#Macro clicker for steelseries drivers#

With inflation coming down (and reversing to disinflation in some cases), procurement gains have evaporated.

To be fair, these aren’t UNFI-specific problems. Management likewise cut EPS expectations significantly – from $3.05-$3.90 to $1.80-$2.30. While management has basically kept revenue expectations intact, EBITDA expectations have been cut from $715M-$785M previously to $610M-$650M, suggesting a fiscal fourth quarter EBITDA number down more than 50% year-over-year and almost 40% sequentially. United Natural Foods’ fiscal third quarter wasn’t great, but another big cut to guidance is decimating sentiment – not only due to absolute decrease in earnings expectations, but the impact it has on investor confidence in management’s visibility into the business and their ability to adjust the business appropriately in response to those changes. Gross margin missed expectations by around a quarter-point.Īdjusted EBITDA declined 19%, with margin down 60bp to 2.1% and adjusted operating income declined 43%, with margin down 70bp to 0.9%. Inventory and procurement gains continue to erode quickly as inflation abate (and turns to disinflation in some product areas, like organic wholesale), and management noted some shifts in customer habits (downtrading to save money) as well as worse shrink. Margins were quite weak, with ex-LIFO adjusted gross margin down 120bp YOY and down 20bp qoq to 13.8% - the lowest level in years. Inflation drove the growth in the quarter (up 8%), as volume weakness accelerated (to around a 4% decline) despite management talking about “increased business with existing customers.” Supernational continues to perform considerably better than average, with revenue up more than 12%, while chain revenue growth slowed to below 1% and growth among independents grew a little more than 2%. Revenue rose 4% in the quarter, more or less meeting expectations. Another Tough Quarter Undermined By Marginsĭespite a significant cut to EBITDA guidance after fiscal second quarter results (a 15% cut), it wasn’t enough as management acknowledged poor visibility into the business (particularly in terms of per-case profitability) as fiscal third quarter results missed expectations and management once again significantly revised estimates. I still see the latter two as issues, and while I like the investment in automation and the increased attention to operating efficiency, and the valuation is not demanding, I’m tempted to wait a bit longer before going bargain-hunting.

However, the company at risk from challenges from large customer concentration, post-pandemic normalization, and logistical inefficiencies. I had mixed feelings about UNF when I last wrote about the stock, seeing the shares as undervalued (and they’ve risen about 33% since, underperforming US Foods ( USFD) and Performance Food Group ( PFGC), but outperforming Sysco Corporation ( SYY)). ( NYSE: UNFI) was one of the biggest beneficiaries from the pandemic and the inflation that followed shortly thereafter, but new challenges from disinflation and changing consumer habits have hit the company hard, and a lack of visibility into its own business has exposed the limits of management’s forecasting capabilities.

#Macro clicker for steelseries drivers#

What macro drivers can give, they can quickly and unpredictably take away.