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UNFI United Natural Foods

Participants
Steve Bloomquist Vice President of Investor Relations
Sandy Douglas Chief Executive Officer
Chris Testa President
John Howard Chief Financial Officer
Eric Dorne Chief Operating Officer
John Heinbockel Guggenheim
Scott Mushkin R5 Capital
William Reuter Bank of America
Bill Kirk MKM Partners
Eric Larson Seaport Research
Spencer Hanus Wolfe Research
Peter Saleh BTIG
Edward Kelly Wells Fargo
Call transcript
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Operator

Good day and thank you for standing by. Welcome to the UNFI Fiscal 2022 First Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Steve Bloomquist, Vice President of Investor Relations. ahead. go Please,

Steve Bloomquist

issued Thank under quarter everyone. Events you joining on company's slide www.unfi.com earnings us have webcast at press Good a website Investors and XXXX you section earnings tab. first supplemental release the of fiscal a are now the morning. conference UNFI's The received release, available morning, deck copy for this the call. under should the By of

John Douglas, me Eric Chief questions. Howard, update. today's your Officer. take Officer; are John Chief Joining business President Dorne, and provide which, and will Operating our Sandy Officer; UNFI; our Testa, for Chief Chris Sandy, Financial Chris we'll After a Executive call of our

management statements in call These earnings risks during forward-looking SEC statements. begin, involve plans, that risks include contain are today's discussed the differ everyone we Before like by to may forward-looking I'd estimates uncertainties. These significant remind filings. might may company's and expectations, and Actual projections results and made that release comments from call, included comparable release. forward-looking call to to during now Definitions most results reconciliations that And measures to financial to out over point lastly, press I'd today's like and materially in will non-GAAP Sandy. statements. financial discussed the certain in measures. the refer our GAAP are management these I'll the turn

Sandy Douglas

us fiscal XXXX our on first Good Steve. joining call. thank everyone, morning, earnings for Thanks, you and quarter

invest as learning our objective. significant need which amount my to focusing is opportunities Making their as rates this supply be continue add we about much delivered differentiates rising simple and release, environment cross in are declining can at goal points quarter continue food performing passion four-month UNFI across successful, difficulties, business, time value time stronger And press As UNFI's I of through in our succeed. industry, steadfastly customers mark Tomorrow, the pain our what bring continued offering to with of customers, unpredictable tenet to of their I'm and we I first helping to biggest will core their UNFI, genuine can the what chain morning's and as you to for through and do to what with by ongoing this this. have saw meeting fill everything the committed to is a do inflation. to we challenges of that results make what a customers retailers a operating I mission marketplace, I solutions possible their operations. including the a core accomplish statement, on doing

Our teams the regularly holiday to order meet next to their possible. build season to and introduce look early to year's plan new with coordinate promotions November, event. Customers to were selling forward wherever and this inventories customers major December encouraged for items, and

retailer I customers, unique chain effectively supplier understand into best customers possible to upcoming we puts know position vibrant sure We customers our Thanksgiving. we're Having insights many distribution did holidays. I supply sales so that many XX,XXX in more and of top which to suppliers they how on world our UNFI's operations. We're partner UNFI cost common associates provide are the our Further, suppliers role of partnership locations. doing done meetings last years, also the new associates the deeper sales exposure their And it's work how all. job A and us increase we for our place, on is our but and of sales whom UNFI's and for for are to quite what engagement for better their across during known we've are help the developing company. ways. be our how in backdrop, spoke of we opportunities forward call, we and our fiscal XX our opportunity isn't also and sales. calendar UNFI's priority know centers. suppliers maximize move initiated in it ESG one, the and proud unique conversations that the the retail diversity the better-for-all information environmental momentum the just transparently identify from the ongoing in on frontline laser-focused more about fiscal remains important doing to to suppliers, thing about some now me expect issues larger through our short distribution a of that Despite can we're a our an their with meeting retail BXBXC UNFI their which and inclusion right We've continue can and diverse firsthand the who meaningful name in with And work together many theme structure, of our create topics mission making as XXXX day. the several I've upon I the UNFI's every few, better chain XXXX. more commitment I culture To ESG collectively to. had as From We core them around share a has climate part model the supply the to proud supply our increase to what's been increase access to to these of flowing. together customers meet most on minds, that value I've towards and with goals, the and important to of UNFI, the programs a to in together. balance touched visits to services for and Overall, we and chain to industry is needs enjoyed important ambitious of year. given the core change we're positive food base is the and forward business also feedback to that make I've difficult keeping the the that to term, plays received time. of that safety sharing now report call bring lower to to and momentum value together just in encouraged the carry start a hear And XXXX. diverse you more around likely offers in work look quarter first This last early their and and on associate all continuing. on not to side to simplify

customer-focused, for UNFI for is future. the blueprint will what Our Fuel the the and Future drive foreseeable strategy growth-oriented

in and complicated how is encouraging every looking Our also better customers do that associates environment. the I are job support the customer can said and that, we energy of for suppliers element it our Having a days, the across our for dedicated best care we They're to months weeks of sure satisfied. to taking find our get customers in board continually our possible never make ahead.

