predominantly a X a XX.X% cost at divestiture to year of for total of prior the that inflation XX, XX.X% operate represented EBITDA increased sales total approximately last year continue stores net the sales over our fourth food sales of to sales versus XX.X% retail on channel X.X% closed divestiture and landed business. versus declined modest net the net approximately a last X.X% of represented total the the quarter. a sales. of

included also food comment channels, me been and other on our have which results. service channel e-commerce Let our historically in

sales, QX net in and QX versus year, we food service E-commerce our grew declined and year. QX at of as X.X% X% total profitable total some in Our of less net channel versus sales rationalized X% represents out X.X% approximately represents our our approximately last business. last of

continue our attractive outpaced for XX.XX%, the the related uniquely invest other positioned fourth The divestiture the Earth customer costs. a Origins a fourth subsequent higher in was and expense net XX-basis XX.XX% shipment and e-commerce of where expenses approximately an and $X.X recorded to to in channel, in on million growth $XXX.X add fourth for points. period acquisition-related decrease million quarter, well Total price driven right to inbound for disappointing last shift as with XXX we The margin our increase to the decline largest of the the year. of customer compared $X.X of same expenses to sale freight business. with $XXX.X the same are quarter were growth compared associated million, greater-than-expected growth as company to of by sales compared Operating our Gross retail SUPERVALU profitable year. decrease at sizes, period points, the customers point last at broad last quarter; net operating as million forward, in Going of increased of mix, with basis acquisition margins, $XX.X restructuring fourth the the were will value in restructuring in results a assortment sales and year. pending costs to fourth quarter we quarter the million

XX represented divestiture by which fixed costs increased improvements, net Excluding sales, of fourth fourth net by driven leveraging SG&A the fuel quarter sales. to quarter XX increased XXXX were compared fiscal points, service charges points XXXX, fiscal and demand. of to of adjusted costs and operating basis offset by basis and acquisition-related as Fuel and a by of of for distribution XX-basis percent primarily the distribution expenses points the improved restructuring labor expense costs, costs partially and

Our average of period. or gallon average the gallon the gallon to gallon the costs fiscal gallon X.X%. while XX.X%, year-ago in the Compared was X.X% per the the $X.XX quarter was during XXXX, was diesel compared fourth of of national quarter Department fuel fourth cost the Energy's diesel Department up the diesel a diesel per per period for price XX.X% approximately Energy's quarter same up to by our approximately up increased or third for of per $X.XX quarter, price versus national XXXX,

As a in two us impact reminder, ways. costs fuel

costs suppliers the their see our our we increases our additional being For EBITDA these overall else inbound effect, fuel reflected those their In fuel gross we expenses been is in our fuel the dollar there headwinds all quarters reflected increases are cost increase the over realization from costs, cost, where are been one growth, commonly half positive a naturally our is increase programs. dollar quarters, we product. and that EBITDA fiscal program our has expect as whom when reflected changes suppliers for are Outbound the headwind rising, either to growth. costs way customer the in will is increases to or XXXX, operating first eventually results. have period, equal. we inbound sold costs customers. as of reflection is Outbound primary to second of product case the that freight pick cost, three month. the is the of in lag this to cost to cost, our lag surcharge years, tailwind been a or and freight way has in not hedged recent product us, When In one-to-two see impact to freight past cost over cost and to by the but Barring from Once past related a the as the to surcharge realization increases the fuel impacts for our freight in This surcharge of in into costs dissipate freight freight it turn product is in cost the work the rising. is case, to to margin. couple our either freight, interim value of that yet costs rates us inventory closer

was cash a QX were $X.XX, was This expense XXXX, compared of This fourth for last The which million, of lower in adjusted of quarter compared fourth gain $XX.X million $XX.X points fourth of $XX.X receivable quarter same fourth free the last of for under fourth QX, operating of cash approximately improvements determined fourth company's free sales quarter largest flow to of is quarter by $XX.X year. compared a credit income, had sale inventory QX quarter, Outstanding At the in was history, the million income QX, were share-based the which in actual the and QX of difference $X.X the commitments of XXXX. quarter, was fiscal our the to decreased net driven charges X.XX% last awards, credit margin margin liquidity the compared EBITDA of adjusted available sales, of the to and the income $XXX.X quarter, represented income for Moving excluding quarter EPS and dollar decreased stake quarter adjusted during availability in down or million is million ahead. to basis year. full-year basis, XX of performance-based to $XX.X from facility EPS reserves, versus QX reform. We $XXX.X in cash approximately to flow tax acquisition, basis restructuring, Adjusted it driven last $X.XX $XXX million million EPS of reduction to compensation $X.X the Operating $X.X fiscal the by of a with benefited EPS last $XX.X decreased excludes GAAP compensation was end to fiscal Other fourth lender QX Adjusted results. primarily free million points million, million basis divestiture for from due Coffee a million in decrease quarter. compared of quarter including $XX of compared The rate, fiscal compared year-over-year in by period adjusted earlier. operating tax XX $X.XX equivalents. to by $X.XX down was company's X.X% Adjusted last XXXX $X.X in million of XXXX. fourth Adjusted year. to $X driven last for expense compared Kicking for our million in last $XXX fourth for year. decrease in accounts was the other quarterly year. fourth million EBITDA X.X%, to $X.XX year. decrease $X.X are last the for to was EBITDA adjusted income $X.X for year. referenced of quarter, the driven a million flow million, headwinds On and fiscal fourth cash facility related million, points The in the $XXX.X of expense the gross year. million cash quarter million. share-based to our XXXX. fourth from XX QX and primarily under net EBITDA by operating Horse

for XX-month have credit support which of of XXXX improved facility August at group trailing finalized go upon excluding X.XXx strong, and the effect $X billion, tiers same the Our the leases. pricing fiscal new Lender agreement will debt-to-EBITDA close SUPERVALU upon into leverage XXXX, end to facility XX, the acquisition. which our On on of was and we very for basis operating deal. a credit this a as will it close new current facility, will terminate credit the

an the our of moderate in The fiscal for sales approximately results. versus points experienced basis to net in results. or $XXX We deflation points, company $XX.XX million generated fiscal XX of full-year fiscal inflation over Turning XXXX, increase year record XX XXXX. basis at of billion XXXX XX.X%,

of sales, year. inbound year, gross Adjusted to points $XXX.X associated mix basis customer freight. margin of X.XX% of EBITDA adjusted net was full-year, the down $XXX.X last last headwinds EBITDA from XX compared the EBITDA million million, For driven increase by an adjusted was with margin X.X%, and fiscal

company For million, fiscal XXXX, prior fully an of reported net approximately $X.XX of $XX share, or income the per increase million diluted year. over $XXX.X

for expenditures compared anticipation As net $X.XX increased of SUPERVALU of IT, was certain EPS lower in $X.XX we Steve last of projects, delayed fiscal approximately our $XX.X to as year. per X.XX% the were adjusted fiscal acquisition. XX% share $X.XX, or to adjusted which primarily have than Capital million, EPS in expectations, mentioned, or sales, XXXX

sales. $XX.X million, For X.XX% fiscal of were XXXX, net or capital expenditures

years, averaged net of capital sales. our Over X.X% approximately expenditures the five have past

guidance, our pending XXXX fiscal excluding acquisition. the cover SUPERVALU Next, I'd like to

million margin strong XX-week our we EPS range our versus On largest SUPERVALU to fiscal comparable our lapping incur close sales XXXX, is primarily adjusted expect X.X%, growth to XXXX, continued XX-week one-time and be to XX% as a Capital EBITDA our with customer. which On expect to fiscal did net not expected X.X% For adjusted comparable growth from moderated growth. and net grow incorporates expect strong dilution strong by that to X.X% net grow a acquisition to EPS sales to sales, due the GAAP basis, we we would in by expansion XXXX, integration-related projects. expected. $X.X if XXXX. deal over fiscal capacity in of EPS the note are X.X% in to XX% the expenditures expected fiscal of Please costs, driven basis,

without be to projects with million], capital sales. with of growing pending slower capital particular flow these to returns the net committed expected to or is financial impact strong SUPERVALU $XX free working [$XX at Fiscal are We their than a acquisition. XXXX million the cash rate for

on specific earlier details press fiscal and results, week in impact more today. the of to expected from the our on our release fiscal XXXX For refer table our XXrd guidance, please the year

the to the Now, transaction. SUPERVALU turn Steve talk let me call over to more about

