United Natural Foods (UNFI) 6 Mar 242024 Q2 Earnings call transcript

Good morning. My name is Jeannie, and I will be your conference operator today. I would like to welcome you to the UNFI Fiscal 2024 Second Quarter Earnings Call. [Operator Instructions]

I would now like to turn the conference over to Steve Bloomquist, you may begin your conference.

thank XXXX joining Earnings and Second on everyone, Fiscal Quarter Conference morning, you us for UNFI's Good Call. morning. By a now this copy received of the you earnings release should have issued management press will the The section company's the at of earnings and presentation, Investors speak are available release to under www.unfi.com. website which disclosure in Excel included key with also We've file financial a supplemental Microsoft information.

update, Douglas, Financial Joining me provide after our Officer; Chief Officer. and questions. and Executive we'll a for today's which business our call your take John Chief are will Sandy Sandy John Howard,

are Before from statements. we expectations, to release earnings statements. remind the forward-looking may comments uncertainties. that materially that filings. discussed These SEC during may everyone these and differ risks significant and forward-looking estimates results management today's results in begin, I'd involve the contain plans, in like made and might by company's include discussed Actual projections forward-looking statements risks call These

management And our lastly, earnings to financial and to that financial point are certain comparable out I'd end of today's the like release presentation. Definitions in reconciliations included most to will measures non-GAAP GAAP the refer press measures. and our call, during

to call presentation of Slide to I turn as the you X ask over I'd turn Sandy. to our

and joining this and as I'll operating appreciate other the in that and release Thanks, value our President will Matteo announced environment driving morning, In profitability for morning's UNFI my this spring and shareholders. also which discuss I'll sustainable later our progress joining remarks creation new our be suppliers restoring customers, everyone Steve. results, our CFO. our we and second the We Tarditi making this of review provide for us quarter resetting in our call. a we're brief

creation resulted continues deflation backdrop exceeded Our sequentially value challenging. expectations the occurring. to This on and Inflation improvement rates We accomplished an results in some second again decline industry some that continue in despite continued this category-specific our benefits. improvements operational adjusted near-term progress initiatives to seasonality EBITDA. and from execution, sequential quarter reflected be with

trend, food volumes under this and overall persists. competition pressure in Despite remain unit increased retail

are traditional to a of are the food This Following period to has grocery from shifting inflation, gains buy volumes and discounters. channel. purchases industry some continuing across the away by led high merchandisers less share negative and mass retail and prolonged consumers

customers on even Given we strengthening possible. that increased remain as with capabilities we in and well addition new customers our propositions. competitive our focused can environment, in these are performing to across go-to-market especially this adding challenges, as our are business, help efficiency those driving of Many so differentiated

and positioned natural levels Importantly, matter unique how their we market value products, promotions, well them markets on in in and and see and their our intelligence efficiency, successful positioned in improved focused markets, food merchandising supporting both of spectrum, we service new with as as conventional large channels. are professional small the are retailers and No well-executed with strategies across services. customers the expertise and introduction

mindset chain driving profitability, this potential supply are their driving management, and apart industry on embedding improved term. focused providing customers our services setting includes realize and itself scale. value that value-added by with levels This cost service continuous the consumers through retailers, to help short creating execution, for improvement. our how across operational to themselves drive a UNFI We're communities, significant to and innovation and Similar growth for cost are and assortment, transformation working efficiencies diversified maintaining continues savings broad and that long business, across optimized a differentiate generate refining

our efficiencies, structure. We savings it levels which $XXX and further are months, see our efficiency to from to with incremental continuing insights lower way opportunities by making the sets, million to are be cumulative in refine skill several approximately near-term easier business last UNFI to service future our best that UNFI do we growth to SG&A profitability, the we improving streamlining in suppliers. review allows while the also business. focused Over profitability expected cost to initiatives, our to and us annualized we've actioned structured with a We're and for ensure realized technology benefit customers and additional needed and organizational that and drive composition

improved continued supply management to drive to chain improvement. embed processes also We've and disciplines significant