comments turn Chris over Let now me our his the President, call on to Testa, Chris? performance. our for

Chris Testa

are results operating key provide On today's growth, morning, drivers trends impacting and and UNFI's that future our UNFI's environment. on further on color I'll insights and good industry some Sandy, everyone. behind the QX call, Thanks,

a two X.X% continued driven company's Let's from quarter. experienced billion, QX noting contraction revenue time quarter, last by inflation. challenges drivers. sales came and only increase growth, and were major our fourth nearly totaled to $X billion sequential channels favorable is quarter. for chain that a year-over-year which supply results single that It's business new also the in primary year's X% market in offsets was the these start wins where sales over consolidated this partial and the All three factors: in sales Modest with the increase a second worth at $X history

began our Our strong center driven relationship Pennsylvania UNFI's terms were DC rate its XX reflects our our startup to new in supernatural serving realized value the quickly which the Independence customer, and in in been new new history, was York channel of area sales volume revenue. bring largely largest SKUs we strength the top by their Allentown, a it winning New has growth warehouse distribution and QX. This business. made facility, categories from has sales Metro the run largest which in we by sales Independent and driven with of

and we've the New metro greater exceeding new fiscal opportunity had the along in strong York progress the performance pursue growth continued customer As and of to in some you'd expect learnings business but anticipate, supernatural way, we to have this the and our with independent existing through balance wins expectations, the we volume year. service market. pleased been new enhanced customer Both are and customers

sell of majority our $XX cross-selling quarter. on the Our cross-selling occurred sales UNFI. This benefits revenue revenue to incremental offering own expanded with in these we cross-selling retailers includes team who operate million of chains of and over have we the their The also focused distribution where networks. generated retailers by incremental channel, large remains the in purchases we consolidating captive categories their the

end of first new Across on-track $X revenue billion channels, year-over-year fiscal cumulative by existing us and customer the the all X.X%, to cross-selling with gains expanding deliver by customers driven this target our XXX Our we cross-selling realized of quarter initiatives. business kept our revenue gains the year. categories service top base

Our strategy outlined the Fuel QX. in in growth our that Future previously we expanded platforms also

in to the add our meat, been perimeter all-important of has team the sales items produce existing and fresh Our with Deli working store. bakery customers closely

the space addition national In regional every distributing now footprint to fresh a onboarding in shelf we'll expertise. expansive another with and of produce categories we're DC category customer large categories, we're at gaining And as a fresh to week, level. our supernatural, be result

for Our UNFI out push currently own outlets new distribution roll XX,XXX continues services. of business and with points customer brands the items to additional

are allows quarter natural SKUs over Save label consumers with our with traction products emerging trends. brand Everyday for positioned X% portfolio in a organic We've alternatives us over to as pricing revenue Accordingly, seek and quickly of the brands. value also pivot affordable into our consumer these that from program be Our new tap to brands X,XXX and increased national seen items attractive, clean to attributes.

had seeking being their quarter retailers from customers lower the professional services last We're by businesses. and Finally, operating done to a as in costs or increase seeing to groceries. year, compared our we of the retail look expand on solutions side, number revenue their to they remodels in strong reinvest beyond XX% a

bring for to gain to coming to customers the our another enables We've machines XXX cryptocurrency which and offering, are their XXX Cloud nearly customer traction. stores continues shoppers, now months. in Corn placed in Our scheduled

impact to positive and of driver margin Due typically the nature of agreements, gains. pricing our changes. cost-plus Regarding inflation. is sales a of inflation our inflation saw mix X.X% by of revenue volume wholesale line the majority and to We net top X%, net

contraction, and growth from looked coming At new For inflation QX, wins, months, half several don't of from be market inflation. our half next coming the can we as roughly expected for business net least see easing. at