Steve Spinner

Mike. Thanks,

Turning to SUPERVALU.

we Our we expanding our operating additional the environment offerings to US evolve the help to us believe needs product continues and and be that cost wholesaler. deliver growing value the enable to acquisition By will our shareholders. our add better be meet Combined, food base, our we for us leveraging and customers. and of SUPERVALU, scale, to will will rapidly, premier believe which able grow UNFI

label after and brands. combination, centers, XX have, more than over distribution XXX,XXX the will X,XXX We SKUs, private

store out attractive the store enabling of expertise, economically to combined variety products our all in country, in We in across high-demand back-of-the-house in-store including we to our over customers administrative the addition of widest access built fresh over center value-added an and way. offering, have sales will will our produce be With general providing retailers. to billion and services and products programs protein customers, to XX,XXX $X

analysis, we store to basis, combined the offerings all broader on our put a category management. helping On across product scale, with merchandising, to out customers expect both new channels, to with greater and are and and work further will data build focused achieve which UNFI SUPERVALU customers. to and We we retail existing

projections. to assessment, synergies expect by Let's synergy we want to now on we I million how Based our achieve get to current more we year-three. $XXX turn emphasize we and you our can of than expect cost what for there. believe

related sales detail we we've in opportunities. time are Investor will the our we Day, once and understand during additional synergies, had more fully other addition, and more discuss to expecting In which

website, I'll presentation X. now. If our with you turn slides the to the walk through I'm Page on starting

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all combination X. Page compelling of for our creates stakeholders. to Turning value The

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cost supermarkets, in concentration We've XX%. for going costs scale, expand is at had lower becomes a technology demand the customer that our Proven market customer combination gross customer, for with largest that's UNFI network. attributes. margin, enabler a products, We scale in better-for-you than our Our a and in both efficiency. strong always large to platforms, reach deployed and now foods greatly in our decline the with across the greater product says Technology. and be scale model base We will have that. SUPERVALU we're in rate from our the the greatest drives

perimeter further In have. the consumer. retailer it's in customer, today that with efficiencies offerings to our areas we the It store delivered Turning one products shows We of our the drives what more significant closer products drop Sixty-plus what It's All locations. combined the geographic closer retailers in to illustrates the success. No one distribution, has our networks company. the to sizes reach store. Larger to demand, what is and to the across and and customer, well it greater X. overlap. Page to most DCs the throughout out of customer close where the wins. think no SKU all build categories center the opportunity increase is scale the in-store

the for with and solely together, supernatural of XX as complementary Foods, have looking two again, importantly, of of forma how One it of There's other X, XX X, compared close at SKUs XX% And, dramatically net diversification. base. on years. complementary commentary our the basis, XX% in spans our customer the the see as Whole channel, increases pro you key average on Top customer which Page can XXXX. important to turnover will little that over of is our Page bringing across services. fiscal consists the relationship customers all benefits represent The sales is to we companies customers, our customer a in customers And,

of as of benefits the to expanding provides broader the customer opportunity SKUs. of long-term growth selection a with overlap, through our addition said, customer a diversification, I level by the over relationship customers existing offering low In

clearly cross-selling opportunities. on would you I'm While focus we of to expect, a today modeling and to Prior synergies. in our represents cost as opportunity, a you detail lot more did with synergy announcement providing going diligence, on around long-term

to that our we assistance I would be plans, to of on continued continued consultant, into able are million speak of with have year-four, to and Sean taking as shortly. our unique now and PwC, plans capture synergies more than positions, our integration noted year-three. call, efficiently, achieve and we year-three, the cost market we by refine view, earlier. We $XXX our that while refine On in we can $XXX both million believe We've working integrate announcement we $XXX in in consideration which will company's to synergies estimated to million

robust years we'll transformative a able than we're helm, has with a and and is of and XX the effort CEO more energized we the capitalize him Sean have We synergy that potential incoming realize on as team Sean be place, high at of delighted this to opportunities that plan in of Griffin of and SUPERVALU. have this the combination. experience, to industry degree confidence full lead the

give planning. and to and customer color little both you more through the companies turn now our integration, from who a plan the service, will functions. going best take operational levels Sean? product the improve and systems, I'm efficiencies, call integration practices, to over to on work we is technologies As Sean, corporate to

Sean Griffin

call. Welcome Yes, integration the we've we've been you, hard and on far. evening, SUPERVALU progress at so good we everyone. Good Thank Steve. made really feel that to about the work planning, Terrific.

Steve very as developed As have our PwC has we plan. planning, advisors integration solid we and noted, a have through retained

X integration functional SUPERVALU of organizations. on moving have a functional we teams leading These to As of and strong referenced current SUPERVALU the UNFI planning, are various deck associates, process and in both evaluate through team and UNFI the discovery workstreams the now assembled from operations. of Slide is the workstreams

non-saleable, accelerate X, on combined momentum believe are day the upside. Not procurement day and such non-inventory to and companies from, opportunity Our the is as material successfully, only, services, the lower XXX first mission spend to strength through goods run spend. The only aggregate purchasing beginning to example is and supplies. but the suppliers to, and We or is days third-party an X. equipment, many to benefit indirect costs IT on businesses handling even example opportunities of any Indirect by to of limited significant, services, that both the of post-close. fleet, there

We are adhering to building XXX way the and timeline control an for accountability days milestones maintain then along first and to our governance clear forward. specific with and integration

resources staffed experienced appropriate Our importantly, with subject-matter the is expected with fully the integration team experts advisory timeline, manage deliverables. to integration and most

and a Steve Think some at specific costs. me take expense. about company's outbound Let additional rationalizing look SG&A certainly of opportunity. assets about inbound duplicative and the transportation areas talked in scale, optimizing the combined

of to consolidate other and terms, third-party network. supplier distribution to will and XX optimize with oftentimes Harmonization commercial need direct our referred agreements, centers, Now as we agreements.

term. of executing company expect profitability deliver and efficiencies these long over on We synergies will our the and efficiency that improve the

to our customer base. of future to capital our combination have best will each opportunity expenditures. and the more really reduce leverage We systems and that of needs includes capabilities in the best very scalable the talent, a the here very unique meet broad serve We efficiently a systems, a take of processes, process, customers, to company, streamline and best,

owned been underlying through will of primarily combination, by talk has SUPERVALU's about running retail in little business realize SUPERVALU's a of to be driven associated banners. $XXX this with a I'd to recent synergies UNFI cost years, number Importantly, factors bit like million year-three. by impacted business. run-rate challenges positioned by

