Why United Natural Foods Inc (NYSE: UNFI) stock is under pressure

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United Natural Foods Inc (NYSE: UNFI) stock plunged 20.23% on June 10th, 2020 and continued its bearish momentum, falling over 8% (as of 10:53 am GMT-4 ; Source: Google finance) after the company posted better than expected results for the third quarter of FY 20. UNFI has reported third-quarter the net income of $88.1 million, up from $57.1 million, last year. Total outstanding debt and finance lease obligations at the end of the third quarter net of cash and cash equivalents was $2.66 billion, which is the lowest quarter end amount since the acquisition and a decrease of $302 million compared to the end of Q2. The company ended the third quarter with a total liquidity of approximately $1.21 billion, which is the sum of the unused capacity under the $2.1 billion revolving ABL facility plus cash and cash equivalents.

UNFI in the third quarter of FY 20 has reported the adjusted earnings per share of $1.40, while reported the adjusted revenue growth of 12 percent to $6.67 billion in the third quarter of FY 20. The revenue growth came on back of COVID-19 demand, cross-selling revenue and strong private brand performance. The sales in the supermarket channel, which represents nearly two-thirds of our volume, rose by 15%. The Supernatural sales grew over 16%, continuing its strong recent trends and expanded by COVID-19. Independent sales, that form 10% of total net sales, had fallen down by about 3% including a 900 basis point headwind from the customer bankruptcies.  The company posted the Adjusted EBITDA of $222 million, up 32% versus last year’s third quarter. The adjusted EBITDA margin rate from continuing operations has expanded by 23 basis points compared to last year.

The company previously withdrew its fiscal 2020 guidance, but has given fresh guidance and now expects sales to be in the range of $26.4 billion to $26.6 billion, up from previous guidance expected to be in the range of $23.5 billion to $24.3 billion. Loss per share is expected to be to be in the range $5.65 to $5.85 compared with previous guidance for a loss per share expected to be in the range of $6.79 to $7.39. And adjusted EPS is expected to be in the range $2.30 to $2.50, up from 85 cents to $1.45. Guidance now includes Cub Foods and certain Shoppers Food Warehouse stores. The FactSet consensus is for revenue to be $25.20 billion and EPS to be of $2.19.

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