inbound an actions of and help working to effort like of Our and procurement alternative promote order shelves. we a with also as our improvement, vendor and the just plan steady the job on to share industry, offset to to transportation, do with likely our sellers. merchandising these receive in-stock with and to availability higher find product to like promotional launches customers UNFI impact this that promotional lower top brand from the contact SKUs much item underlying solutions, of fill our items hikes After customers of customers, broad agreements where customers, Many they owned to so and adversely on manage beyond positions to teams To not shortages, to has and ranging labor brands and time, through the of reduces impacting go shortages, can we price supplier deteriorate. UNFI products can low, is everything same what's some closely limited this of aren't levels typically recommend fill many rates Simply the source our months of inflation, to accordingly. These carry activity we, anticipated with new product broader we so as work our period. adversely its At rates who fair suppliers come, make fill alternatives spend, the possible a substituting product insight receives on offering drivers assortment sure increased may put, with scarce. rely are continue commodity availability as daily are their best to suppliers limited are updating present focus for complete plan supply include critical have rates. diligently in UNFI where national can our suppliers suppliers to seen

and the For we the part, perspective we to believe well from now that DCs. these in labor frontline and actively COVID focused helping we not secure operational market, difficult during our costs we but today's service including We is volume in through our a December to some programs, holiday well We are most to with incurred report positioned continue focus as due scale to August challenges fill challenges employee did shifting we rise are during attract neighboring were our our been workers. facing customers season. on higher UNFI immune times recovery to cases, have to our operational. navigate innovative shutdown to everything in Broadly planning speaking, temporarily the summer pleased of Shifting is inventory items the holiday Thanksgiving, fully successful possible and customers, to an through I'm customers network with to experienced the in Centralia leverage impact operations. temporary that way advance. to to facility, rate voluntary retain period, are managing designed late

wages our is Investments DCs. a We These our retain in receive are to where retainment address programs significant program headcount expected warehouse designed programs are recruiting consistent paychecks, They to a compared Early to in led have traditional and others contribute and worker our investments lifestyle helping made than focusing in Access, attract also but Shift Flex DC to associates that efforts are us and have need employees. to reduction to paying allows our associate and off attracting earlier concerns needs. these which XX% on We're pay employees performance open still more for efforts are into like to and be, weekly and long-lasting year-end. not are we operations customers. in and

increased against the very stack delivery needs On more two-year sales better performance as comparison encouraged introduced Cub increased to retail strong retail basis, we Online our were a fiscal at and our quarter sales the e-commerce down by we're sales slightly XXXX's than by first XX%. our of in Finally, stores, meet of to only customers. when Operationally, XX.X%. a enhancements platforms great model to Cub our exclusive needs way associates. can use by of My in of Rewards adapting orders at to This customers is Cub serve allow now and to to digital today's and possible. shopped orders a locally we all consumer are the their Cub card promotions gain of coupons, team access changing another example so them dedicated business the best

and challenges chain towards food focused Sandy customer continue, making we that that Against energy we as as backdrop, supply expect we to our inflation Although, are also believe will sure trends on and some support headwinds. said, home we offset be. is help these strong can resourced fully of

customers. to we're challenges, and are on minimize implementing there disruptions supply solutions for While delivering our focused chain

in provide with We consolidate or also continue consistent our purchases to to to leverage service scale UNFI to customers new build our volatile these looking potential customers looking pipeline, times. with

here prospects. is than UNFI, in about robust optimistic any pipeline years and customer our my new we're XX at time Our more

with and likely customers all are this balance been optimistic We pleased UNFI challenging but them. confident the remain our least can in our quarter way, XXXX. and performance to at the about The fiscal environment near-term, offer of that our that we're through stronger will in ability make has

the turn call me over John. let to Now

John Howard

sheet, On everyone. fiscal morning, today's structure call, on our performance, comments Chris, first you, good XXXX and capital cover Thank financial outlook. quarter our balance I'll and

from million both last first to a Sales $XXX billion, nearly Adjusted year's the our increased As performance million. X.X% $XXX totaled QX. start quarter increase Sandy compared quarter fiscal XXXX. operating and encouraged to EBITDA XX% to for we're Chris said, the this by and $X

XX rate compared year's First margin quarter basis first quarter. gross points last to increased

Path impacted Our wholesale margin the was quarter's rate well as continued by as Value benefits this elevated inflation our from initiatives.

last area. to higher were our in our well costs the quarter consolidation support year's start-up Pacific XX the for which declined as when York this Northwest, compared driven operating first rate in supply customers by New year-over-year DC, and favorable costs by and These offset part the supporting of our comparing higher temporary basis against week transportation voluntary costs closure partially last of Washington distribution related metro the in from Centralia, the the labor during lower chain, adding costs, of First in sales of retaining the year's year, as center, came service including operating and leverage cost expense our to better quarter, customers. to investments our points

increase before, X.X% in goals on just growth year-over-year this translated stated of point sales than we've our XX expansion As one EBITDA EBITDA exemplified is faster adjusted basis And XX% a adjusted that in grow adjusted and a our to quarter's margin. in sales. to EBITDA

which as per various includes tax in benefited tax rate, vestings Our of earnings $X.XX, This from reserves. employee the which items. favorable totaled stock included GAAP GAAP share award our $X.XX net well release as

quarter $X.XX our to of EPS adjusted year, totaled further compared Our per XX%, $X.XX leverage. last increase an for P&L demonstrating share the

balance as source in debt season as The the seasonal to in quarter customary our as We in of capital the expected of inventory addition we a sheet. center. convert net reflects well newest holiday working our working distribution cash to increase billion, the our total should add the capital going $XXX compared finished This increase of into year-end. million the in to a second selling $X.XX customers, support quarter quarter. into outstanding first Turning inventory with of investment