reduction shrink significant with our sequentially the percentage expectations a achieved sales we've prior surpassing as example, prior year to shrink first in the of from declined Net as reduction as compared in meaningfully both quarter. For quarter period, shrink. well the

still there's for improvement. believe we further Importantly, room

believe these In improve in gains, our our aimed better commercial which accelerate drive ability suppliers investment will customers, working we maximize helping it and our to at capture while supplier to addition simplify enable model, invest to near-term to own shared And growth business and customers. significantly to we programs time, profitability and our sustainable ultimately them enhance support should are friction. help to win-win growth. see, in go-to-market their profitable improvements operational merchandising are UNFI program reduce connect with savings expected delivering improvements to opportunities rapidly their over profitable These

and structurally our remains the reduce of does investments distribution later free our and this drive of focused live flow track cash to paths on at network project to in center create optimizing on our to efficiency higher the optimization fulfillment and progress year to levels. progress. be realignment key on Northeastern are projects expected the network. We've and of automation near-term are capacity profile go distribution accuracy These our to service continued currently and transformation increase We're centers will geographies. continue intensity distribution that The fiscal Centralia savings, our increase capital to these evaluate expected in continuing long-term as operational to also

creation service into of half We of driven use, the remain plan to efficiency, experience. value we've driving a improvement as fiscal business. ordering so levels Additionally, on by path XXXX. creating significant on our also far focused progress our seamless to online second and we customers to year the is made we've the We tools compelling long-term this which the transforming profitability the build move more

I remain that for the to especially to we've our enduring already shareholders. stakeholders, action opportunities value our confident all begun create in

Importantly, remains of while our it management- we Board-led remains challenging, our review and a environment announced the look external provides for provides become finance backdrop continues industry this gradually the which our clear and trajectory ongoing. that fourth which call, productive to business, and a us quarter volatile, long-term on less at our

review the Chair and includes Chairman, of planning to X as group group behalf the Board, directors The strong Audit newest transformation and Committee management leading our Board on in last moves provide and of with assessing the of are joined backgrounds updates actively business the our of value This team forward. members and experience brings September. creation. involved broad timely broader range our a We'll meaningful our for in finance, the opportunities plan of strategic potential process who

turn onboarding. Matteo, of know John, I partner counsel UNFI to for a I pandemic, take his works challenges the and to have too, enable let smooth the to and during will as company. partnership appreciated service a quick be during helped call leadership. he the moment navigate he him Before at time my me over a his helpful transition a global and John and of I his to years thank

past, delivered times said experienced the reportable of previously executed execute in who our several has be consistently the leaders served He largest of company I've adaptable CFO our as Matteo operating executive, at to segments has has several businesses. forward, to has and several different results to is proven can extensive experience strategy transformations. and He is who move As philosophy and GE. a also help finance talented the recruit and us business proven

augment experience, the have is important this believe with building and I strong ensure the transition. put UNFI in in him also reset a his will capabilities to to we are process John our improve remain organization. smooth background May help merchandising positions existing to our onboard place customer momentum It to the efforts and existing combined in complement profitability. across and with Matteo our an of well excellence end until that we

over With for the John that, call remarks. John? let me now to his turn

you, Thank morning, everyone. and Sandy, good

we'll noted, I my mark partnering of during just Matteo look the with last earnings today, UNFI. forward transition call coming months. as CFO to Sandy As the over

start handoff. awaiting leadership and already for onboarding Matteo's his team process and date, smooth is finance we're and Our preparing a quick expect

execution you As quarter solid of heard our business. was second the our also across driven earlier ahead expectations, improving and from by Sandy,

we look provide sheet seeking XXXX year structure fiscal reflects outlook remains manage with the challenging I updated and of outlook. balance household balance capital morning, This second consumers quarter our value commentary as considerations environment results, that this and some on as the and Our balance an spending. against they will the our to performance updated

With that, QX our review let's results.