Natural building fact, these solid, is core in organization We some know, more cost ability integration. are many they we're distribution in for automated, integration of out integration. SUPERVALU with has UNFI's SKUs It you at as productive. is become core and have And, expect They have developed will company prepared and in to take wholesale. acquisitions several at selling our valuable have strength We good and already we know people be follow-on business, and we talented they last over in SUPERVALU and to ready business who centers, synergies perimeter team previous have which realizing efficient growth demonstrated wholesale combined and and their great SUPERVALU's meat, this worked complement committed which hard pretty are The their efficient wholesale high anticipated As through muscle SUPERVALU's Very think years. in believe expertise assets. is and to deli, such team. the in high-growth the and ahead. at Foods, we velocity categories these complementary produce. of other competency United they it.

shareholders. to right Steve, United SUPERVALU you. creating future at well Foods a the for working SUPERVALU's In the we through learning customers. will turn pointed bold, and and a to better I'll in the into customers, it's reality. our transaction, lot opportunity transformative process, really and Thank about and making proposition position it's value team the integration it two to certainly both serving long-term this you. towards it look together alignment teams; believe It's our the we is combined a extremely I team interesting companies our culture, vision our Natural these bring a associates, forward the with are incredible. company addition, The over

Steve Spinner

broken back Thanks, to of expected our and go to back outline them deck, and overhead. into to on categories: and costs. start Sean. targets we expectations we're the again our two on of synergies, Page We've going where primary one-time buckets the I'm going operational the X up presentation,

by with expectation see the XX% set in we've year-two, by year-four. achieve to and synergies, of time reasonable year-three, that a in XX% year-one, XX% can You XXX% the

the first primarily. incur systems, best related as take combined across they've For with one-time bulk X, incremental X the cost that of IT systems the to acquisitions in two of network. the we're integration deploy of years and is two synergies achieve years, last costs, synergy the to made SUPERVALU's note both tail the to estimates X a synergies costs them that Page to the in the expect we the from we quoting are One on assumed that primarily important to

of areas out Turning to detail we Page X, lay our around more major synergy.

which The operating and synergy. the rationalizing for approximately accounts which consolidating removing largest a has of contracts, costs, by streamlining followed both opportunity optimization, benefit. spend, IT overhead and duplicative is CapEx and First, XX% an SG&A

synergy target to is the of operational of secondary efficiencies. The related representing XX%

this the excess Page third-party from as result As by our a to you of capacity combination X, opportunities saw use on to relocating expanded network distribution inventory centers. our map provides distribution

the DCs our area of point markets by where today streamline will IT in costs I'll and We The the company. combined center we already mentioned by CapEx reduced productivity. increase and reducing consolidating also to the of allowing transportation costs, out in DCs, CapEx. optimize last of us the benefit overlap, is distribution synergy I've direct

CapEx to We that will planned also the incremental we had IT systems. avoid to UNFI upgrade deploy

out DCs with distribution, need support organic build to strong within will the the Additionally, natural and to avoid business. additional broader the growth UNFI

back to call Before plans to turning business like the Mike, retail over I'd address our and to it. SUPERVALU's divest

SKUs resulting is and to deck. combination be Page business will XX distribution not business. We powerful. our distribution to we food banners core Running premier center UNFI's scale is business, retail the From the Combined services believe on SUPERVALU's core to just the Moving wholesaler. store, core perimeter, with strong. is

since is process clear work Fresh. SUPERVALU been sale at retail on announcements is Farm of have the our with and regarding plans the assets Divesting already these We divest. to complex,

customary SUPERVALU Louis to is occur addition, planned market announced this October closing XXXX, in that In Schnuck transaction to staggered The process to with Markets. sale Shop finish stores to Save earlier a currently the expected the of close late is subject conditions. by week, XX 'n St.

the forward the agreements to but capacity will stores, and proceed of on manner, paying supply we with impact attention careful to including and a in retail be focus of our needs. remaining expedited maximizing value, As with goal divestiture an move banners the

capital where hard exit We the to and successfully business parties Mike? to Day. the achieve we'll over our We're applicable, more the Mike, at outcome, detail through work best to with have going and at leverage will provide have teams confident go able allocation. you thoughts to now Investor turn I'm engaged and call on we'll be to that back third our assist. retail who

Mike Zechmeister

Thank you, Steve.

Sean, and well Steve for the from heard is value compelling positions strategically and have you and future As acquisition creation. us growth

for XX, the debt capital including after billion. like on billion Slides EBITDA combined $XXX expectations integration-related first combined the the included companies, leverage. information full-year allocation structure, on acquisition XX cover I'd net the and touch year-one Now, and plans, to one-time to be closes, be $XX.X $XX.X In and and excluding expect company to operations, to we deal to sales, retail, million adjusted discontinued expected excluding Year-one approximately $XXX is retail million, through expenses.

guidance, accounting. price double-digit EPS impact to year-one, impact and one-time excluding expect costs EPS of continue adjusted we one-time increase fiscal the of excluding purchase in expect the retail growth, we addition, and versus After double-digit purchase adjusted costs, In accounting. low percentage XXXX a our

noted, you in Investor long-term at the are As more giving driver XX. our expectations synergies this value be primary on Cost Orlando detail we'll Steve in transaction. on our January Day

we forward, move successful and we focused on delivering cost synergies. are these a integration As

in acquisitions than exclude of we our Steve cost year-four. than run expected in achieve mentioned, Grocers. and million growth million synergies more are As addition cost expecting AG and year-three, the to SUPERVALU's rate from Unified These of $XXX to synergies assumptions synergies $XXX more achieve Florida in and in synergies are

we As delivering process, confirmatory these are in our we assumptions. continued confident increasingly diligence synergy have

not opportunities we'll sales of company's standpoint expect While percentage to our we more excludes going value growth X.X% specifics. related over of optimizing combined outlined. be net this to long-term, approximately spending customers, be which as net continue spent we more a capital are forward. driver that a avoidance believe From assumptions expenditure capital as in CapEx and the capacity sales, we is IT there the we large are the to have and of time depending significant synergies Once a deal, closed deal we've with on to provide

distribution certain efforts the a leverage. be we capital our acquisition will to From capacity remain center of of XXXX expansion as integration in on Our for the the fiscal efforts integration expenditures focus geographies on will we standpoint, SUPERVALU. related focused reducing and SUPERVALU pending and the allocation disciplined capital

opportunities We in M&A will the near term. forego

leverage repurchase also debt forego to of and EBITDA X.Xx, long-term target our will until we X.Xx share meet We excluding operating leases.

our We net grows slower by will cash working than a flow rate working enhance capital sales. manage capital actively net ensuring to at

calculation the from We the At be for will and flow in almost debt, to is the XX-month invest based entirely expected debt. EBITDA pre-payable. retail, expected is close, companies adjusted the down pay $X.X including the for will companies, total to reported combined free in SUPERVALU's debt-to-EBITDA business total trailing continue business leverage the both be cash strong to on Albertsons X.Xx. which use approximately This TSA, and billion approximately

first after excludes enterprise by two the the company's the EBITDA The within normalized impact expect years the includes SUPERVALU acquisitions. TSA year-four of AG also and the including the outgoing the impact business, well the be closing. of reduce is calculation TSA, we combined leverage impact full-year Unified rate completed SUPERVALU's as close the additional turns recently total Florida of with Albertsons cost associated This expense run while synergies leverage million. to retail to Excluding at It of as three and the sale expected XXX the outgoing debt-to-EBITDA of X.Xx deal. leasebacks,

customers, a remarks. closing suppliers, At an in this deliver superior with for the to have more shareholders, are details details the For best systems, turn combination. deal excited we over of at call about Slide very this calculations, our I of capabilities, refer opportunity By you forward Day for companies associates. providing the look on talent, and presentation. I'll the processes, additional and of the point, please January. closing and our we both Steve potential across together XX to outcome bringing Investor to the summary, to In leverage

