United Natural Foods Inc 2026 Q4 Earnings Call

You may begin. Good morning, and welcome to UNFI's fourth quarter and full year fiscal 2026 earnings conference call.

Our earnings press release and presentation, which management will speak to, are available under the investor section of the company's website. We have also included a supplemental disclosure file with key financial information. Joining me for today's call are Sandy Douglas, our Chief Executive Officer, and Matteo Tarditi, our President and Chief Operating Officer. Before we begin, I would like to remind everyone that comments made by management during today's call may contain forward-looking statements. These forward-looking statements include plans, expectations, estimates, and projections that might involve significant risks and uncertainties. These risks are discussed in the company's earnings release and SEC filings. Actual results may differ materially from the results discussed in these forward-looking statements. Additionally, Sandy and Matteo will refer to certain non-GAAP financial measures.

Definitions and reconciliations to the most comparable GAAP financial measures are included in our press release and at the end of the earnings presentation.

Now, over to Sandy. Thank you, Jeremy, and thank you everyone for joining us this morning.

In the fourth quarter of fiscal 2026, UNFI delivered solid results in line with our most recent outlook and completed a strong second year of our strategy to add value for customers and suppliers while becoming a more effective and efficient company. Through consistent execution of our value creation strategy, we delivered fourth quarter Adjusted EBITDA of $172 million, which contributed to full-year Adjusted EBITDA growth of 27%, and free cash flow of $80 million in the fourth quarter and $323 million for the full year. We reduced our year-end net leverage ratio to 2.2 times, more than a full turn less than last year. At the same time, we strengthened capabilities to help our customers and suppliers grow profitably, continued improving our operating model, and built momentum as we enter fiscal 2027.

Now turning to slide 6. Let me take a few minutes to review UNFI's target addressable market, the basis for our value creation strategy. Over the past two decades, many of the most successful food retailers have built growth strategies centered on differentiation. While value remains critically important, many shoppers also continue to seek healthier foods, innovative products, and locally relevant experiences. As a result, food retailers with differentiated value propositions have steadily gained share within the grocery industry over time. We continue to see this trend across a wide range of retailers, including natural and organic grocers, as well as smaller chains and independents with unique, locally relevant offerings. These retailers are the foundation of UNFI's approximately $90 billion target addressable market, which is expected to grow in the low single digits over time.

Our focus is helping these customers execute growth strategies to differentiate their shopping experiences in the marketplace and better compete with mass and discount retailers. Through a combination of our proprietary analysis and third-party research, we estimate retailers within our target addressable market grew in the low single digits and increased their combined share of the grocery industry by approximately 30 basis points compared to last year's fourth quarter. Within this backdrop, UNFI delivered low single-digit underlying sales growth in line with our target addressable market. As we've discussed previously, our reported sales included the impact of accretive network optimization actions and the unwind of short-term project work in our natural product segment, partially offset by the cycling of last year's cyber event. Excluding those factors, our underlying sales performance remained largely in line with the most consistent and growth-oriented portions of the market.

Importantly, we believe our target addressable market will continue to grow because of the quality of our customer base and their alignment with enduring consumer priorities around health, innovation, quality, and value. Turning to slide 7. Our value creation strategy is purpose-built for this part of the market and anchored on two priorities: adding value for customers and suppliers and becoming a more effective and efficient company. First, we're adding value for customers and suppliers by enhancing account management, merchandising and supplier support programs, innovative private brands, and professional services that help our partners differentiate, compete, and profitably grow. Second, we're improving effectiveness and efficiency across the business through next-generation supply chain technology and productivity initiatives that are steadily improving safety, quality, and delivery accuracy for our partners while reducing our operating costs.

Together, these strategic capabilities represent our roadmap to building a company that can best serve the most growth-oriented parts of our industry while supporting shared profitable growth for our customers, our suppliers, and for UNFI. Turning to slide 8. In fiscal 2026, we made solid progress on our roadmap to strengthen our core capabilities while continuing to improve daily execution. This year, we launched more than 130 new private brand SKUs, including a variety of innovative health-forward options. In Q4, we also refreshed one of our core seafood brands that offers a unique combination of quality and value. We've seen private brands continue to grow steadily across the industry, playing an important role in many retailers' differentiation strategies. We also continue to enhance our supplier support programs, which several of our investors saw in real-time at our holiday and winter selling shows.

Most recently, we added new AI-enabled features on the UNFI Insights platform to make it easier for our suppliers to assess store-level performance, improve demand planning, and achieve their goals. Throughout fiscal 2026, we also made progress towards becoming a more effective and efficient company. We continued to optimize our network to better serve our customers and suppliers over time while investing in technology to support long-term growth. In the fourth quarter, we consolidated our Racine, Wisconsin facility and expanded our nearby Joliet, Illinois DC with full-case automation, which is now in the early stages of implementation. We also completed the rollout of our AI-powered supply chain and procurement planning platform to all DCs in our network, which is helping to steadily improve fill rates and inventory management while increasing free cash flow. In addition to technology investments, we focused equal attention on strengthening processes across our network.

By year-end, we completed the initial deployment phase of Lean Daily Management in 44 distribution centers, which is enabling ongoing improvements in our safety, quality, delivery, and cost metrics. While we've made progress this year, we still see significant opportunities to continue improving our capabilities as well as our effectiveness and efficiency across the business. The leadership updates we recently announced are another step forward in aligning our operating model more closely to our value creation strategy. Matteo's expanded role as President and Chief Operating Officer brings together our sales, supply chain, technology, and lean organizations, creating stronger alignment between our customer relationships and our operational execution. We're also sharpening our focus on commercial capability building under Louis Martin's leadership. On that note, I'm pleased to officially welcome Alfredo Luchini as our new Chief Financial Officer who is joining us on today's call.

We're excited to have him on board as we continue executing our strategic priorities with strong financial discipline. Turning to slide 9. We've achieved significant improvement as we cap the second year of our value creation strategy with momentum continuing into fiscal 2027. Over the past two years, we have consistently delivered on our earnings and cash flow commitments. We've grown Adjusted EBITDA to over $700 million, generated substantial free cash flow, and reduced net leverage from 4 times in fiscal 2024 to 2.2 times in fiscal year 2026. These results reflect the impact of our value creation strategy and the actions we've taken to improve execution, increase efficiency, and strengthen the company's financial foundation. In fiscal 2027, we're positioned for another year of continued progress with Adjusted EBITDA up high single digits, sustained free cash flow generation, and lower net leverage while returning to profitable growth.

As Matteo will detail shortly, the midpoint of our Adjusted EBITDA outlook is $25 million above the targets we communicated during our 2025 Investor Day, reflecting our strong performance in fiscal 2026. Although it's early, we would expect this favorability to flow through to fiscal 2028. Importantly, we're confident in our ability to deliver long-term profitable growth within the most resilient segments of the grocery retail industry. Looking ahead, our teams remain laser-focused on helping our customers execute their differentiation strategies, supporting our suppliers' growth with these retailers, and continuing to improve the service that we deliver every day. With that, I'll turn the call over to Matteo to discuss our fourth quarter results and fiscal 2027 outlook in more detail.