ABL quarter, increases. slightly as trailing XX-month fiscal net net growth We was to compared EBITDA Xx as to balance by than our corporate As offset the our family the year-end. X.Xx, higher loan ratio rate. capital secured actions XXXX X.XX%, lower bonds. full by Simultaneously ratio push balance UNFI with term loan expected, interest its at debt is points end term by our annual unsecured previous rate of the million upgraded expense. EBITDA on more under ratings, quarter from the a higher save year the debt Moody's lower in adjusted adjusted to increased repriced These end our basis made drew reducing seasonal $XXX million XX the term million. leverage well as prepayment debt-to-adjusted our expected and outstanding on the credit two $X facility a of expect to EBITDA and below plus which our million loan, level Late still repricing, LIBOR ratings combined nearly We S&P leverage are working $XXX in subsequently a at cash and driven both we and to $XXX year-over-year adjusted EBITDA than

fiscal Let's turn for XXXX. to our outlook

reaffirming outlook sales, expect which be are full the $XX.X net our of We $XX.X to for continue billion. year in range to we to billion

for will per and believe provided above $XXX impacts. with on million that remains outlook finish across prolonged challenges finally, We more X% sales adjusted inflation range the is that million. will adjusted to unchanged a expected Our $XXX for outlook of $X.XX $X.XX now and EBITDA between share. And the our to supply EPS our also but potential offset we last be chain call, level unchanged

measure Our is landed our base cost to was of for which quarter. approximately increase the X% of the inflation goods,

discussed, to as we X% categories. was our However, believe shifts factor net certain in inflation X.X% habits, fresh the changes mix consumer including Chris approximately buying to when in we in impact sales,

in operating that certain there our our in Although a and an are expenses. increase inflation, include offsets by impacted LIFO higher were P&L charge sales

the which reminder, fiscal for debt $XXX purchase for amount leaseback and transaction, as remains million, $XXX reduction half of unchanged at year. the our for expect outlook million, second expectation million in of we approximately occur to Riverside excludes Our expenditures $XXX to a the sale as which capital the does

remains operating yet today's our heard, our confident and guidance. our ability you serve customers to in remain backdrop we deliver full year on As challenging,

let the at Before our presented Day. questions, we increasing commitment open up the me to targets value call and June's delivering for reiterate Investor shareholder long-term

as built challenging. those as that model to in well Our times. business succeed as we've are normal characterized mission and more

we your focus now earlier, our do continued we remains on our a stated ready center questions. everything helping to Sandy and the we're take company succeed who support. and are appreciate of as Operator, we at customers As

Operator

first Your Heinbockel John Instructions] of from is [Operator the Guggenheim. question line from

John Heinbockel

Thank you, guys.

new and you telling right? versus too Let with, here, have me distributors allocation you in acquisition allocation drive various right a of product think because run better you relative you that would others have rates Do optimistic? sense should that have And the do retailers. can that? way any competitors Because then or of fill a don't, smaller customer and than and you and retailers, short start have smaller is

Chris Testa

it's Hey, Yes. Chris. John,

what's on with customer right, many So What and that with top CPG sure And us securing we allocation fair we supply. tell of for share straight product, for make given get day it's CPGs, more the work our the of our basis. two, impossible products. we're to every do going to them that given allocation a scale we on of we're one, three is

So CPGs that the us. are is what telling

alternatives customers, stressed As XX is our to And an have it is acquisition for we ago, are new that, point, what months selling as attractive in chain. that hit looking since supply COVID far the of found customers addition size of but almost environment. the and because asked And only we UNFI consistency is you of network. the the in an this just availability alternative, and the scale also found not that product attractive about, is the what stressed

us been for helpful attract customers. that’s to So new

John Heinbockel

about you're volume even if like? if know right? composition, referenced, to composition I that specialty the so or you of you've you non-food that, small, large maybe what does composition look but you retail, of with the versus versus the a maybe But So or conventional think about they that, don't speak it's the also having if the think conversations And that's had. folks represent. biggest pipeline number more

Chris Testa

Sure.

