What happened
Shares of United Natural Foods (NYSE: UNFI) jumped early Wednesday after the grocery wholesaler and supermarket operator reported blowout profits for its fiscal 2022 first quarter — and pretty nice sales as well. The stock was up 9.7% as of 12:01 p.m. ET.
Analysts had forecast that United Natural Foods would earn only $0.56 per share in “adjusted income” in the quarter, on sales of $6.8 billion. In fact, earnings came in well ahead of estimates at $0.97 per share (pro forma), and sales also exceeded expectations at $7 billion.
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So what
As good as that sounds, the real news is actually even better.
You see, United Natural Foods’ fiscal quarter, which ended Oct. 30, was one of those rare instances in which a company’s adjusted profits actually understate its true profitability.
When calculated according to generally accepted accounting principles (GAAP), it turns out that United Natural Foods actually earned not the $0.56 per share that analysts had predicted, nor the $0.97 per share that the company reported as pro forma income, but $1.25 per share — a huge turnaround from the $0.02 per share GAAP loss that the company reported in the year-ago quarter.
Sales were up 5% from a year ago, but that was just the start of United Natural Foods’ superb quarter. Helping the company to exceed earnings expectations were increases in gross profit margin (up 38 basis points) and decreases in operating costs (down 20 basis points). Granted, this still added up to only a 1.1% net profit margin on the bottom line — but that was enough to deliver a profitable quarter.
Now what
Investors can expect more of the same as the fiscal year progresses. Encouraged by the Q1 numbers, United Natural Foods reaffirmed its guidance for its fiscal 2022.
For the year, the company expects GAAP earnings per share of between $3.60 and $3.90 per share on sales in the range of $27.8 billion to $28.3 billion. Adjusted earnings per share — the number Wall Street focuses on — are forecast to land in the range of $3.90 to $4.20.
Taken at the midpoint, that’s slightly below the analysts’ consensus estimate of $4.09 per share in profit. But in light of the size of Wednesday’s earnings beat, it seems investors are willing to overlook that and simply take the win.
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