Shares of United Natural Foods (UNFI 0.25%) were down 10.9% as of 12:45 p.m. EDT Friday after the natural and organic foods distributor announced disappointing fiscal fourth-quarter 2018 results.

More specifically, United Natural Foods' quarterly revenue grew 10.7% year over year to $2.592 billion. That translated to a 5.6% increase in adjusted (non-GAAP) earnings per share -- which excludes items like restructuring and acquisition expenses -- to $0.76. Consensus estimates on Wall Street had predicted adjusted earnings of $0.85 per share on revenue of $2.61 billion.

Yellow arrow line chart indicating losses over a grey background with stock market data.


So what

Within United Natural Foods' top line, its "supernatural" channel -- or national chains that carry more than 90% natural products -- continued to lead growth, with sales climbing 27.5% to $982 million. Meanwhile, sales to independent retailers climbed 5.7% to $651 million, conventional supermarkets rose 1.1% to $707 million, and revenue from all other sources declined 1.5%. The latter drop was driven mostly by the company's recent divestiture of its Earth Origins Market retail business.

"We continued to deliver solid top-line growth across our customer channels, demonstrating sustained strong demand for UNFI's product assortment and services," explained United Natural Foods chairman and CEO Steven Spinner. "On the bottom line, our results reflected the impact of customer mix shift and higher-than-anticipated freight costs, while improvement in our working capital has resulted in record free cash flow for the quarter."

Now what

Spinner added that United Natural Foods is on track to close on its $2.9 billion acquisition of SUPERVALU by the end of the calendar year, noting that the company is "hard at work planning for the integration to capture the significant synergies and strategic benefits of this transformative combination."

In the meantime, United Natural Foods expects fiscal 2019 revenue in the range of $11.1 billion to $11.3 billion, or year-over-year growth of 8.6% to 10.5%. On the bottom line, that should translate to adjusted earnings per share of $3.48 to $3.58, up 11.8% to 15% from fiscal 2018. Here again, however, most investors watching the stock were modeling earnings near the high end of that range on lower revenue of $11 billion.

It's no surprise, then, that the market is punishing United Natural Foods as higher costs continue to eat into its profits.