7. United Natural Foods Inc. (NYSE:UNFI)
Number of Hedge Fund Holders: 22
United Natural Foods Inc. (NYSE:UNFI) is a leading distributor of natural and organic foods in North America. The company supplies over 250,000 products, including organic, conventional, and specialty items, to more than 30,000 locations across the United States and Canada. UNFI serves various types of customers, such as natural product superstores, independent retailers, eCommerce providers, and food service providers. United Natural Foods Inc. (NYSE:UNFI) is one of the best food stocks to buy.
The company’s management believes that United Natural Foods Inc.’s (NYSE:UNFI) scale and expertise in natural and organic products position it well for future growth. The ongoing demand for healthier food options continues to rise, making UNFI a strong player in this evolving market.
In the first quarter of fiscal 2025, the company reported a 4.2% increase in net sales, reaching $7.9 billion. Adjusted EBITDA also saw a significant rise of 14.5%, totaling $134 million. This positive performance reflects the company’s effective execution of its multi-year strategy and value-creation initiatives that have strengthened relationships with existing customers. United Natural Foods Inc. (NYSE:UNFI) is focused on optimizing its distribution network, having closed several distribution centers while enhancing operations at others. The company also moved natural volumes from York to a larger, soon-to-be automated facility in Manchester. These changes are expected to create greater efficiencies and improve service delivery.
With its solid financial performance and strategic initiatives for operational efficiency and growth, United Natural Foods Inc. (NYSE:UNFI) represents an attractive investment opportunity in the organic food sector. Miller Value Partners stated the following regarding UNFI in its “Deep Value Select Strategy” third-quarter 2024 investor letter:
“During the quarter, our two largest positive contributors were Gannett (GCI), whose market share price up 20% and United Natural Foods Inc. (NYSE:UNFI), with a market share price up 31%. United Natural Foods’ share price continues to recover from recent 20-year lows however is still down 60% from its former high. The company’s new CFO recently highlighted a new three-year transformation plan focused on building market share in the natural foods sector, expanding higher margin digital services and rolling out six sigma/lean initiatives to improve operating efficiencies. UNFI is also rolling out a simplified contract structure with their clients which will eliminate layers of complexity positioning the company to achieve greater operating efficiencies overtime. There remains a wide gap between relatively low UNFI margins, and those some smaller distributors are able to achieve. Success on the transformation plan should allow the company to not only narrow that gap overtime but exceed their smaller peers due to their greater size, scale, and higher margin proprietary service offerings. The new transformation initiatives have potential to accelerate profit growth and significantly improve future free cash flow generation. UNFI also has an extensive asset base, and a distribution network across all 50 states and 10 Canadian providences. The company has an extensive distribution and warehouse network, providing a significant margin of safety. As the transformation plan progresses the company says it will focus on optimizing their distribution assets to further improve asset utilization and enhance company financial returns. We believe UNFI long-term upside potential may be multiples of the current share price given our estimation of their long-term earnings power, near 30% discount to book value and Enterprise Value to Revenue of only .1 times! The greatest near-term risk in the company transformation plan would be a delayed recovery in company margins due to the unexpected disruptions from consolidating the Firm’s distribution network.”
