August 9, 2010 - United Natural Foods, Inc. (UNFI-NASDAQ) together with its subsidiaries, distributes natural, organic, and specialty foods, as well as non-food products in the United States. It carries approximately 60,000 products, consisting of national brand, regional brand, private label, and master distribution products in 6 product categories: grocery and general merchandise, produce, perishables and frozen foods, nutritional supplements, bulk and food service products, and personal care items.

The company also owns and operates natural products retail stores. As of August 1, 2009, it had 13 natural products retail stores primarily in Florida. In addition, the company engages in the international importing, roasting, packaging, and distribution of nuts, seeds, dried fruits, and snack items.

It sells in bulk its own packaged snack lines, EXPRESSnacks, Woodfield Farms, and Woodstock Farms, as well as through private label packaging arrangements. The company was founded in 1978 and is headquartered in Providence, Rhode Island.

United Natural just bought SunOpta Distribution group for $68 million (Canadian). That will add 6000 customer locations and 5 distribution centers. UNFI Canada, as the new entity will be called, is headquartered in Toronto and is Canada's largest distributor of organic, natural, kosher and specialty foods. In addition the company just announced it will become Whole Foods Market's pimary nonperishable distributor for the Rocky Mountain region. United Natural agreed to buy certain inventory from Whole Foods' Aurora, Co., and Austin, TX. distribution centers. It recently renewed a partnership deal with Whole Foods for the next 10 years. United Natural also plans to buy substantially all the other assets, assume the existing lease agreements, and hir all employees at Whole Foods' Aurora distribution facility. Closing for the deals is expected this month.

United's product mix is changing with private-label goods seeing an 18% increase in the latest quarter. They make up 30% of United's gross sales and produce the best profit margins of any product United sells. That helps to offset some of the lower fuel surcharge revenues. Expect margins to continue widening as private label sales grow.

Another possible reason for better margins: more organic and specialty item sales. While consumers have been buying less during these economic tough times, they may be about to feel a little better as the economy stabilizes. That could mean more purchases of higher priced daily items like organic and specialty foods. There is also a trend toward more organic foods as a more healthy lifestyle is getting plenty of attention.

More numbers: Over the last 5 years, revenues grew by 15.5% a year, on average, profits by 14.5% annually. For the next 5, analysts see revenues averaging 8.5% a year in growth and earnings up by 10.5%. Market Cap is $1.51 billion. Forward P/E is 19.42. Price to book is 2.41. Book value is $13.98. Operating margin for the last 12 months was 3.07% while Profit margin was 1.83%. Return on equity was 11.70% and Return on assets was 6.07%. Total cash is $9.68 million or 22 cents a share. Total debt is $244.17 million or 8% of capital. Current ratio is 1.46. Beta is .83. The stock is up 25% in the last 52 weeks. There are 43.32 million shares outstanding. Float is 40.31 million. Insiders own 6.78%. Institutions have 93%. There is no dividend.

There's a lot going for United as consumers begin to loosen their wallets and look for a healthier diet. The company offers products that can help. While margins are rather thin, that's the nature of grocery distribution. Volume is everything. Now that the company has added the Canadian distribution customers through SunOpta, look for better growth in all of North America. The only caveat: the stock is trading near its all-time high and might be a little ahead of its earnings. If there's a disappointment in any quarter, the stock price is vulnerable to some correction.

- Company Web site: www.unfi.com

- Ted Allrich