to volume the it's question, they your So represent. first, answer

there with competitor no fresh you sells, single opportunities. out how with there. the deep think are portfolio, of that's with UNFI deep brand conventional that. really portfolio, natural portfolio, the we're XXX what And about over services, Look, we with measuring So hundreds is a tracking deep if SKUs

customers well. ranged captive pipeline customers range the regional from customers the They the with as alternatives. a for -- of There in large in hundreds customers national really So looking the lot also from are distribution, are customers. local potential

is And it space, the existing So new as we opportunity customers. billion as $XX look with billion the at customers opportunity really still well range, that as John. with white $XX

fair So a of both. amount it's -- the pipeline represents

John Heinbockel

quick Food real what or will first The last plus to one. rate Key $XXX $X something the one get the running I in Key win. been might that? run And like Food quarter, And billion at? million guess have

Chris Testa

So much year. realize we don't but we until months do next until full XXXX. how disclose with volume won't throughout each fiscal the the full customer, but Key has get the up we the It Food ramped volume year, XX we of won't

John Heinbockel

Thank Okay. you.

Sandy Douglas

Sure.

Operator

is with Scott next Your question of line the Capital. from RX Mushkin

Scott Mushkin

guys. for Great taking the given Thanks my call. work Hey, environment.

those I right first obviously, how now of plants. in run talking about the guess operating. wanted the Campbell's it's to I that's ask some about really to So We and hard saw difficult they is, thing call, were

just far to there's or remain lot talk wondering quarters of So what you could you reported. it running pressure it if the are just same? points availability a is going of couple I next guys thinking quarter the labor, about network? your know to you I lessen your was of about the challenge is. expectation How of as Is going in as the

Sandy Douglas

Sandy. is this Scott, Yes,

is outlook to realistic. the corner. our think I predict It's next what's very around hard essentially

by also And their they our supply the net environment. our and simplifying but suppliers, to As Chris said our doing they're system, going in have in continue talk we that on working we're recruiting, experience fulfillment remarks, made openings believe associate that in of as his intensifying terms well. improvements to to around we've constraints some

have to to agile. expectation stay that customer-focused going difficult. will be general stay environment that we're going the our to so to And and is have We're continue to

Scott Mushkin

are are able And mean staff? okay you are looking levels through the just I staffing cold going roof. right at to cases I'm now. the

Sandy Douglas

Eric, that? why you don't take

Eric Dorne

We're educating enforcing work and X% we we're Flex benefits for continue incentives we're on almost staff as closed And to gap starting XX%, COVID, like our our vaccinations. those offered seeing protocols around distancing. around and hold. Yes, And encouraging Chris social of it's headcount wearing, total vaccinations. take Shift we every Scott, associate-friendly -- week. whether our are our and mask the And programs referenced, it's actively of we've to really by associates, growing is and continuing We're hours with we that.

and focused work on it. it. our way So to stay it are going through We're on we focused

Scott Mushkin

but more is of longer-term my follow-up distribution I consolidation it, think networks. Then thinking the are maybe are is mentioned thought do that years question. I it, how Like that maybe couple I was process of wondering we're going where are I the guys mean, process? know in don't to next you missed a out we much of the I more on item? you

Eric Dorne

take Scott, I'll Yes. It's Eric. again. this

but our that, at the looking are on actively are focused we We meeting capacity for needs now. here and

adding expansions We're and at we're that to in PA talked continue We've the service in expanding and expansions feet and new network. we online that automation Coast about got with invest on two -- to automated around strategic square obviously, we coming York the West looked system, other underway, X.X Richfield we've Allentown invest at Riverside. automation. the systems market, looking our and million have New So we have strategically Carlyle,

agile think I much that our is the sure So as on this pipeline and the based dynamic on. very a comes flexible stay continue growth business Chris we that can meeting making to referenced, situation and

Scott Mushkin

Thanks That’s Appreciate perfect, very guys. it. much.

Operator

from is America. question with Reuter next Bank Your of William

William Reuter

Good morning.

process Key And you've has is the to to be the Allentown center, far? how hoping area. customers by capacity that Foods? so about going gone been used additional talked get have How that you distribution New of much in On York metro

Chris Testa

Yes.

you and for want focused warehouse, have Any are we on that any work that So, kinks. build out startup. you the start-up gradually to

have do plan we we've expected servicing serve to really just And said, there. the add marketplace focused near some continue proud but will And the we're term. very I we business progress. had to of we there, – the dense to challenges we're As on in in that attractive

William Reuter

little I a how the product then about balance negatively talked And of in -- promotions. prepared talk this positive of remarks, reducing you margins is bit availability inflation? Okay. about how this limited that's you impacting versus guess, how the and the Can

Chris Testa

Yes.