see from X. basis second last business. we new year's $X.X compared year-over-year rate units to Slide at deflation. declined decelerating offset Net category-specific and sold XX to that inflation, are a Turning negative points in sales to basis billion, about trend and partially last was year's continuing reflecting continuing Inflation by a points albeit decreased by XXX quarter second to quarter,

remarks, his retailers. discussed for grocery environment Sandy traditional be As the to continues in challenging

a while is approximately across pressure X.X% diverse with difficult continue performance government environment. reflects others as as highly there see well significant grow in a retail some We by in our channels and decline Sales by to to base. as significant a However, results in we competitive this environment. customer macro in own our business continuing declined impacted industry This partially our be assistance. face

X. Slide to Flipping

this at drivers quarter. look our now Let's profitability

profit points, close in by gross years XX rate our Our expectations. to both LIFO noncash basis decreased was about the prior to which charge

of quarters when second stated, last rate gains and year's we've we've cycled procurement X As most quarter gross elevated profit previously in the now benefited that X. is the

QX the While to procurement the year level gains sequentially from to QX. in the there period to expected QX second is in be cycled prior are half, gains and still decline from QX some of to

by of of that procurement price higher led than shrink, on around year year's last As the lower gains meaningfully we was in was substantial X%. decrease increases The quarter. anticipated about which year's rate XX%, markedly a continuing QX reducing driven quarter's to last experienced is offset progress reminder, supplier which than last second by rate this gains were partially inflation

down We've and live go estate through percentage outbound we began sequentially our in and last new which business further These costs, foundational turnover excluding XX% fiscal a second operating saw for also rent, This by decline possible improving DCs, million first to quarter service to versus continued DC initiatives compared Pennsylvania increasing steadily second as related sales were quarter the seen rates. to and nearly customers. by rates. Our DC expenses, last flat compared expected partway drive and year's were in to again which rose quarter. our our fill We offset incurring costs related quarter designed year's efficiencies for in start-up improvements in levels real of $X the throughput transformation investment provide about include the XXXX. includes operating highest to a also Manchester,

totaled EBITDA, related $X to inflation-driven cycling $XXX increase primarily to Adjusted difference million last largely compared EBITDA to our X.X% X.X% was of of Within in or holiday being $XXX the last million with year's the season. there a gains. million profit the sales decline segment, procurement adjusted or in retail related year, sequential sales selling gross

smaller these of Our as primarily compared share driver last $X.XX with for transformation costs level which charges in our well being per share, GAAP of per $X.XX totaled the change several for LIFO. included and was business the EBITDA. adjusted year, adjusted as EPS lower largest the $X.XX to $X.XX Adjusting items, loss

net lower investment of of liquidity. cash significant decrease quarter outstanding of with finished total we're the We through $XXX now the in balance capital billion We the expected season. Moving sheet from a the million XX. first This to to inflows reflects $X.XX selling working that the end debt quarter. Slide holiday billion, $X.X with of compared retained the flexibility levels

term prepayable flexibility of turnaround structure debt implemented. structure our profile as optimizing We long-term including continue our our to consistent to our credit and provide capital loan expect long-term maintain our to and debt manage plan base strategy will are with

to Slide Turning XX.

for for billion. continues range be We've $XX outlook date in net sales outlined reflect year about our expectation performance the that the billion XXXX to to our new we're full environment lowered to midpoint year As $XX.X a press release, challenging. our of our X.X% to by full updating and operating of fiscal to

to adjusted be For adjusted EPS, of the and is expected narrowed which maintaining the to million per for $XXX earnings the EBITDA, to now a we've $XXX of midpoint $XXX million, to range we've $X.XX corresponding range loss updated million, of share. $X.XX

to This including plan the expenditures new for largest customer in remains capital we higher and drive XXXX towards includes that transformation This automation. component improve $XXX and our infrastructure network our our profitability that the million, investments backdrop implementation cloud our investments will going year-to-date at approximately continue optimization efficiency. and remains also macroeconomic challenging. believe outlook and industry resetting fiscal Our with progress and outlook expectations technology balances improving to with

inflation to We the expect decline pace moderate. is to believe likely but continue of to decline, the

these We prolonged increases both quantity to supplier trends promotions, which also more will recovery but optimistic customers continue remain drive of benefits volume in and anticipate that a volume, UNFI. and for our the cautiously depth

fourth outlook of modest our and the improvements help the continued is of million from the the will $XXX balance initiatives, at the of management, expectations adjusted further the ramp-up million, $X second expense in distribution our shrink midpoint quarter. includes center. about in our acceleration XXrd the for This new which cost-saving including our year, approximately the for for implied enable EBITDA disciplined in of Manchester investments of year half incremental level As week the