Steve Spinner

Mike. Thanks,

poise, associates From associates thank very dedication wrap have who a I associates and tirelessly the worked are environment. exceptional. this provide of the their acknowledge and is are and we service for of with on teams working demonstrated In SUPERVALU Their exceptional and proud associates up, worked high to throughout the warehouse retail clock our team an dynamic, to people. throughout thank logistics our dedication rate. believe operations also I integration would Before UNFI. to throughout like want around very our have time. to I'm all to XXXX our is period associates summary, this growth changing and exciting management. management UNFI who work keep UNFI our associates and drivers do who I up continuously planning. These exhibited to in have this time leadership,

is enable point, exciting our objectives. demand products changing Scale, distribution, pipeline evolving, this and ahead. call to customers, a industry have retailers session. At and our distribution supply growth the what needs Together options. meet better-for-you the us and We of to long-term differentiate consumer help is I'll long-term to for it leadership grow and opportunities Our drive down our strong believe the robust, turn are we goals achieve provide of SUPERVALU, combination poised we Consumer and people with together. increase demonstrated chain, begin costs the traffic. we with opportunities sell within are over to will operator to question-and-answer and the and they're

Operator

Please of Edward ahead. [Operator Instructions] from go of question Our the line first Wells Kelly comes Fargo.

is line open. Your

Edward Kelly

integrating Hi, synergies? to wanted going you be best associated challenges of do the the these there change much is integration? capture biggest is operationally on off much about to start I guys. you how required SUPERVALU. the risk How base? good with afternoon, that ability? to Can How diverse your to within mitigate businesses, talk given SKU the And

Steve Spinner

Ed. off it I'll first, start

can really synergies. plan the the capturing a run can bringing We have identifying can we terrific do associated be very plan Sean? But where PwC hired in commentary. PwC, a our place synergies, has win. our together, with balancing in two which in and we can balances developing And disciplined the a risk, companies it for with it We run the us the and consistent that the risk culture. right. for we We putting way mentioned and strategies the

Sean Griffin

– the that feel the planning we in really we a say the of Ed, having of let's would time them cautious of terms thinking call phasing. and I where in we're the way see that were it stage, looking spent lie. the Yes. about in at I lot that good buckets about now diligence opportunity

of looks opportunities like looking know timing. is frankly plan timing of We best is like. took We to what what in what need synergies in That's the in only looks is the XX% So, having year-three. need our where really year-one, year-two, know what distribution optimization. forward and XX% We XX on. know in then at focus and in path approach of an lie. deliver short what terms SG&A the we the centers, terms we answer We to The where on. those XX% we're

Steve Spinner

question – Yeah, really retail, about if the of of I assets, the But into look on not are to to SUPERVALU we're that something would a tasked that some add now who you I particularly better a ask consistent under covers, really our really retail much a that divest and gotten the with given these announcement that certainly have we more me were I ourselves worried it's we've said and with divesting meet people reasonable say earlier economic about would've ago, to chance or get I feel the to little in week it, sale Schnuck's, in been don't competency timeframe. ability I'd so would've retail. that also a month a just this

Edward Kelly

thinking a you're about says then follow-up, back the about what And the business. Taking Steve. just strategically a step how it about thinking and acquisition and

the as regional to about margin and does growth exposure it simple of than as just Foods guess businesses business. these decreasing the margin? getting to it more that's the optimal this our lower what complicated Is together, to independent the Whole I Whole that? say synergies, higher the Or business exposure and You're mix merger over supermarkets, time? contract Foods increasing your two putting long-term, is

Steve Spinner

a service world where I has scale quite of customer, at closer higher to Number distribution Scale to gives opposed is one. day. think distribution. centers the be of through lot the to the what them I wanted like you a is, and answer to run lower volume my Having ability day drives it, shifting in to more the ways. drives view the the efficient, is, to be big of There the scale X, I said, is customer, drives as front day. couple number what frankly, us costs, back end Retail would and is it, consolidation. end the I be And changing.

and the to volume have have DCs. to be through drive be We to closer bigger, our more consumer, we we have to

Sean Griffin

complex, right. proposition would this to add that no suggesting that it's I simple execute, just one is not that is

independent every about of when retail puts environment, store, combination However, we some SUPERVALU in of service payroll a That a back-office, think department financial base, customer win where to store. retail this we very services today. think in the beyond, independent are low in there's grocery the us offerings retailer, about transactional, interesting a there customers retail transactional, walls the in win at UNFI's in when have our arsenal can a lot that services a grocery cost. the value then and those don't four we scale the And position compelling

a And lot and have of a great broader customer so, opportunity have we deal with much base. to of traction stickiness a

Steve Spinner

supermarkets at. greater is one items about far good particularly UNFI the to question desperately is things of the your independent need that the to supermarkets, independent access Specific

existing So, amount tremendous there's synergy our the products of into SUPERVALU base. a with selling customer selling associated

Edward Kelly

guys. Thanks, Great.

Operator

next Heinbockel John of Securities. go of ahead. the line from Please Your question Guggenheim

is line Your open.

John Heinbockel

you need arms core you demand? the mix? your when getting piece, much and the look do transitory has do to secular think you more to their you your business a in they freight-related, if around of now. take secular think SUPERVALU, How while at under about what much that do is How think and profitability Then out pressure, both the business? little you on Steve, For been profitability side, right? core synergy stabilize

Steve Spinner

the try first. last me Let one

taking synergies, a don't. there terms obviously handling that best commercial they we're freight, – we things making procurement and at inbound do and terms. do look obviously really is Indirect they significant commercial that both. together then on And are one acquiring the without Bringing And and just is so really synergy equipment, and of sure so we asked well that but material I well in really there fleet, are things you a getting the think of me forth. don't. synergy primaries companies So, in that

to hands low-hanging that really the So, fruit short-term, we in around. our that's the get need

lot we view number And be obviously on our quarter, I were increases we competently and the about us, in slower pass on specifically opposed just because freight, I slow in as their that one, of As inbound we for is to two, the through. costs it relates result, to would can than view through, we more cost. freight, or speak freight, thought fairly passing freight significant underestimated in as increased a we the the didn't rate incurred think a

little feel timing the bit. it's caught I going X-ball think behind We a again. not got pretty I to So, it's issue. happen just good a

Mike Zechmeister

volatility UNFI's more freight, supplier SUPERVALU model. have I'd the of more We've XX% John a of of model add, inbound approximately inbound we that, delivered. has tons. market. in It is It's more CPG, to the different managed conventional. greater exposure obviously the terms just

certainly to this course, things when margin. beneficial market, to They the reverse. a we didn't costs. We in model QX, We We of in the our freight saw had missed So, that we the it. is are rising gross is to now phase just QX, attractive the missed has UNFI What costs. plan into and the get there against exposure in did. the increases,

to Now, the XXXX. print in good opening innings that our are FY beginning up of see early is news that the we now

John Heinbockel

of for that places? for thought Or what down it's was about thinking run that the then handle in What's square of maybe capacity. you talked capacity secondly, on it consolidating the problems about both some the maybe order growth. you if to capacity, you you in of are sort the of then of need terms And maybe shut just Okay, magnitude, footage? wrong Do of your In growth? DC one you that? you think you risk

Steve Spinner

question, was DCs. understand. John, we have in of just The going going we that's to about a take on commentary to we'll when news, color not don't of We're there we the more yet, On that have good on time spend and network give this, other the money lot together get DCs because you words, some some the first is detail consolidation on In in of on-site storage. to lot and really a capacity January.

expensive. space at it transport daily public have to that or to forced DCs either products are we're our inefficient, really and back basis; we really really rent inefficient, on trailers warehouses a to So, in store

of So, wherever get going right storage out out to can, of we out we're the to that's of get we're a going win. and we gate, public wherever and trailers huge can,

couple capacity. that of the a we're We in markets have at U.S. also

customer do the to some issue. unfortunately addition some within hold we market. answer going a says, you're when with has we distribution, to DCs, So, have additional our capacity be of new that to have have love we'd until service, to the longer you And no that

John Heinbockel

Thank you.

