United Natural Foods On Better Footing, But Still In A Brutal Business

Credit where due, United Natural Foods (UNFI) has managed the sudden and dramatic shifts in its business caused by COVID-19 pretty well, and the unexpected cash flow has helped fund debt reduction and future automation investments, even as the pandemic has delayed the eventual sale of the retail operations.

The fact remains that distribution, particularly food distribution, is a brutally competitive business with razor-thin margins. That should keep potential new market entrants at bay, but the risk of losing Amazon's (AMZN) business still hangs over the operations, and a lot of the company's addressed market is under significant pressure. While I can see upside in UNFI's share price from here, I look at this as a difficult opportunity where it's hard to see adequate returns for the risks.

 

Follow the link the full article: 

United Natural Foods On Better Footing, But Still In A Brutal Business

Seeking Alpha: Core-Mark Holding Could Be A Core Holding

Investors who are familiar with distribution stories like Sysco (SYY) and United Natural Foods (UNFI) will see a lot of recognizable features in Core-Mark Holding (CORE). This company is still small in terms of market cap, but it is one of only two convenience store distributors to operate on a national scale. Not only could Core-Mark benefit by acquiring more C-store customers (through competitive gains or distributor acquisitions), but growth in the company's value-added services could offer powerful margin leverage in the coming years.

To be sure, this is a low-margin business and it will always be so. But if Core-Mark can close even just a small part of the gap in free cash flow margins between itself and the likes of Sysco or UNFI, the growth in free cash flow and the stock price could be impressive. These shares have already had a good run this year, but still look more than 30% undervalued to me today.

Continue here:
Core-Mark Holding Could Be A Core Holding

Seeking Alpha: Investors Paying A Steep Price For United Natural Foods' Growth

I get that investors are willing to pay up for dependable growth stories, not to mention legitimate plays on the underlying shift toward organic and natural foods. To that end, United Natural Foods (UNFI) is definitely a logical picks-and-shovels play on the trend. As the largest organic/natural foods distributor in the country, UNFI is certainly well-positioned to benefit from same-store growth at dedicated retailers like Whole Foods (WFM), Natural Grocers (NGVC), and Sprouts (SFM), as well as conventional supermarkets building their organic/natural assortments.

The fly in the ointment is valuation. Organic/natural food distribution may be a much higher-growth opportunity within distribution, but it's still distribution and companies like SUPERVALU (SVU), SpartanNash (SPTN), and Sysco (SYY) (which is admittedly a different sort of distribution) have amply demonstrated that margins in this business just aren't very robust. With that in mind, I believe that United Natural Foods is overpriced on both a discounted cash flow and EBITDA basis. I don't expect the Street to suddenly stop liking these shares just because they're expensive, but the risk-reward balance at these levels skews too far into "risk" to make me want to step up as a buyer.

Read more here:
Investors Paying A Steep Price For United Natural Foods' Growth

Seeking Alpha: Natural Grocers Boldly Going Where Others Have Gone Before

If imitation is the sincerest form of flattery, Natural Grocers (NGVC) (also known by its full name of Natural Grocers by Vitamin Cottage) is paying some big compliments to Whole Foods (WFM), The Fresh Market (TFM), Trader Joe's and Sprouts. The company is pursuing a growth strategy in the organic/natural food retailing sector that seems to be taking some of the best ideas of these larger chains and coupling them with an even tighter focus on the hard-core healthy eating community. While these shares have had a big run in 2013 and sport pretty robust valuation multiples, it may be hasty to assume that the stock is overpriced today on a long-term basis.

Please read the full article at Seeking Alpha:
Natural Grocers Boldly Going Where Others Have Gone Before

Investopedia: Strong Growth Can Help United Natural Foods Grow Into Its Multiple

United Natural Foods (Nasdaq:UNFI) offers an interesting test-case for two conflicting realities of Wall Street. On one hand, investors frequently pay up for above-average growth stories, and particularly those with strong market share and/or barriers to entry. On the other hand, margins are an under-appreciated driver of investment performance and investors seldom pay high multiples for weak margin stories. While these shares have underperformed in a hot market for packaged food stocks, the market continues to assign a pretty rich value to this natural foods distribution company.