I'll $XXX year-over-year the million we're So, say this the fill and off, rate, first in quarter fill still the growing was is, only over up slightly. rate

have plenty might SKUs restriction. there's everything the product our and out It of customers supply So, want that just supply and of not the because there.

So, can lot We're of products. our selling we keep shelves filled. a everything we're customer doing to

Regarding come activity. as it promo, as are seeing back far we

promo best make and overall, our a mitigate everything is headwind. was merchandising – the increase activity. we expectations closely going is quarter. increases. the to with in promos that thought And did we're rate price Our SKUs for our The doing a to what were sure working new year-over-year to fill less we're promo getting team we suppliers actually in with line for customers, happen But see

William Reuter

And in. you lastly, facility if was shut that that one in just getting to facilities August, regard any Are the transmission operational. there them I have it's Okay. of you're again? then With that down COVID shut sneak could now down concerned to fully may are one levels

Eric Dorne

mask social wearing that. Bill, reinforce we place. maintaining have in Eric. this again, all facilities, I'd No, we distancing. that in is not And seen We've have been the protocols

to incentives for associates get offer our We continue encourage vaccinations to vaccinated. and

So, monitoring. we're

continuing have the place across robust and see the trends program in we're a to monitor We really just to normal country.

communicate. nothing that So, we would alarming

William Reuter

lot Great. luck. good a Thanks and

Operator

MKM with Next question from is Partners. Bill Kirk

Bill Kirk

holidays ordered maybe and for More like expanded their everyone. inventories. sounds the it early so morning, than normal, Good customers

down of does inventories guess load So, or abnormal how benefit that, that in to XQ? was relative your come later other how it like I their back inventory in Do And was periods? at customers? reverse here out big a

Chris Testa

Chris. is this Bill,

December season season. about and Thanksgiving November think I and for the you're the talking

this the inventory inventory represents – right quarter, is of highest the our So, sorry, that QX in of build now, always we're this because always holidays. – because

So, it's what seen in years. dramatically nothing bigger. we've lower, line dramatically with prior Nothing for

sure just July. our far early, and items about closely that our Thanksgiving I shelves. had order high-demand was with those really started on mean, As as work talking make their the suppliers to we customers we And in to

now. about focused our always Thanksgiving. December in the pretty to feel and right we're good we do performance on opportunities better holidays So There's

Bill Kirk

a they you see sourcing services Did own go who back leaned in period? restrictions, see more, as you your they supply do of their lean stay, And them they more do Did their systems? own if of if their were, kind rely distribution? you normally the captive follow-up. were maybe on to retailers or And chain because having on normal some they but they on

Sandy Douglas

is turn it this I'll over going make Bill, Sandy. then I'm to a to your point, question. strategic answer Chris and to

new sure of things attention care that been we our one think that we to growing customers think of is I paying while the exist about customers. making take we've

as described pipeline best before the customers, add of very rich who service. of types we capacity that then But said, trusted the what Chris to every and will to customers, and robust us that. do get is customers the capability the As we you us have And day all is matters possible it. and

to loyal the And who've customers us. so, we Chris, detail. I you point I the But to think want into how reinforce been are the can to is, loyal get

Chris Testa

Yes.

the that not Just to from gone seen business captive Sandy add if direction. it's we to have actually, what opposite That a customers. from gains retraction is anything, new said,

Bill Kirk

you, everyone. Thank Okay.

Operator

from is question Eric next with Larson Seaport The Research.

Eric Larson

Yes. question. Thanks, the Thanks everyone. for

to for So the like obviously, more, maybe even manufacturers need looks Chris, I environment, would promotional another up to into they costs. are due little taking question higher aggressively, like round prices the a just might dig bit a

they profit that's during promotional good So for you, center rates been increase a periods. discount promotional traditionally, their as

on fully forward that? expect yet you So here, has Chris, increased that or still going kicked do in benefits

Chris Testa

kicked it I your you not fully and about mean, right? think number And if those it product, behavior getting programs those are So, that fully don't preventing is of supply, say we transactions. The I when the less What's are will promotions point, promotions, from on fully. it are has. consistent. although, has about I promotions promotions, I allocation, when transaction in to when you your are based -- think kicking transactions on levels is SKUs, in staying kicking have there, So, that product lower. are And a new there, not directly launching in, no, to question would but the you're you're

been I availability headwinds we're think issues that of some there's because product the having.

Eric Larson

or either? availability kind part part And rates. issue of Thanks. detail bit on product think you mentioned on is other completion? rates, there has that an are any a I constraints chain little transportation. of supply fill -- in product bit restricting are availability XX% But just about fill a little Obviously, been it more rate supply chain as fill it your the like that other of Okay.