$XX half expenses other incremental related to DC Manchester within our about and rent million our second expect We of results.

the profitability. and is these near-term efficiency on Importantly, largely focus of increasing investments

of supply our the fiscal management deliver Board value. in of be Slide focused our encouraged remain execute updated and a our through and confident fiscal outlook in execution efficiency shareholder ability retail summary, as and year chain cost our on half our our stores. team focus first continue performance operating the increased performance remain driving model Directors' profitability effectiveness in and transformation outlined agenda backdrop, year-to-date XXXX to and business We XX, on We strategy our well balances on In to our and and challenging relentless and by management. as overall for as

questions, those leaving that past UNFI I'm call strong we bright is the for with I an would a with thank be Matteo I've Before like support support your to that future over the leader for feedback. years the open interacted and of as conviction you organization. X to will shareholder eager its and

line the for Operator, please open questions.

Instructions] comes first question the Carden with [Operator UBS. Your Mark of from line

channel is expecting, line you Was this John, say, forward. ago? wanted how best luck traditional much seeing are going shifts were to digging guys from having of what of guys I demand on grocery a services? you to by what start has mass. for Or quarter your on with an this in then it into impact largely how accelerated? And value-added

Mark, Sandy. it's

I it's part. for the most trends with in line think

will money of to stressed increasing to right is more competitive. standpoint, is we is they in And save so our them think for make continue customers more fierce increasing I ways demand refresh be you that looking for it's pro create for very them, and a customers being commitment to From more and sure our now. to lot what our a competition that the ways. consumer value tell it's services can

Got stage, the helpful. at guys over how then it. the next this quarters? the course That's you are level about of thinking few And of inflation

can I on -- well, think here. John pile

of anything? As the he XX% to the do quarter towards year. to the we to change and go in a moderate from the you said, year-over-year was significant of obviously, we're want rate second end X%, as about expecting drop John, add down

think that's I No, exactly right.

in our I of back in in year, somewhere the X% up fiscal half year. think and but end end that we'll we between -- X% the

Leah comes Goldman of question with next from the Jordan Your line Sachs.

seeing baked ask guidance your into there. evolving? what to half vendor for back conversations year? are How the of see what's suppliers you're I promotions And the wanted with first about and

activity, we're what's and a for sense increasing, they're from below increase continue What Leah, the of year. going expectations the that sequential expectation, pre-COVID. is is Yes. in our were sequentially and My they continued rest seeing, that's promotional more aggressively but we promote think with suppliers to the still and meetings what they're to in get I

I Okay. Great. ask just the my And segment. then for retail follow-up, about to wanted

weakness some We there. continue to see

competitive around demand changes -- if you in made trends leadership And comment I then Just recently. some the environment? know

there maybe any on about thinking made you're improvements how that business it you and some updates longer So in term? the

very obviously, Persaud, quarter Sure. did a standpoint, looking is merchandising performance. was is From in Andre our and retail. the because Twin performance in new who's Cub mass. with competing both our the consulting a taking aspects appoint overall Andre challenging would And it fresh brand. We an environment Cub And It's Cities actively and CEO, at service of look at franchisees, with local brand. Shoppers for a good a say, area I and discounters all challenging with the a