Please click below to continue:
http://www.investopedia.com/stock-analysis/052913/strong-growth-can-help-united-natural-foods-grow-its-multiple-unfi-wfm-syy-kr.aspx

Investopedia: Whole Foods Back On Pace

There will come a time when this is no longer true, but it still seems to be the case that Whole Foods (NYSE:WFM) is a stock you want to buy when comps disappoint and sell-side analysts start collectively clutching their pearls and/or talking about slowing store expansion in favor of capital returns to shareholders. While consumer confidence is still pretty shaky, Whole Foods seems to be doing well with its value positioning and there's still ample store growth potential. Whole Foods isn't cheap today, but I'd be slow to part with these shares if I already owned them.

Please read more here:
http://www.investopedia.com/stock-analysis/050813/whole-foods-back-pace-wfm-tfm-unfi-htsi.aspx

Investopedia: Annie's Surfing A Rising Tide In Food

Annie's (NYSE:BNNY) looks like one of those companies that is destined to be controversial and frustrating for the skeptics. The company's business model is predicated on selling premium-priced packaged foods to customers who believe it's somehow better for them, and while skeptics will almost certainly question how sustainable that model is, plenty of companies have prospered for years by selling people on the notion that there is value in paying up for their particular products.

In the meantime, the more pressing financial questions revolve around the company's ability to successfully introduce new products and drive better margins while they do. Not surprisingly, the stock is no particular bargain today, but growth investors are not likely to abandon it for that particular reason.

Please follow this link for more:
http://www.investopedia.com/stock-analysis/2013/Annies-Surfing-A-Rising-Tide-In-Food-BNNY-KRFT-K-CPB0214.aspx

Investopedia: United Natural Foods Has To Spend Money To Make Money

While there have certainly been some pullbacks along the way, including a nearly 10% decline after fourth quarter earnings, United Natural Foods (Nasdaq:UNFI) has, by and large, basked in the love of growth stock investors. And not without some good reasons - United Natural has delivered excellent growth and market share gains, and has recently shown some solid margin improvements. I still think a key fundamental question remains, however, and that is whether investors are properly discounting what the company needs to spend on capex to maintain its growth rate into the near future.

To read the full article, please follow this link:
http://www.investopedia.com/stock-analysis/2012/United-Natural-Foods-Has-To-Spend-Money-To-Make-Money-UNFI-SYY-WFM-SWY0913.aspx

Investopedia: Premium Foods Not Driving Premium Cash Flow For United Natural

For most of the last three years, shares of United Natural Foods (Nasdaq:UNFI) have pretty consistently flummoxed value-oriented investors. While the margins aren't great for this organic food distributor (nor for food distribution in general), revenue and profit growth has continued to support a pretty healthy valuation and a rising stock price. The market may eventually realize that it's not "different this time" and that the fundamentals of United Natural's business cannot support this valuation, but that's been a money-losing thesis for skeptics so far.

Continue below:
http://stocks.investopedia.com/stock-analysis/2012/Premium-Foods-Not-Driving-Premium-Cash-Flow-For-United-Natural-UNFI-WFM-WMT-NAFC0606.aspx

Investopedia: Sysco Not Exactly Feasting

It's a little scary when even some of the most efficient operators have difficulties cutting their costs enough to keep growing. That would seem to be the case today with Sysco (NYSE:SYY). It seems odd to read analysts criticizing Sysco's cost structure, but the reality is that growth has become more challenging for this proven dividend champion.


Costs Chewing into Profits
Sysco posted revenue growth of over 9%, but that number is a little misleading. Two-thirds of the company's growth was a byproduct of food cost inflation and actual case volume growth was more on the order of 3% with real organic growth closer to 2%. (For related reading, see What You Should Know About Inflation.)