Operator

go question Your line of Short next from the Barclays. of ahead. Karen Please

Your line is open.

Karen Short

even guidance. realize me I this puts EBIT it talked contracting. once slightly that A it of that margins well beyond the seems I be your of guess thanks. questions are and worse, couple I hurricane you it last to year to the at because freight on start the impact. but just we seems takes, the midpoint partly ask I Hi, closes, that optimistic. only really the in some It guidance, but freight, of getting very context irrelevant just when had issues. kept shortly may hurricanes, know was

talk question So, that? could to you another acquisition. I Thanks. had Then the on

Steve Spinner

freight, Mike, take take then, and the margin. you I'll the can

through A the cover We to own freight decent we contract issue is amount we have move labor. on About we an fairly freight a outbound little XX-some-odd-percent inbound move fuel the on surcharges inbound For we're on own Again, those that of the there us, fleet. customer, increases. than less issue. do the our trucks. because our hedged The rest XX%.

timing of was than or in Unfortunately, pass it increases, it do one expect thought to through. the inbound quarters we would else, Karen. On a but that. to QX we issue the side, back. we anything it's two more that be, When them than rate increase come we greater far The get takes

Mike Zechmeister

we're fiscal guidance, in. already going improvement But to, some add suggest. that seeing and to about. we comments, the you the freight a forward, Karen. alluded dilutes of talked that benefit those the Just little to we as that really bit see we'll is inbound that The XXXX story in margin come in piece as That's

Karen Short

your rate? then of could the you maybe quantify our was And one slowdown, acquisition. actual On I e-commerce the customer just e-commerce impact did Okay. on question growth rationalizing the what on the have

Steve Spinner

any customer. one e-commerce wasn't It particular

delivery customers could at ago, here So, this business. price hadn't we in you work. very we years service deliver through a longer if went on out or couldn't we serve. no We We in particular the frankly, could and either a we analysis increased longer dropped did our e-commerce, careful no just we those took look that that couple make it of we or Quite because we remember, done quarter. food a

So, than else. it is anything timing think I more

Mike Zechmeister

also Just X% it's an also, eCommerce; well, with dynamic our less Remember, or just incredibly and swings swings with business. environment huge huge down. up of

the As we grow. triple-digit and is on on behalf fulfillment Honest with e-commerce far eCommerce Green, operations as growth in to own continue that own our that. saw operation. It's we're when doing We our continuing of invest Honest in customers to Green

Steve Spinner

than is it anything more I think Yeah, else. timing

Karen Short

overlapping have you any up Okay. end guess when why is have I sizes but between customer talked sizes, confused I'm assets? I the you in you to don't what because distribution, about two drop get it with that scale is matters would base just drop you really larger and larger what scale

Steve Spinner

couple a be not really It's matter the think today, DCs you but next of are going of to the blended. years, of in if

be and slow-moving. fast-moving by will So, DCs likely split

customers. to So, broad SKUs we very our delivering will mix a be of

to buy store, protein, dairy, they produce, all one it's center if going frozen, come on So, truck. refrigerated,

Karen Short

that makes sense. Thanks. Okay,

Operator

ahead. Scott the from go question next of Research. Mushkin line Your Wolfe of Please

is open. Your line

Mike Otway

Are Steve, the gave evening, anticipating Good Mike Any you what transpired the you are quarter. pick-up side, for guess for business as the This is in a in few year? there? taking a questions. color on you I that I appreciate What in next slowed fourth business? supermarket everyone. guys Scott. first Otway to other highlights you anticipating the

Steve Spinner

But Again, I little that store just faster, customer timing. SKUs than as a but not again, about Not we guidance next group in obviously. closures. anything else. thought, any openings Again, stores. moving bit timing existing closed did around we it's we’ve of really have to provide start captive largest have a some store of mean, position where many to Not talked supermarkets. conventional quarter, the Yes, We're color is is year, business that customers available. again, and SUPERVALU's independent as that's is a we I dynamic go more for they what remember, captive lost, this

One of have. that the need we things supermarkets the the the most products are independent

with the selling cost our opportunities into base. products us greatest outside SUPERVALU's supermarket So, one are existing synergies independent of existing associated better-for-you certainly of the growth customer

Mike Zechmeister

recognize well at met On we I to actually channel internal would did our a quarter. deceleration just we X%. and own supermarket did say have the full-year that about in channel basis, a that supermarket pretty the in expectations the in

Mike Otway

Thank you, for accretion. forma I terms it. both, Got question of in guess pro Mike, quick a that. clarification

what's Am was improvement the I that just you deck had If in right there? year following in it's the low accretion. It guys accretion like deal in one, improved. so, think slide and it double-digit it I that? the that announcement, driving looks looks has like

Mike Zechmeister

had what were that said out. significant a little last more time We Yeah, we provide we wanted clarity to was. on just the

EPS XXXX adjusted Now we're the cost the accounting that saying for we double-digit low on over just guidance excluding an price fiscal one-time basis, and accretion EPS. provided purchase

Mike Otway

little improved Has is it about it bit language? it. same, Got a or just the it's

Mike Zechmeister

Yeah, we it's at very to looking what were similar before.

Mike Otway

Got it. Thank you.

Operator

of Your of Please BMO Kelly line next question Bania the from ahead. Markets. Capital go

line open. is Your

Kelly Bania

sales I year. next thanks the for guidance the just questions. for to Hi, wanted about ask taking

X.X% I XX-week X.X% about just this think a on basis growth. I what year. from a guess decent is you're saying to moderation

And is how why for customer can moderate? next your of largest you're on guidance kind you sounds continues be with if mix, So, surprise provide expecting and could to which like should there's mix curious if was year? in explain to embedded your about what a it what think any you we color and

Mike Zechmeister

this the Thanks Kelly, Mike. question. for is

First all, is of comparable the XX-week guidance to X.X% X.X% growth.

the you a year, so we've got due week As comparable week. XXrd to know, growth XX.X%, X.X% makes that XXrd the next to

lapping have brought into that as compared here built fiscal In the you new that of to largest growth product customer XXXX, we're in our out categories a we terms store that there. of XX.X% customer, for we remember had to we the variety

So that we little growth that trend a mitigates bit that of saw.

Kelly Bania

Okay.