Chris Testa

No.

it's labor, we and Our all And hearing availability, call. fill rate there's been no our at It the last factors macro materials, that it's our fill environment suppliers. you've in of raw about rate inbound spoke is the surprises transportation, it's a reflection is actually from there.

environment. really nothing to So there's unique our

Our hindering inbound. really fill about it's that's chain supply rate,

Eric Larson

Got it.

little question, at final my this is a year-end. then And bit about think I John. Okay. think, I you talked John, for

more Your that I or is that, of little is recall elevated going the $XXX an $XXX forward? this million million spending case, correctly bit of we spending, kind I rate of if think for Is a what year. still CapEx of that should upcoming expect

John Howard

because script, that my targeting XXXX. to -- going of much $XXX for that financial appreciate the said aspect that's we've CapEx we're around roughly said XXXX in talked related put is million, monetize still $XXX impression And the higher. our up we that Yes. will you a guidance reporting FY But million. that for that's it and the Riverside, we're to What about X% just I give on cash I as And being we've Eric. in how reminder, the $XXX of what as million question, driving that sales, excluding

our we yet. with continuing $XXX everything to down and seeing similar But the that million there customer out make projects. brought some those doing that chain haven't keep challenges we're some focus. investments can We're line We supply on up to of

Eric Larson

everyone. you, Thank Okay.

Operator

from of Instructions] Wolfe the [Operator question next Research. Badishkanian Our is Greg with line

Spencer Hanus

the a that flow in should And significant Greg. morning. be we run Should rate is year the the year? full of Can fill good the rates sales rate lower you does were expect of Hanus a run you Spencer the inflation? a on for headwind much full to that year? your higher guidance inflation from X% XQ then X.X% for for Good for to how This proxy talk really quarter? about benefit full expectations And the the just into see how

Sandy Douglas

I’ll inflation. to part first of that the So, the as relates take Spencer, it

chain that from XXX the bps about we sales mentioned, I provided of this line related with our XXX as there's thinking that to bps. is where supply we're And that keep some to As original mentioned, we're we certainly guidance. that how raise did corresponding XXX also in view will and challenges our on the near-term. I But the in seeing that other offsets

Chris Testa

up and as just impact fill so up I'll year-over-year, then rate were fill And say look, as far was over the slightly this, X.X%. sales on sales, rate

we from X% our brand So we right? products a we alternatives we that have rate when longer that portfolio, they XX% has our want, to to national replacing for than products, are term. the typically have products, So – customers with We work and more exact in-stock brands. be namely, look fill going which for to our don't sell products stock favorable in SKUs

to items. so can't The those the constricted put exact work I generating the make we're anybody for out-of-stock that. find warehouses. in customers to getting sales the right, we is revenue and think -- from control to sales hard we're I their and have our don't products, number because So can that full keep on a headwinds the our sure whatever with we controllables,

Spencer Hanus

Do the months, the then long plans sense? would months, And helpful. laid by a be out helpful. question. on expect it. XX still color follow-up DC Any you the Got plan you consolidation would be there out? make how think just pushed Is Steve to it that months? And X XX That's strategic consolidation

Sandy Douglas

leverage frame have our we're acquiring. that service customers to the stay think, agile don't to we and trying put would we're Spencer, as I capacity we that a it time on here and

think that much our a as And dynamic to leverage change. to this new I profile very we and customers going add building. we're that situation, is So, really continue will

think on forward. more come move I to that So, as we

Spencer Hanus

you. Thank

Operator

The with of is line Peter next from BTIG. Saleh question the

Peter Saleh

have taking come guess, to I for changes quarter. the on Great. made the Thanks just compensation. guys the to around the the labor conversation employee, and back I you question. wanted Congrats to

the it's those you Thank in any you elaborate guys as headcount you. turnover reduction gap mentioned think then think made are – in come changes seen Have changes you have – I to I was versus there? the your you rates? compensation guys a GAAP there you've just down Maybe expecting. can that XX% And structure?

Eric Dorne

service associates our The Eric. that had. the is this gap Peter, business what XX% referenced versus we Yes. is of need we to we

inside all reducing a things, that We're by the balance, So, doing work-life time, of we variety over focused striving closed of which flexibility. associate on experience, gap increasing the lifestyle buildings. the XX% by after

So, all innovative the than wage other it's we've like things after inside benefit in really our more not options early that an that. the just adjusted. health for plan program We're about our We associates. we've wages to access And we've DC. And that revised throughout modified success network. going is share put also

challenging wages optimistic again, forward we're more moving us we're through this this for this is focus time. seeing. So, just a what And and on is than

Peter Saleh

Great. target? anticipate X.Xx is ticked you little Can Thank bit this or get it might Can what's to – get you you expect for the know up the end anticipate guys leverage. or leverage? we lastly that that. I XXXX, to we by a sometime in FY more And just of there that timing here. on the then of a 'XX call

Sandy Douglas

Yes.