I to is value relative Twin brand And platform. for the all Cities through and term long that obviously, market. shareholders accelerate we're to think our Cub looking bullish the of view at in potential and that ways performance the

next the comes Your line question of John with Securities. Guggenheim Heinbockel from

that you've to do? when in sort existing I of that So So had that is you part together guys of still a to work still on the or billion then think financial provide the to want opportunity, I When longer-term opportunity you start not think this -- do you'll X-year past with with $XX service And now year outlook think know away? that. you ready right? be I which see, do your view Sandy, outlined you maybe targets? got a Is wallet

me started. start let John, you where

very remain as a both quite that you But as performance on opportunity perspective. we're significant of that ready we're about simply see and our to customers with continues service from with, competitive. public And customers outlook. to of and number but in be there. we're very need opportunity, to that new the because new is a category more not our bullish And we pipeline in some them of We see the continue go a well services to we help have grow talking working new

longer-term management on perspective, ahead progress being in a us financial of I I want middle a and our making team already are a and relative the while said, with the to Board get that strategy-focused it, on mentioned our performing and strategy remarks, in we're put plan. in this. my in ourselves way programs From think strong don't place. clarify long-term to I we're going good help of And we've we're to efficiency this That review that

I we XXXX, As in making improvements, last XX points pre-COVID level. the year, in shrink that when now based highlighted of on operational basis can the example, trim fiscal about term. below believe, reasonable exited for progress near was we're terms above we actually that running that We pre-COVID

review So lots to by with strategic and Board through improved on of linked in financial work efficiency appropriate. strong operational team term, committed giving and to drive process to improvement we're and more it's the when our the detail underway Street forward-looking profitability the going short plan, and next our updates

other just going accounts you sales, and by stupid, it Maybe as a growing creatively, be it's it's you not receivable to about leverage be follow-up, asset to just going process? than when the to quicker whether right, have a -- or right, right. think definition, there to deleveraging, past. term gradual Is All interesting EBITDA, reduce long monetized anything in

and range that very I And but different are describe lots ones we say company. hopefully through of stupid. this that, a come as again, of review, doing none at see financial we're I looking to the ideas John, And a we're more thorough creation for opportunity on and would Yes, value review. that interesting would the

from Fargo. of comes Wells with line Kelly question next Your the Edward

you an get to out back in John, like it elasticity that to of that any are hard there's, And forward. I volume from don't that? volumes because I luck fact the the wanted volumes think, X%-ish expectation you of Are leaning can I know, mean, down looks any be volumes, better or It's the moving report like seeing side. come something here. might best out but of benefit you the into be you as what elasticity vendor to Vendors that. are to seeing promo benefit pricing I'm the seems like doing relates the sense the and the look in time need what sustained over trying business EBITDA like of for then customers could drive picture what's as pending? over right to to stuff? growth to a all get well Are share And leaning level to that, growth inflation it because volume addition of time? volume do is here? you your just in promos.

Ed. Thanks,

a a question. over lower, they the significantly higher declines get facts Unit I with element mid- couple are were years. your Let as right on start that's growth of couple parts that me of are than for discounters while to I have and And the math promoting the consumer, rate strategic more then that's the unit consumers and inflation creating Promotions the sort ago. a still is increasing, few help of lower are to. to are or competitive. that as picture and weighing out the think lot as years build opportunity certainly been retailers past and prices responding be And may mentioned, are of clearly fairly they an consistent well And now in economy. of the

but are that I think trading. baskets retail some detail, counts down. healthy with still, Inside category are has And sort going customer the of do to

with part part our this -- algorithm the them be And function our Our growth. I of going be we profitable is more going but of healthy and going growth clearly, to more emphasize to is of to ability customers, possible. your and profitable to to question forward, think for gets work forward them profitable then and a growth latter as categories as

now have gains, Okay. way then your fully pertains through you as procurement it those. worked And to

think now XXXX. of for EBITDA? what about the opportunity to of related levels flip that on about frame we that, what below the that vendor And way consider you So rising, reporting EBITDA would like to levels normalized? promotions talked you you're you as side more are is is there the Is then obviously a

Yes.