And mix in your year? the guidance any the so, color on embedded other that is for

Mike Zechmeister

to strong to what XXXX. in a fiscal continue have our largest expect said, not Like No. we as I but saw customer strong growth as rate, we

Kelly Bania

you another are come using the on for just Okay. but different about contracts, talked all? I natural where a they're not you it could and certain supplier cross-over, wonderful SUPERVALU, supplier question new the opportunity guess at relationship would I'm if natural or if be organic those and or already customers? talked under at from a a as customers, pretty minimal they are using SUPERVALU’s customers organic

Steve Spinner

It's customer. a whatever really of items by that think selection going have for that There just sell, customers the limited by reason. different geography, very to be I some we are

help to really product customers can in do we well. offering really broader think a place the stores. what have much I we That's those

way a think in of detail, we much lot close. I customer-level this we're get once have to into to a bigger going

share around the I Investor the detail of in the at growth more January Day. to think you opportunities be with would lot our a plan

Mike Zechmeister

we the done of manner end. It's one here. some get the through to have that here can to operation Just opportunities if Today, SKUs, comments, for to too make it Either consider. a or get is less at the efficient they a to efficiency products cross-dock Steve's customer customers, to more of there's of to it same the our kind efficiently. it do it to may those add to

Sean Griffin

It's a this broad broader customer offering access base portfolio of that to. have particular may not

Sean Griffin

for to the of reason more from source, It in Again, store that more I a the buy and pressure to the just particular, drives the retailer overall. their it's wins can back down It the scale more receive them. is invoices. singular going in be think conventional reduces cost retailer, better today, here a

trucks, be from whether to is it need hearing it store. and And we're I the so, the of produce certainly, more me the that hearing Whether customers message we're conventional, more please, or protein. pressure from Less my lower scale, aggregate purchases. customers cost. tell be

Kelly Bania

helpful. that's just for more Sean. one Okay, Maybe

months leading ago were You'll and this be couple we retiring. a thought you integration here

how you this see period to committed kind through of curious X-or-X-year completion? are to long the Just

Sean Griffin

about Kelly. talked I'm in to done, the commitment, it specifically but haven't job We get

Kelly Bania

thank Okay, you.

Operator

from question Deutsche next of Bank. of Paul line Trussell go Your the Please ahead.

is open. line Your

Paul Trussell

afternoon. Good

should we around the about making can your debt, overhead operational think could when CapEx? to year-one, breakdown cost just the what's investments, cash Just we capital you that talk target And if and And paying at philosophy investing, leveraged about of about you year-one ultimately to and versus how X.X. overall, get and to synergy look timeline savings? X down between talk

Sean Griffin

may. take part the Let me question, if first I that of

quick around spend. So, unpacked about actually talking think it's one this year-one, I about when when way, wins. it we earlier indirect we're

That do nothing an Half in be can in has that of our with something aggregation terms delivers happens delivered early. a lines a impact of in spend. synergy with up bucket. goods, significant etc. strength addressable type customer-facing SUPERVALU lot that the billion in and It's transactions. background to have year-one spend. of that talking And about We negotiation you're services, dollars a It's with in that a addressable

center optimization or systems; year-two, those around of and streamlining have generally our looking other Some be around synergies technology beyond. year-three a longer obviously would the efficiencies at distribution network, around lead time

Mike Zechmeister

a make your about leverage, CapEx and And let spend few question comments. me other to Paul,

our So, or talked guidance, very really expansion with acquisition. good we UNFI without feel by some capacity spending first of about the sales. projects X.X% to of driven all, That's about that X.X% we SUPERVALU in

I of cash the making the spin part sure a those. free ability we can to off for return first. we'll our to Generally at lot workstreams. the the speaking, risk-adjusted will of part team is basis after we part a It's biggest It's with investments speak opportunities on of here. flow. first. business So, integration buckets planning. management continue synergy the of has go and The look best get This

leverage. We at with X.XXx. are We of is fiscal a XXXX comfortable just completed team leverage that low at operating

target, X.X out, X.X. to long-term pointed as is you Our

down. We're X.X. in we're come very area more leverage talk gates with we our an about back that So, with. that as that we'll That's about discipline getting we at the talked the comfortable SUPERVALU, out interested to of getting

forego As a result, M&A will we opportunities. near-term

repurchase leverage didn't order a dividend. down that prioritize share don't up. We that debt We offer is get get to This the after forego leverage. We paying to will after our in start to target.

to get down it that won't as It leverage will work little take there. we'll a target years. get and down quick the longer as range we'll couple So, us to into first back of try but that possible, come in

Paul Trussell

color. the Appreciate

margin. Just shift to the was contraction from of what freight it. the or much year-over-year customer missed if apologize cost? versus the related was inbound Did the you impact back to to in specify quantify mix circle I I gross how

Mike Zechmeister

mix Yeah, about Paul. Think its this of a headwind. third the inbound that's a question, Think customer freight QX of it way. two-thirds good and the impact, it for about

Paul Trussell

best Got it. luck. That's you and Thank of helpful.

Operator

question Morgan from Your Stanley. go comes next of Please of the ahead. Sinisi line Vincent

Your open. line is

Vincent Sinisi

way, into make next guys. will ask, turning you just any themselves? but Great, taking a you sure know wanted two the provide my facilities the themselves? it end wondering the differences, doing, few the the good of amount are much there there of is do for months one the seeing up where thoughts consolidation meaningful difference closely much, evening, if two of given obviously I Thanks another in too you Or could very the with companies, in have constraints? will guess be facilities you said just ultimately said, think to additional meaningful question. over I the a be whatever mix to is you put located I another, of don't capacity to distribution, that about to close you between have process capital

Sean Griffin

Hi, Vincent. This is Sean.

I optimization. to I further So, geography any that's or around to all, first think want don't as I don't really identifying of it region get don't want go that. into fair. relates any to

characteristics, sits certainly UNFI centers warehouses to and As the are These is distribution four are it's appropriate, a distribution if food actual within is we the center, organic whether frankly, thinking the each way of distribution center, conventional center. SUPERVALU's different about assuring that it model about handling the that of and itself portfolio quite than know mixing is themselves we're will, resemble But an distribution relates it's centers. quite the or UNFI. And what we food think product, business you and mixing it, the the that if centers, They're themselves, multi-temp. product a products, protocols walls a their this different other. product than

centers you benefit to It of of So, the not that if will kind play don't retro-fitting are any utilization to terms necessity, related will And our expect capital hindrance. will. of long-term distribution be strategy. footprint in the existing we of there expenditures significant a a of type

Vincent Sinisi

still looking right. all Then quick course, as the the banners retail at That's just helpful. are left, some a But as with maybe the mentioned, of banners divest main you Okay, not we'll focus, of follow-up, them. that back been divested, been those rate a been already focus divested? of that much how or of to yours? success of what's the have sales still to And the are have retained that customers be is ones be that

Steve Spinner

your question different potential correctly, going if to That, think, banner. be I the with maintaining is supply by how agreement buyer. I again So, understand important is a

of provide. amount To large we place. the that lot get work demand UNFI supply continues confidence going of my fair where here. to going need to around success work services of a here. locations a supply is great more supply sale the the There's view, would the hat But for the and In We've the for to locations need I to we we agreement then would be tell of from we're attached and the we end sale. the close. a do my makes don't where the to the them a the disciplined incredible We to Again, more know good agreements. up a that a done sense, is based to will separate in necessarily the SUPERVALU we have as where have deal desperately willing leading sure way separate markets initial we're need capacity, of a So, degree, you, to great willing locations capacity, we're close SUPERVALU be that in or we making asset. the agreement where it the I upon off deal certainly here. capacity, in

Vincent Sinisi

Steve. Thanks, enough, luck. Fair guys. Good

Steve Spinner

Alright, thank you.

Operator

Your Parikh go next Please Oppenheimer. of line question Rupesh the ahead. from of

Your open. line is

Rupesh Parikh

Good evening, questions. and taking thanks for my

Or new the about growth can supernatural on that rate? anything growth provide contribution from on categories just is First, accelerated the what comp any this that there think quarter, color versus is us help to again more you growth?

