Dayville, Conn., Sept. 3 - United Natural Foods, Inc. today reported net sales for the fourth quarter of fiscal 2008, ended August 2, 2008, of $911.9 million, an increase of $205.1 million, or 29.0%, from net sales of $706.8 million realized in the fourth quarter of fiscal 2007, ended July 28, 2007.
Excluding the effect of the Company's November 2007 acquisition of Millbrook Distribution Services, Inc. ("Millbrook"), net sales increased by approximately $143.2 million, or 20.3%, to $850.0 million. Comparable sales growth for the fourth quarter of fiscal 2008, excluding the Millbrook acquisition and the 14th week included in the fourth quarter of fiscal 2008, was 11.9%.
Gross margin was 19.5% for the fourth quarter of fiscal 2008, which represents an 83 basis point improvement from the gross margin of 18.7% reported for the fourth quarter of fiscal 2007, and an 81 basis point sequential improvement when compared with the gross margin of 18.7% reported in the third quarter of fiscal 2008.
The Company reported net income of $12.8 million, or $0.30 per diluted share, for the fourth quarter of fiscal 2008, which was relatively flat compared to net income of $13.1 million, or $0.31 per diluted share, reported for the fourth quarter of fiscal 2007. Millbrook, which the Company acquired in the second quarter of fiscal 2008, negatively impacted net income by approximately $2.9 million, or $0.07 per diluted share, during the fourth quarter of fiscal 2008. Excluding the effect of Millbrook, net income for the quarter ended August 2, 2008 would have been $15.7 million, or $0.37 per diluted share, compared to $13.1 million, or $0.31 per diluted share for the comparable quarter ended July 28, 2007.
For the quarter ended August 2, 2008, operating expenses were 16.9% of net sales, or $154.0 million, an increase of $45.8 million, or 42.3%, over operating expenses of $108.2 million, or 15.3% of net sales, for the fourth quarter of fiscal 2007. In the fourth quarter of fiscal 2008, several items negatively impacted the Company's operating expenses and net income. Operating expenses in the fourth quarter of fiscal 2008 were negatively impacted by $2.7 million in labor and other duplicate expenses related to the Company's relocation from its facility in Fontana, California to a new distribution facility in Moreno Valley, California, which is scheduled to opened in the first week of September 2008, and the Company's previously announced new facility in York, Pennsylvania. An increase in fuel costs of $4.0 million, excluding fuel costs specific to Millbrook, also contributed to the increase in operating expenses as a percentage of net sales for the fourth quarter of fiscal 2008.
The Company recorded share-based compensation expense of $1.2 million, in the fourth quarter of fiscal 2008, in accordance with SFAS No. 123R, Share-Based Payment, compared to $1.0 million of share-based compensation expense recorded in the fourth quarter of fiscal 2007.
Full Year Results
Net sales for fiscal 2008 totaled a record $3.37 billion, an increase of 22.2%, or $611.6 million, over the $2.75 billion of net sales recorded in fiscal 2007. Gross margin was 18.8% for fiscal 2008, which represents a 33 basis point improvement from the gross margin of 18.5% for fiscal 2007.
Net income for fiscal 2008 decreased $1.7 million, or 3.3%, to $48.5 million, or $1.13 per diluted share, from $50.2 million, or $1.17 per diluted share, for fiscal 2007.
Fiscal year 2008 operating expenses were 16.1% of net sales, or $541.4 million, an increase of $125.3 million, or 30.1%, over operating expenses of $416.1 million, or 15.1% of net sales, for fiscal 2007.
Operating expenses during fiscal 2008 were negatively impacted by approximately $10.6 million of operating losses associated with the Company's Specialty distribution division, which consists of Millbrook, and $6.3 million in labor and other start-up expenses related to the Company's new distribution facilities in Sarasota, Florida, Ridgefield, Washington, Moreno Valley, California and York, Pennsylvania.
Operating expenses during fiscal 2007 were negatively impacted by approximately $2.2 million of losses related to the Company's two Auburn, California facilities, $0.7 million in fees and abandoned leasehold improvements and $0.9 million in labor and other start-up expenses related to the Company's new distribution facilities in Sarasota, Florida and Ridgefield, Washington.
For the fiscal year ended August 2, 2008, share-based compensation expense was $4.7 million, compared with $4.0 million of share-based compensation expense for the fiscal year ended July 28, 2007.
Comments from Management
"I am very pleased to once again report record revenue results for our fiscal year 2008 fourth quarter and full year, driven by growth from both existing and new customers. During the quarter, we delivered our fourth consecutive quarterly increase in comparable sales, matching the high end of our forecasted range of 10% to 12%, despite a weak economy and slower then expected growth in the supernatural channel," said Michael Funk, President and Chief Executive Officer.
"While Specialty division revenues have been below our expectations, we're beginning to realize positive customer reaction from initiatives designed to improve service and performance levels. We're confident the business is stabilized and positioned to yield sales growth in fiscal 2009. Additionally, we remain diligently focused on fully integrating the specialty division into our broadline distribution, resulting in a considerable reduction in expenses and dilution of approximately $0.06 for the entire fiscal year 2009."
Mr. Funk added, "Operationally, we're excited about the opening of our Moreno Valley, California facility this coming weekend, and with the additional capacity we've added, the Company is well positioned for increased efficiencies to handle additional SKU assortments and business."
"We enter 2009 with strong core businesses that will support our growth initiatives and current expectations for top line growth between 10% to 12%, and a 15% to 22% increase in earnings to our shareholders," Mr. Funk concluded.
Introduces Fiscal 2009 Guidance
The Company also has provided its financial outlook for fiscal 2009, ending August 1, 2009.
For fiscal 2009, the Company expects revenues to increase by approximately 10% to 12% on a comparable basis from fiscal 2008 to a range of $3.63 billion to $3.70 billion. Fiscal 2009 earnings per diluted share are expected to be in the range of $1.30 to $1.38 per share, an increase of 15% to 22% over fiscal 2008. The Company's fiscal 2009 earnings guidance includes the expectation of approximately $0.06 per diluted share in dilution from the Company's Specialty division. After adjusting for the impact of the 53-week year in fiscal 2008, fiscal 2009 earnings per diluted share are expected to increase 17% to 24% over fiscal 2008 earnings per diluted share.
Capital expenditures are expected to be in the range of $55 million to $62 million during fiscal 2009. Certain costs associated with the Moreno Valley, California and York, Pennsylvania facilities, as well as costs associated with a new facility in Texas are included in the Company's 2009 capital expenditures guidance. The Company will begin operating out of its Moreno Valley, California facility in September 2008, and the York Pennsylvania facility should commence operations late in the second fiscal quarter of 2009. The Company expects to open a new broadline distribution facility in Texas in the fourth quarter of fiscal 2009.
The Company's guidance is based on a number of assumptions, which are subject to change and many of which are outside the Company's control. If any of these assumptions vary, the Company's guidance may change. There can be no assurance that the Company will achieve these results.