Please click below for more:
http://stocks.investopedia.com/stock-analysis/2012/Sysco-Not-Exactly-Feasting-SYY-UNFI-SVU-TSN-MCD0209.aspx

Investopedia: The Fresh Market Is A Breath Of Fresh Growth

It's almost traditional (if not quite cliché) to take Wal-Mart (NYSE:WMT) to task for ruining that pastoral ideal that was the American Main Street shopping experience. More recently, neo-hippies have done battle over whether Whole Foods (Nasdaq:WFM) has "gone corporate" by forcing many smaller organic specialty stores out of business, and catering every bit as much to the Audi and soccer mom set as the patchouli and hemp-shirt set.

With that backdrop, it may seem daft to try to enter the market with yet another food market concept. Even with a market already full of choices, companies like Aldi, Trader Joe's and The Fresh Market (Nasdaq:TFM) are showing that customers still aren't completely satisfied with the retail landscape. While The Fresh Market is going to have to prove that it can manage its growth (and make it a profitable growth), this is one of the most interesting retail growth stories going on today.

Please follow this link for the full piece:
http://stocks.investopedia.com/stock-analysis/2011/The-Fresh-Market-Is-A-Breath-Of-Fresh-Growth-TFM-WFM-WMT-UNFI-KR-RDK-VSI-SWY1201.aspx

Investopedia: UNFI - Everything Is Right But The Price

Investors often look to food stocks for their safety and perceived resistance to tough times; even though consumers are pinching pennies, companies like McDonald's (NYSE:MCD), Sysco (NYSE:SYY) and Whole Foods Market (NYSE:WFM) are still selling food. So, when you find a company that offers a growth kicker to what is often a staid industry, it's no surprise that investors take notice. Still, so much is already expected from United Natural Foods (Nasdaq:UNFI) that it seems hard to imagine how the stock will deliver above-average gains, to long-term investors. 


Business is Still Good 
As UNFI's fiscal first quarter results show the company is still delivering good growth. Revenue rose almost 16% on reported basis, with organic growth of just a little under 14%. Food inflation was below 4%; an interesting result, given the numbers reported by Sysco about a month ago, and granting that they operate quite different businesses.


Please click this link for more:
http://stocks.investopedia.com/stock-analysis/2011/UNFI---Everything-Is-Right-But-The-Price-UNFI-SYY-WFM-SWY-SVU-KR-NAFC1201.aspx

Investopedia: Optimism Already Built Into United Natural Foods

There is nothing new about the organic food industry anymore, and investors are already well-attuned to the big names like Whole Foods (Nasdaq:WFM) and leading distributor United Natural Foods (Nasdaq:UNFI). The question, though, is whether there is still enough runway in front of UNFI to make the stock a worthwhile addition or holding for growth-oriented portfolios. While it is true that many major supermarkets like Kroger (NYSE:KR) and warehouses like Costco (Nasdaq:COST) could go even further in stocking more organic products, much of this seems to already be factored into UNFI's stock price. 

A Good Third Quarter, But With a Few Spots 

For the most part, United Natural Foods had a solid fiscal third quarter. Reported revenue rose more than 22%, while revenue rose more than 12% on a like-for-like basis. While better than 10% growth from major customer Whole Foods was a bit below average, UNFI did see nearly 20% like-for-like sales growth in the conventional supermarket category. (For more insight, see Organic Food For Thought.)

Unfortunately, that supermarket growth comes at a bit of a cost, because it is not as profitable as UNFI's more traditional channels (smaller organic-focused chains with much less bargaining power). Gross margin slipped about 30 basis points as a result. UNFI made some of this up through operations, though, and 15% operating income growth mitigated the operating margin erosion to about 20 basis points. 

To continue, click below:
http://stocks.investopedia.com/stock-analysis/2011/A-Lot-Of-Optimism-Already-Built-Into-United-Natural-Foods-UNFI-WFM-COST-WMT-TFM-SYY-KR0603.aspx