in gains the third I'd substantially describe further annualized, quarter had fourth although is the fiscal. tapering and year they're then, procurement some the still in this last into So they again, quarter the way and

of which will continue. From I quarter through partnership retailers profitability, of to in versus and a terms year, investing And market. with In base. driven as through They're customer in seasonality the is, promotion as to some we're media try And some to opposed profitability business, standpoint, look and in there's strategy the are it first by a is items. incremental lot suppliers actions a second is our holiday quarter good they're drive at to think first that we're also last in second investments, our of that of sequentially top. profitability in quarter increases way and through year-over-year, quarter of improved versus help investing being the promotions. what to new quarter, our those. I seeing investing And see taking ways over but fourth the various that the the suppliers mentioned, They're investing some into all the the our

base vibrant all the with XX,XXX over customer country, Our is across positionings really outlets. kinds of

that with more big all them, just the get. over consumer successful they'll to And companies extent time. So watch that they can that opportunity, can they the gets more independents, successful the We not going. suppliers the the and are see be the the flywheel profitable returns of quantify ones, products that believe

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

absolute an you, going been so good working it's with John, all, of pleasure luck first forward. Just

because last favoring gave It to the our being some spread businesses the you How as work go seems some of do can question. are wanted promotions How and that not of the have across Sandy I research vendor kind that? these some maybe promotions the jump you larger ads we answer continue would retailers move of on to that retailers. equally against large actually, and advertising forward maybe that -- that higher? do stop some -- the probably to it's these the say -- market, necessarily So that of

customer and an question. products consumer many to consumer little of editorialize your value over I'll then driver the is extreme a My that back bit is in for companies. the come experience Scott, So years, diversity products base

leaders, having is we're that the America advocating chief commercial North really with conversations for officers, the presidents So strategic customer focus.

successful retailers the on a to products company is focus independents. big unlock drive all certainly ones. consumer But growth with and going accelerated Now work with is to

growth that's earn share to work investment companies I of Our job them And help customers the they is streamline see for little it and return it, have works we simplify see again. it that, their together are help measurement, products growth and see invest begin sophisticated and to how very works when they them to and end Consumer the will and our return hopefully when them our profitable do that focus get. ability up able we by think or virtue being with fair well, a them. more can our see they

an media if it to lens might opportunity. be in through incredibly independent is on help The that. focusing relative businesses, advertising able executed. And be obviously, that's to an can ways think Retail would I final be successful which we point we're with

then others, And them if actually Perfect. right. got All I in. could slip I've two

forward, guess it's I million on Do down? $XXX going CapEx that maybe will that's to you expect year. this it expect When do come down? all, So of first you the about come number So one.

And table? to not that merger this Cub really the that was when is, the more would is sold, the be -- -- has that Or second again, Originally, that's was Cub. do with thought and on the on It still hey, table? done is strategic. the is

its the second start a ahead very first. one with brand believe success me of brand future. We viable and is let Scott, the Cub lot in has a

the retailers best some the discuss interesting the brand good on in is Andre drive of part franchise it heavily table. And the of the parts joining to and and a ways brand. company, of in engaged forward to the One a we're franchisees number the is the are our Twin model that of Cities are with significant leading with of very ideas

capital to to brand, and of for as and capital our part that good the And overall of and an And for will have philosophy there, is used franchisees Board, in earlier we're way a next focus to financial time. so plan more conversation. planning shareholders. Relative good talk the that do it in about X-year with review a we're script, appropriate as in my of planning good the well, that's capital we'll we an mentioned the that for to at our middle I outlook a process continue intensity important the we the and employing for X-based

Northcoast the from line comes question next with of Research. Chuck Cerankosky Your

the In about looking volumes, much, don't loop consumers value of talk at do it if manufacturing. lower incredibly are CPGs, private to prices, way you while the How be have same the the but and volume in and your that quest for time, in looking to you seems as label? et at grow can cetera? improve not You get any, your annoying important the

good an retailers talent we're exclusive in to of little We that streamlined extremely of kind actually. done customers. Chuck, brands out a private ideas recruited be on as customers. positionings portfolios mean our bring into Yes. We lot various And it on part the helping our private important or the on fit focused brands. of competitive our that. top point. work I that we of value focused proposition we're bunch of big very we've And into some of a

I with of agree your question. So the thesis

question next BMO with Bania Markets. the Kelly Your comes Capital of line from

luck, endeavors. future of is Kelly. Wood your on John, This behalf Good Ben on

Appreciate that, Ben.

