United Natural Foods (NYSE:UNFI) reported fourth-quarter fiscal 2026 results in line with its outlook, as the grocery distributor cited improved operating leverage, higher free cash flow and lower leverage following the second year of its value creation strategy.
Chief Executive Officer Sandy Douglas said the company generated fourth-quarter adjusted EBITDA of $172 million and full-year adjusted EBITDA of $701 million, representing 27% growth from the prior fiscal year. Free cash flow totaled $80 million in the fourth quarter and a record $323 million for the full year, up $84 million from fiscal 2025.
Sales affected by optimization actions
Fourth-quarter sales exceeded $7.6 billion, bringing full-year sales to approximately $31.2 billion. Reported quarterly sales declined by less than 1% year over year, reflecting planned network optimization actions, the unwind of short-term project work in the natural segment, and comparisons with the prior-year cyber incident.
Matteo Tarditi, UNFI’s president and chief operating officer, said the company estimated that optimization actions reduced reported sales by about 500 basis points and short-term project work reduced sales by about 150 basis points. The project work involved helping a large natural retailer make a strategic transition through fresh-product business, according to management.
Excluding those items and the effect of cycling last year’s cyber incident, UNFI said underlying wholesale sales grew in line with its approximately $90 billion target addressable market. The company estimates that market grew in the low single digits during the period.
Underlying sales in UNFI’s natural products segment outperformed the broader market, aided by demand for natural, organic, fresh and specialty products. Underlying sales in the conventional products segment declined by the mid-single digits. Retail sales fell 8%, largely due to planned store actions, though the company said its comparable same-store sales decline improved by approximately 150 basis points from the third quarter after adjusting for the cyber-event comparison.
Margins, technology and network changes
UNFI’s fourth-quarter gross margin rate rose approximately 30 basis points from a year earlier to 13.7%, which management attributed to optimization work and favorable customer mix. Operating expenses were about 12.9% of net sales. Adjusted EBITDA margin was approximately 2.3%.
Fourth-quarter adjusted earnings per share were $0.69, while full-year adjusted EPS reached $2.65, above the company’s guidance range. UNFI said reduced net debt, refinancing activity and lower depreciation expense helped support earnings.
The company continued its operational improvement initiatives during the quarter, including the consolidation of its Racine, Wisconsin, distribution center and expansion of its Joliet, Illinois, facility. The Joliet distribution center includes full-case automation and is in the early stages of implementation.
UNFI also completed the initial rollout of Lean Daily Management at 44 distribution centers and deployed its AI-powered supply chain and procurement planning platform across its distribution-center network. Tarditi said the company recorded a fourth consecutive quarter of year-over-year improvement in fill rates, on-time deliveries and throughput.
Management plans to advance to “Lean 2.0,” focusing more deeply on management routines, problem-solving and continuous-improvement efforts at facilities with the greatest customer and operational opportunities.
- UNFI launched more than 130 private-brand SKUs during fiscal 2026.
- The company added AI-enabled features to its UNFI Insights supplier platform for store-level performance analysis and demand planning.
- UNFI repurchased approximately 1.25 million shares during fiscal 2026 for about $50 million.
- The board authorized a new $200 million share repurchase program to replace the program due to expire this month.
Fiscal 2027 outlook calls for growth in second half
For fiscal 2027, UNFI forecast sales of $31.2 billion to $31.8 billion, with growth of about 1% at the midpoint. Management expects reported sales to decline in the first quarter as the company continues to cycle optimization actions before returning to profitable growth in the second half.
Adjusted EBITDA is projected at $730 million to $780 million, representing high-single-digit growth at the midpoint. The outlook’s midpoint is $25 million above the target communicated at UNFI’s 2025 investor day, according to Douglas. The company expects adjusted EPS of $3.00 to $3.50, or approximately 23% growth at the midpoint.
UNFI expects fiscal 2027 margin expansion of 10 basis points at the midpoint of its sales and EBITDA outlook. Tarditi said the forecast positions the company to reach its fiscal 2028 margin-rate target one year earlier than previously planned. Management also said it currently expects fiscal 2028 adjusted EBITDA to rise about 10% from the midpoint of its fiscal 2027 guidance.
The company plans about $300 million in capital expenditures in fiscal 2027, including targeted automation, enterprise resource planning deployment and broader technology investments. It expects free cash flow of $275 million to $325 million, with higher capital spending partly offsetting anticipated EBITDA growth.
Management said it will prioritize organic investments and deleveraging while evaluating opportunistic stock repurchases. Douglas said the company remains open to acquisitions but currently sees its principal opportunity in internal investments to improve execution, customer service and operating efficiency.
About United Natural Foods (NYSE:UNFI)
United Natural Foods, Inc (NYSE: UNFI) is a leading distributor of natural, organic and specialty foods in North America. Founded in 1976 and headquartered in Providence, Rhode Island, the company has grown through strategic acquisitions and organic expansion to become one of the largest food distributors serving retail, foodservice and e-commerce customers.
UNFI’s core business centers on the procurement, warehousing and distribution of a broad portfolio of products, including fresh produce, groceries, frozen foods, dairy, bakery items, beverages, supplements and household essentials.