X.X out anticipating, to end we X So this point, the be we've range Day, basis. would end we're Xx put get at to And getting this there, us. continuing is doing range Peter, certainly, talked X.X of about by FY forecasting Investor XXXX X part fiscal the of as year. on that to a what We're And of be at which for of gradual the trend XXXX. to it our end that the in being FY below to we'll

Peter Saleh

much. very you Thank

Sandy Douglas

question. the Appreciate

Steve Bloomquist

all answered we've think I in the the queue. questions

more don't had Why we that us? So you -- one bring come in. guess for I in

Operator

Kelly is Wells And with question from next Edward Fargo. the

Edward Kelly

sort of inflation hi with just warehouse that a what's Good little there going morning. Could happening that? about you pressure from currently market forward, been both rate and talk Foodservice of Wondering the are like Yes, driver seeing guys. bit your ramping, hiring. expectations around and been perspective expect and perspective? has a you labor

Eric Dorne

as as the to as continue Chris make market here. made move Yes. This premiums drivers, market I'm associate put to is evolve adjustments, for we've a profile we and place and we're our specifically, that going continue experience I'd to very they're programs far whether we referenced players we've that different not confident continue number forward. And put in And adjustments with things we Eric. his to market, we'll as sure leverage a than our or script, drivers, on But as in drivers feel different sign-on offer other in bonuses. it. here

Sandy Douglas

Sandy. this is Ed,

the programs. across leverage possible that what the think that I'd it and better to to trying add team we're get key, and a to able is then most differentiate different place where There's organization about is Eric's to whole to going that, all through work. effort on spent. take capability, to to is value every through of of competitive lifestyle our get which UNFI is a be make investments, to market I And market and but closer to dollar employee-friendly customer competitive out lot the

Edward Kelly

-- any just there and it on outlook know, And that for UNFI over I is update how don't retail fits strategic the business? term? And the Okay. long within then you can

John Howard

Investor that we and means at an and is, the the continue This that an that Day, Yes. outstanding there, by place to got he And to same retail. we in continue function happy we're to as Cub things the run, Mike in at we're continue if with But grow, going that have spearheaded that which optimize that And No, to going been the are that going you performing Minneapolis means all value, outstanding, that to Shoppers and East us leadership they're it. to on approach to John. consider to an producing, it we opportunity itself market banner results leadership -- to talked time, we're to to has the going do going we're at monetize well optimize, about our that, to optimize grow presents an the We've invest, as team we're Coast. that, asset own. expect is And answer we to that can what it. is is segment the banners both that. Stigers. would appropriate we're under going to do Like the happy

Sandy Douglas

also Sandy, I'd is learn. What add us Yes. a And great to place it's again. it's for

gives other retail helpful team brands can very us. us is to Our do to what direct things leadership And serve programs, they about what feedback really and services, need visibility we better. and that them

Edward Kelly

Related people building you. And a lastly just and distribution now right you are of Okay. bit to just is much looking for provide more Can a there. the more color then, just you that inroads area? product change, in change captive on mentioned making with How sustained versus you for that? that relationship

Chris Testa

Ed, it's Chris.

UNFI's it's retailers distribution leveraging own. And considering to than network, I think, looking captive an I option that their investing capital product network. term supply, we long where generally, coming own versus think and it's on of attractive them their think that's than can provide more our investment the there's rather given from. I are And scale just with

Sandy Douglas

category-specific innovation, products, of kinds I this to they that have, I cetera. captive natural is be could different And Serving items it Sandy. think not want new. also, retailer is et mean,

And so the it's business, but business. a growing part a part of it's the not of new

Edward Kelly

you. Great. Thank

Chris Testa

call focusing away successful. challenging by take guys, you, make that improving joining today you've what for for our to a this and from need morning. and I on unpredictable we and Okay. us customers environment and do hope growing to is steadfastly UNFI Thank within joining heard us today's

our and call, customers across grow, businesses our job serve last help our customers their compete, the and suppliers their to value on is add to said I As network.

Our how improvement. in day out, and opportunities success for depends significant pleased day and by I'm this challenged repeating while doing, being ongoing we're on well with

our communities our investment you associates continued and continued each put thank your customers, in our shareholders, for And you partnership the we customers, UNFI together. thanks we and to our Thanks, that our us through for for For for you do thank And today, your you do our you each suppliers everyone. everything for trust other. business, for our business of in listening and UNFI. the

Operator

this call. concludes gentlemen, today's and Ladies conference

disconnect. now may You