gain you process UNFI initiative? introduced been able simplified fees are be What it? that on recently What's to a incremental behind structures. thought is new Would or supplier question you Our that hope to expand first the approach from to hearing efficient fee it? business we've the

faster, well. really have new the launch us investment, data items flexible easier, quicker. and that way simplify to to it It's relationship design more a early with them our insights is faster, a our with that promotions is ability suppliers you get their working their Sure. And described access it's of process, Ben, and but new customers get to will in their enable to which to of to their the

focus More investment but stage, much lot simpler work had value relationship, put come, and mode. doing we that have we rollout approach make early, in so how with we're the suppliers. able we're a they'll it's our focus We that And to a driving very a be this and eliminating traditionally on a the to and to their to simple is we're details creating of at shelf. what fee-based then

Great. XQ, wanted little And just Understanding still were should potentially offset between It dig as some a procurement be by some like into there in then then to in bit. and gains. margins increases gross I promotions. shift the looks segments pressure mix guys you lapping

puts major to to our should in as from margin when second the question and maybe margins the are is, What compared So half, gross takes gross in QX -- start stabilize? well?

just is this generally sales EPS. I'll so start. -- EBITDA, Ben, guidance Yes, don't and we margin, on the gross John. provide The

of We of the we've margin, have, imagine, that takes and as this that we're and talked all which you seeing, might half between puts the lot I and buy forward year. of first lapping through promo spend, think a mostly the about improvements we're strength

see will we still about that the within to we're that spend add rate. we're and tick guidance margin thinking start margin mentioned, Sandy, to promo what for general but we're or pressure to provided to And has anything the We'll industry. to continue as anticipating is the the continue see EBITDA reflects the seeing we that? in Sandy in shrink, So that up. again, improvements the how have

well. think it No, you said I

of question the Andrew Your CL with next from King. comes line Wolf

an review kind the trails as one. a -- think Scott And you you're wish I as automation like Is of and of up? some Could of labor discuss, the Sandy, structure? you going sort the I at much really business change incremental? wanted How insight Is case centers? You a distribution to give cost a a kind open. capital opportunity follow-on sea to you of in transformation? as for this capitalized kind announced business to new information was gone of maybe price of automation for defensive large about asking us has or because view reasonably the go through the it have on the do expenditures. you it what Is to cost additional just well

So thanks, Andy.

and our on drive profitable of invested how growth being layout is distributed enables of allows more are It efficient their other quality, scarcity us And time how customer we return case. network You a load more issue and also from center. materially We believe obviously better else. very is automation more labor parcel to a I shelves of which articulated think capital, enhance friendly to set. anything the the us service and of as automation optimization strokes based of the are and the in each perspective, part efficiency. the growth. see the and retailers distribution pallets It's case. drives ultimate capability, payoff for DCs the and big organized some that's that over a organizing than part on Ultimately, big It labor

cost a and meaning see discuss change them between you assume defensive your margins being sea related. I incremental increase. where can both is maintain I it an them big this Defensive is a type somehow to and/or least helpful. a margins even -- the see qualitatively and But structure being change I and of meaning could Okay. profit sea just investment? -- at

Yes.

it I sea we're review, And improves doesn't the a disciplined extremely fits something think change, in, that have and disciplined we've capital. we incrementally returns it an a have and situations situations incremental granular on in a expectations more our way, others. market financials because it's think fit certain do than it in in high financial overall part and working our largely we more of But as through way. to because and we for it our much put it's

of that. I might just by it's sounds enough it cumulative? cost follow-up $XXX in shrink a increasing? to that could is Is than things about million added it rate? say $XXX it. that that a to identified. Okay. realizing full where it that more it and it that? you added other less think, X going Is you've savings are you've, be like One, the it? And been million run Or on kind X? at you I have divided it Is and think And to accumulating, Is two, of And much also there how is

