Executive Summary
UNFI started fiscal 2025 with a solid operating setup, delivering revenue growth of 4.2% in Q1 (USD 7.871B) led by wholesale volume gains of roughly 2%. Management attributes the topline strength to the strength of its large 30,000-store customer base, continued growth in natural/organic and multicultural segments, and an expanding value-added services proposition. Adjusted EBITDA rose about 15% year over year to approximately USD 134 million, marking the fifth consecutive quarter of sequential EBITDA improvements, reflecting ongoing efficiency gains and cost-control efforts under the Lean program. Net income remained negative at USD -21 million, with an EPS of -0.35, driven by working capital movements and near-term cost timing. Free cash flow remained negative at USD -159 million, pressured by inventory management and working capital dynamics, though the company reiterated its plan to deleverage and improve free cash flow over the remainder of fiscal 2025.
Management raised its full-year outlook across most financial metrics (except capital spending), signaling confidence in the multi-year program: net sales guidance lifted to USD 30.6-31.0 billion; adjusted EBITDA guidance raised to USD 530-580 million; adjusted EPS guidance increased to USD 0.40-0.80; and full-year free cash flow expected to be > USD 100 million. The firm also outlined concrete operating actions—DC closures and realignment, lean daily management pilots in two DCs, decentralization of procurement, and enhanced supplier go-to-market programs—that are intended to accelerate service levels, reduce waste, and expand margin opportunities. While leverage remains elevated at around 4.2x net debt to EBITDA, UNFI views the current trajectory as consistent with deleveraging goals toward roughly 2.5x by 2027, supported by additional asset-light opportunities and potential real estate monetization from closed DCs.
Investor takeaway: UNFI appears to be on a measured turnaround path anchored by volume-led growth in wholesale, a rapid rollout of lean practices, and a disciplined plan to monetize underutilized assets while returning leverage toward its target range. The key risk remains macro consumer demand, supply chain volatility, and the pace at which margin and cash flow benefits materialize, particularly given the near-term negative free cash flow and ongoing working capital needs. Nevertheless, the company’s progress on efficiency, value-added services, and strategic asset optimization provides a constructive basis for longer-term upside if the pace of deleveraging and revenue mix transformation accelerates.
Key Performance Indicators
QoQ: 150.00% | YoY:131.25%
Key Insights
UNFI Q1 FY2025: Revenue USD 7.871B, up 4.22% YoY and down 3.48% QoQ. Gross profit USD 1.038B; gross margin 13.19% (13.19% YoY in margin terms). Adjusted EBITDA USD 134.0M, up ~15% YoY, marking fifth consecutive quarter of sequential EBITDA growth; adjusted EBITDA margin ~1.70% on net sales. Operating income USD 5.0M with an operating margin of ~0.0635% (0.064%). Net income USD -21.0M; net income margin -0.21%. EPS (GAAP) -0.35; Adjusted EPS USD 0.16 (vs prior year EPS -0.04). Free cash flow (FCF...