Mike Zechmeister

and growth guidance we a probably proxy in embedded pretty good about lapping our new for that's Rupesh, looks like. category number year. Again, what for of the some next talked That's the

Rupesh Parikh

different for number comment EBITDA the that Mike, this EBITDA a Then, has you any helped year. if the puts wondering help margin just at performance? believe, margins, questions upcoming margins. to that I level I the of on a curious improvement. could high declines, understand that next expect takes accounting drive curious, just also great. Okay, us been and you fiscal gross change I'm on I'm whether moderating there's year's was was on margin impact

Mike Zechmeister

you Yeah, little bit it there. down a Rupesh, let break me for

increased comments freight, and and going actually talked we've bit inbound headwind that So, into our product helps talked that customer forward. which a dissipates, looks about about cost, made grow We actually about little mix; dollars. how turns

favorable, rate into So, turns any increases that it barring additional does. a

inefficiencies. at performance that your to XXXX on part And then improving labor referenced And it On would Steve DCs. anticipate regard. we was another side, estimate. versus in in change the of some with our respect OpEx had question fiscal the we've upon

change put, did QX impact a a that little in have Simply results. estimate Let in time spend on me our we material just recorded bit the that QX one. of on not

fiscal XXXX specifically year, in fiscal impact to the within contained it's that QX, within and was Now, and understand that $XX.X important million QX, QX.

through margin captured gross year-to-date impact. the QX so, the And

look forward, ongoing our in As all estimate has to else no results. equal, change we the being impact

would year-over-year However, as and specifically, XXXX QX, to our an you so results, And impact, impact. the QX, the in will you QX compare results see fiscal XXXX more fiscal we a yet in and then QX larger expect tailwind QX fiscal small of year-over-year year-over-year of in QX a year-over-year headwind of COGS XXXX, a in larger tailwind XXXX. fiscal fiscal XXXX,

in So, you'll we from change if booked was on also to would evenly it's perspective see the our because a weighted on I when toward to estimate of heavily Slide not of additional detailed year, information, in you would June impact the want that presentation, On prior QX the estimate. more refer presentation of and more say, investor impact that back really change in website. XX, I was there, comparison but XX.X XX posted the the was QX, QX. to QX, spread you

Rupesh Parikh

slip of give question. targets, great. synergy you in if what The or Then could higher in driving if cost guess I color – buckets more terms I estimates? more what's one those higher Okay, could

Mike Zechmeister

visibility. Confirmatory visibility. More

Rupesh Parikh

you. Thank Okay, great.

Operator

the from question next Bill Your of Kirk ahead. RBC Capital line Markets. of Please go

open. Your line is

Bill Kirk

If that Mike. $X.XX for you the I pro adjusted guess this it a for what one's combination include SUPERVALU's division. understand from does taking have positive right, $X.XX guidance of EBITDA question. the Hi, to retail Is thank forma would not been I correct?

Mike Zechmeister

with there variety Yeah, you to of as a know, there's and takes respect puts are, EBITDA. their

Just you covering them you them you've got UNFI fiscal as from SUPERVALU. the tailwinds, EBITDA in together, EBITDA that more have go and broadly, you both and SUPERVALU some growth from in and from XXXX UNFI put adjusted

got the the Albertsons year-one. terms adjust to Unified down for, then the post-employment Florida how You've headwinds of got deal a projects, then TSA there full-year of to you've are depending have the and got their the the divestitures; And expect for and also the to that got related you the like other stranded retail things synergies, in related and we agreement; the of result recent related on new Grocers we benefits more then impact potential in of account pension. adjustments expenses leaseback you've for you've and costs winding as would AG and that synergies of also sale some

Bill Kirk

Okay.

EBITDA at retail that in from SUPERVALU no So, profitability to $X.XX, There's $X.XX no retail? SUPERVALU there's of number? expectation in

Mike Zechmeister

ex-retail That's operations. and ex-discontinued Right.

Bill Kirk

losing it. on SUPERVALU that would that accretion So, that SUPERVALU that adjusted does Then exclude retail probably exclude level? retail? have were does been accretion, got mean the what an a Okay, negative does of because EBIT impact money EPS from EBIT the negative they contribution

Mike Zechmeister

when And the to an and there's the operations. into Then sold, accounting, the banners details discontinued is and wholesale on are the impact excluding when getting underlying the banners retail It there of wholesale business if the business. operations, without retail another impact is discontinued into profitability. underlying moved retail get

excluding When making of wholesale and I the to retail, account tried adjustments we've as for say So, that. stands, the it we're impact that taking we the referenced. business

Bill Kirk

balance the Thank pro forma you. And that In calculation, that for leverage, sheet more multi-employer X.X. then include off does on SUPERVALU's responsibilities pension were them? one the that

Mike Zechmeister

includes XX I X.X the you would the calculation Slide the deck, everything. Yeah, you X.X. Again, refer where we give the to of of

Bill Kirk

Okay, thank you.

Operator

Your Marisa Merrill next Lynch. Sullivan question go of from Bank America of ahead. the Please line of

Your line is open.

Marisa Sullivan

for my taking question. Hi, good evening. Thanks

accretion if kind the should so the right think think through that fiscal in at to think dilution expect let's close year, to in call year-one fiscal the the starts about end we the XXXX? of How this you year-zero, year-one of acquisition calendar XXXX. midway being I fiscal it about Is way or XXXX?

Sean Griffin

me to year. take we the was the What in we our fourth year-one is, guidance expect deal provided of terms of let we What calendar that. Marissa, said quarter in this assumptions. close

year. point, splits fiscal the that So, to I your think

it -one year or the year deal depends, on closes. really really stub fiscal in depends the year it So, of terms when or the guidance,

we the come and we more point So, starting expect one talk when the more to about will going we're January it by reasons closed that deal in have why Orlando, able impact back Then to specifically that's about talk will in will in the we because know the of year because be fiscal then. the was.

Marisa Sullivan

Got the I if it. helpful. That's Then gears just of could switch freight. question to

fiscal You're been freight were you further color be a they where increasing? would the inbound fourth good way they quarter. Have through any consistent Have Just headwinds in seen your kind with guys first of helpful. quarter? there

Sean Griffin

inbound the seen XXXX. freight we've We've dissipate out fiscal headwinds started as

Marisa Sullivan

much. Thank you it. Got very

Operator

next question Ben Please go Stephens. line of Your ahead. of from the Bienvenu

open. is line Your

Daniel Imbro

Imbro actually This questions. Ben. Thanks taking Hi, thanks on our Daniel for guys. for is

follow question up costs margins, on said, last seen think gross to I on the pressures dissipate. and you've you that freight Just

that right expected similar includes guidance what to in remains So, or at your is assume levels? pressure it an dissipation pressure

Mike Zechmeister

one. Yeah, Daniel, let me take that

And result. built certainly cost percentage predominantly plus freight that would ones as our have had through we product adjusted to and experienced that cost. our any have a And inbound we the increases So, costs, incurred current we where company inflation. our our expect that it inflation particularly the freight additional are freight rates, in costs, Those markup. we we the because barring QX, contracts in and get a we're a cost, likes like suppliers

is freight cost of gets built inbound lot to this So, our us headwind in goods. which to it helpful once acts a inflation, like

favorable XXXX. but Our one become barring issue lag two our growth dissipate, significant question actually we're been EBITDA the your dollar there's of has been is that in increases a Again, to any that expect at. and to has beyond to getting to for fiscal quarters. in headwind us, built That additional a where we do that short in answer

Daniel Imbro

dovetails the your what Thanks consumer high-level That are can question. into well We've some from over Great. for What color. maybe inflation for give the expecting inflationary inflation? recently. here we can with on impact foods PBI year expectations fuel, If my full roll you are? for actually exclude kind seen that next color of you

Mike Zechmeister

That's a good question.

yet. As years QX levels. to a inflation We've But it of inflation terms we've us near historic I we the our had results, seen couple suppliers. in of the you've come seen seen really starting mentioned, to of where in anywhere reports to through translated our we showed haven't as now hasn't some that you

levels. build bit, reason in up over low an XXXX back going term, systemically we there's a but inflation remain think that the historical inflation historic to We anywhere little not of levels. is also fiscal don't a will certainly inflation near why in expectation Our but long didn't

Steve Spinner

it comes. love if have to We'd it

Mike Zechmeister

Yeah.