savings be at done million run rate and the we've actioned in we've relatively unpack would far not and around $XXX forever. and as incremental So efficiency this company million, We've and and Shrink $XXX would to will $XXX $XXX the that going layers, million going Andy, continue process. process the it. streamlining forward, work $XXX compared incremental, What me is actioned, coming. savings. spans And but work million, been it's as the I and public layers in improving quarter is spans is is which that incremental of and it effort of million to small is least the is say shrink each be is try and year now. to improvement the let our to about and is that's further incremental with But small compared the the in

line Your next from Alex question of comes Jefferies. Slagle with the

at And looks more improvements you seen? wondering to levels go the biggest relative margin how gains if like maybe the point? training I'm tenure impactful room been really the and and to in forward, been just turnover and could just you've talk have improvements, have to productivity captured this or related these going path what

ask then market of in is in to improvement make So John a comment, to going increased associates. our our and detail. tenure in saw and summary DCs fill I'm going component to throughput significant We that I'm with of

constant as we're answer effort. opportunity stabilizes. there. workforce seeing significant which like throughput in of your productivity improvement it a XX-year I but a is also grow, is of say savings, to are shrink. not improvements, we driver And would Much operational the reduction we think productivity, question for a But specific to is the continue have SG&A of the addition, In driver only process increase the driver

anything do on to more put that? John, want you

that's right. No, think I

the think we and continue to mentioned vacancy on rate, we've improve progress seen see quarter in first lowering that we QX. I in that the

throughput, some Sandy throughput level standard years actually the said, It's QX QX, place. of continue operating that's as We the last said. technology in direct and seen what processes, new was we've result also also the just procedures, warehouse Sandy in we been a put additional highest in that improve our suggested result and X to of the that a it's in

through results OpEx. So come we're in our seeing the

Got to sort view were guardrails it. in came And or had evaluate ramp cost out quarter a XQ in the timing XQ and bigger quarter? maybe that from that on perspective. get thinking profitability and saves any outsized an as a where reduction trying of high-level of you the the there benefit Just about shrink third

Yes.

million fourth extra be said we've $X guidance The in quarter And John of well. in that all think remarks second prepared I $XXX said about week, million. an -- We is that half. the implies the pacing. his had EBITDA very would about our which

And Peter with your last for question the of BTIG. today from comes line Saleh

so where basis we Great. we pre-pandemic, were us [ basis know, And on missed heard, exact have were or XX know I was maybe last I points I don't of may ] running, of give think points. Did this. we amount XX shrink. guys you it I an shrink?

Just trying shrink? to understand on given exactly where made we are you've progress the today

Yes.

before. because this in happy to I'm are than we'd numbers and said we see said made we've the fact, provided significant to you that it what that consistent expect progress make, think we've And today what just progress, waste. I pure is with is more

I to and we see think So actually going commented pre-COVID. further lows -- new forward get below opportunity then that the to

material made on we've it. So progress

We have progress more to go.

is levels. Great. the the kind to trying better Sandy, getting is time progress shrink, Or on And to of in you Just to initiative? more than something pre-COVID on of then line that understand those near foresee that term? a be on that multiyear

obviously we haven't That's, Yes. in given go-forward Peter, guidance.

that we've opportunity as it operational just I'm an think something and got I on. to conviction pointing

the turn for closing remarks. Douglas now over back will to call Sandy I

everybody operator, Thanks, to this morning. us for joining and thanks

multiyear of Our the XXXX. We team as is plan. look our we committed improvement fiscal to balance sustaining operational to momentum confident in remain our

behalf we we our We're and we and the over you his suppliers the compelling first to leadership also capabilities, UNFI. the we thank John, this. As we'll years our last for our efficiency John all he's opportunity me for sustainable to progress have look a to UNFI, focus. support value customers, shareholders a Howard initiatives scale, profitability we've believe our through provided I and enhanced result, made the X continuing wish optimistic forward when joined on build on in of create half, to and want that on you to best. for . I update

your we And we and for you the together. and do for partnership our thank continued customers suppliers, finally, business

you to For joining the And other. each to us in morning, our to I our customers, you shareholders, our that listening place business, continue and for Thanks for we June and for our thank the forward each this you thanks look you updating trust us. associates with for today, communities Matteo. for everything UNFI do our of you again in

call. This concludes today's

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