Financial Highlights
UNFI Q1 FY2025: Revenue USD 7.871B, up 4.22% YoY and down 3.48% QoQ. Gross profit USD 1.038B; gross margin 13.19% (13.19% YoY in margin terms). Adjusted EBITDA USD 134.0M, up ~15% YoY, marking fifth consecutive quarter of sequential EBITDA growth; adjusted EBITDA margin ~1.70% on net sales. Operating income USD 5.0M with an operating margin of ~0.0635% (0.064%). Net income USD -21.0M; net income margin -0.21%. EPS (GAAP) -0.35; Adjusted EPS USD 0.16 (vs prior year EPS -0.04). Free cash flow (FCF) USD -159.0M for the quarter. Net debt USD 2.20B; total debt USD 3.84B; net debt/EBITDA ~4.2x. DSO 12.6 days; DIO 31.6 days; DPO 25.1 days; cash cycle ~44.3 days. Cash and cash equivalents USD 37.0M; total current assets USD 3.743B; total assets USD 7.967B. Current ratio 1.479; quick ratio 0.530; cash ratio 0.0146. Year-to-date and quarterly momentum point to leverage-driven deleveraging as targeted in the three-year plan. Guidance (fiscal 2025): Net sales USD 30.6-31.0B (midpoint ~USD 30.8B, +~1% YoY). Adjusted EBITDA USD 530-580M (midpoint USD 555M, ~9% YoY at the midpoint). Adjusted EPS USD 0.40-0.80. Full-year FCF > USD 100M (up from prior ~USD 100M). Management highlighted continued progress on lean initiatives, including decentralized procurement, lean daily management in DCs (Texas and Colorado pilots with 11% improvement in fulfillment quality, 5% on-time delivery gains), and network optimization that included Billings, Bismarck DC closings, and Fort Wayne transfer.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
7.87B |
4.22% |
-3.48% |
| Gross Profit |
1.04B |
0.78% |
-6.99% |
| Operating Income |
5.00M |
131.25% |
150.00% |
| Net Income |
-21.00M |
46.15% |
43.24% |
| EPS |
-0.35 |
46.97% |
44.44% |
Key Financial Ratios
operatingProfitMargin
0.06%
operatingCashFlowPerShare
$-1.85
freeCashFlowPerShare
$-1.85
Management Commentary
Key management insights from the earnings call, grouped by theme:
- Strategy and value proposition: "We delivered a solid start to fiscal 2025, which included revenue growth of over 4%, primarily resulting from positive volume growth in our wholesale business and improving adjusted EBITDA and free cashflow" (Sandy Douglas). Significance: validates volume-led growth in wholesale and early efficiency gains supporting the margin expansion thesis.
- Lean transformation and operations: "Lean principles... decentralization of procurement" with initial DC pilots showing material improvements (11% in fulfillment quality, 5% in on-time delivery) and ongoing scaling to more facilities. Significance: early proof points for the cost-out and service improvements driving future margin and cash flow benefits.
- Guidance and outlook: "we’re modestly raising our full-year outlook for all financial metrics other than capital spending... net sales 30.6-31.0B; adjusted EBITDA 530-580M; adjusted EPS 0.40-0.80; free cashflow >$100M". Significance: confirms confidence in the multi-year plan and puts a floor under expectations despite near-term cash burn.
- Growth drivers and customer mix: Sandy noted continued strength in natural/organic, multicultural, and professional/digital services, with volume gains across customers and categories, including expansion into conventional retailers with natural portfolios. Significance: supports a favorable, differentiated product/offer mix and potential long-term margin upside through higher-value services.
We delivered a solid start to fiscal 2025, which included revenue growth of over 4%, primarily resulting from positive volume growth in our wholesale business and improving adjusted EBITDA and free cashflow driven by actions to enhance our capabilities and drive efficiencies across the business.
— Sandy Douglas
We have raised the bottom end of our expectations for adjusted EBITDA by $10 million, bringing the new range to $530 million to $580 million, which is a 9% increase over the last year at midpoint.
— Matteo Tarditi
Forward Guidance
Management provided the following forward-looking statements: Net sales guidance for FY2025 at USD 30.6-31.0B, representing roughly 1% growth at the midpoint; Adjusted EBITDA guidance USD 530-580M; Adjusted EPS USD 0.40-0.80; Full-year free cash flow > USD 100M. The cadence is expected to be back-half weighted due to the timing of DC optimization benefits and ongoing Lean initiatives. The company plans continued deleveraging toward roughly 2.5x net debt to EBITDA by 2027, aided by asset-light strategies and real estate monetization from closed DCs. Our assessment: The outlook is plausible if Lean-driven cost-out, inventory optimization, and higher-margin services (professional services, digital offerings, and Brands Plus) scale as expected. Risks include slower-than-anticipated volume growth in conventional channels, persistent inflation or deflation dynamics affecting supplier terms, supply chain disruptions, and execution risk in rapidly expanding Lean deployments. Investors should monitor: progression of DC closures/realignments (Billings, Bismarck, Fort Wayne, York-to-Manchester transition), uptake of supplier go-to-market programs, and the pace of deleveraging and free cash flow inflection.