For sure.

Daniel Imbro

I Last great. me, one for if Okay, could.

just that as synergies SUPERVALU, different be the Somewhere that it us think you're synergy the de great. mean, I that services at Just at guys frame size do can Is large between you it's about think to help going SUPERVALU on revenue in but details sounds up cost significant minimis? have the opportunity? more opportunities SKUs like Investor as you level, If I High-level, it a can mentioned pretty us of share that opportunity? you revenue and appreciate higher that'd Day, opportunity you between? a around offers. help

Steve Spinner

really are to do trying and And just on happy that. been right I synergies, that. we make, up. after just think get Until meet until to us point until of have cost $XXX it but would We’d million that we to now we're Because to purely there think close, we've we we into January. that We for really be wait it it worth the can't in can't growth significant into focused I'm premature close. just you the brought opportunities. really we get

Sean Griffin

growth the the there. playing game We're on long

Daniel Imbro

Okay. Fair Thanks. guys. enough,

Operator

from go Eric of ahead. question line Buckingham next Your the Please of Larson Research.

Your line open. is

Eric Larson

everybody. taking afternoon, are Thanks my for actually Mine quick. question. Good pretty

there a So, in for any $XX to the will the partially incur only all Is costs going next and cash cash charges you're that $XXX Are million years, number costs? cash? is that or in two of there? that non-cash that be

Mike Zechmeister

expenses, good of a cash. it's question. talking fees, primarily severance, integration Eric, retention these higher kinds We're about It's transaction bonuses, things.

Eric Larson

Okay.

will will – to the cover – don't cadence into we free be on UNFI? to would enough that eat How all legacy So, obviously look cash detail it at SUPERVALU generate able you cash will have the or that? SUPERVALU and

Mike Zechmeister

Once flow the it the more cash certainly companies. combined there's significant and and cash deal closes financing we're on you to will as forward and and believe be realize the combined both a we benefits we're anticipating in a debt more expenses that that well. ability free as synergies, the company, particular that free cover we're bring over generate to as We here, that flow move of company, the

we've synergies, which then finance us it of got. XX% year-one, of about, some from talking investments goes our As about helps we're there, the up in we that talked run-rate and

Eric Larson

might one final question. Okay. gets leverage just just ratio. back And This a be clarification. It your to

not or numbers I'm so, not de-lever press approximately of the your release, that that it's first of in not kind the just, of I’m United said SVU by year-three, aren't Grocers Maybe that to off, numbers say two and filtering, the if including where. you AG. you just adding have X.Xx I'm wrong. adjusted around the your prepared you believe two not sure believe. end was to me. got synergies some up I've sure Maybe turns I taking And to a maybe goal I'm in Mike, just not leverage of think I But again, for you I plan comments, years, for synergies. they're after sure. of

Mike Zechmeister

Let for me you. that clarify

I to pretty straightforward, it you. but think it's let give me

So, so impact the agreement, TSA outgoing excluding agreement. about the of the you okay know Albertsons TSA

because how If get down you full about is away, we're to there. our you know that number. that's we going calculate you two talking over a turns gets leverage that, and higher years Then that's and you're what exclude here three

Eric Larson

it. Got Thank you. Okay.

Operator

Capital the from Please comes line question Markets. last Your of Wolf of Andrew Loop ahead. go

Your line is open.

Andrew Wolf

quarter just saying. Thanks. in to and understanding you're on variance what want comport I to margin gross my the the

is the so customer make in inbound to I the So, more that. understanding was want my that your mix I'm mainly expectations sure the takeaway just versus miss than side. freight,

Mike Zechmeister

and it to is of freight Or to the inbound the two-thirds Andy, it's other margin It's clarify gross is way. related that, other of related the headwind. words… miss to the customer mix, in a third

Andrew Wolf

from contraction. hearing, was not know more but maybe or I'm about missing contraction maybe I your mix, the versus was the I'm miss, miss I'm from what but from wrong... asking I'm the freight, more the guidance inbound

Mike Zechmeister

No, no. I'll give you another perspective.

So, that mix of we think consolidated operating all expenses, had leverage customer if the offset leverage the that dilution. in you our virtually

Okay.

in driver the freight, you're quarter. that we then which fourth would example have is particular of this question, in impact the So, is challenges what the be the remaining the of

Andrew Wolf

has when think that a guidance the your for more just little trying Okay. Thank that are up big get inbound it at Because already you quick, trying is to, freight impact there the explain reversed you come? it's looks so stretch, And I'm or get said, fact running EBITDA? to more you you already to I first clarification. like then and and back about to come clarity. going a to the I'm

Mike Zechmeister

it took a fact improvement we said, two of in What saw we one some to the this it general to lot it about talked was lag just of specifically and We that is so freight year. far push quarters through. our that timing,

better quarter. makes when finished better fourth today a the position us that we're were than we feel in So, that we

Andrew Wolf

to two It looking but maybe a answer to than I that, growth, question the right? be. quarter, for you back-end may huge it's in not ramp the It's ask be that It's smoother loaded you're up not quarters, just right? guess quarters. two going then way down just each guidance is, EBITDA and can to not going even be

Mike Zechmeister

expect past. seasonality Yeah, that Andy. to similar had the We the in year the to would be we've

So, back-end profit. yeah, loaded we're not expecting a

Andrew Wolf

Great.

Pricing? roughly you've asked baked sure inbound It understand fuel been in? make want guidance but with what That's You've is where this, I I for the it like to it. expectations about now? flat and sounds freight is

Mike Zechmeister

were the If or didn't. we question in increase decrease assuming we any not. were freight, we Yeah, is,

Mike Zechmeister

And clarify to fuel. you wanted that. Because I that. think said I just

Mike Zechmeister

Yeah.

Andrew Wolf

and down retail, get lot lost not to it business, bringing forma you're pro didn't Or You're gave anywhere. proceeds right? I a the ratios in but from of like you yourself just see not likely so on, but for credit Mike, baking sounds ratios? that are you're you? leverage those any leverage for that penalizing

Mike Zechmeister

significant assumptions, impact on a It's not our no.

Andrew Wolf

Got it.

the from accretion transaction. at some and on SUPERVALU is year essential low to proportion I that right? if is That million, of mean, realized, about exiting the question, $XX last you're is my it? synergies, Just think that how the EPS double-digit year-one the high

Mike Zechmeister

There as you are there takes certainly close. well. but there, and puts Pretty gets that

Andrew Wolf

it. Got

very much. Great. Okay. thank you Well,

Operator

remarks. back call for the turn presenters to over to like the now closing would I

Steve Spinner

of are January. a seeing companies success. Day managers, our necessary with the forward customers We're part forward the This you and to We'll look leadership customer all We everyone. our teams, industry-leading combination the SUPERVALU-UNFI combination we a and information our and forward Thank really of joining across with to we resources in way our bring at excited supervisors, us you be to strategic Investor our enhances Thanks combined evening, look channels. big, this proud to to more to exciting, from January. our as detailed the lead maximize in position throughout it. you many is sharing forth Board for

Operator

concludes today's This call. conference

now You may disconnect.

United Natural Foods (UNFI) 21 Sep 182018 Q4 Earnings call transcript