What happened

Shares of United Natural Foods (UNFI -1.66%) fell more than 20% this morning after the food wholesaler reported quarterly earnings well short of expectations and suggested it is still struggling to integrate its 2018 acquisition of rival SUPERVALU. Management believes better times are right around the corner, but investors on Wednesday were in no mood to stick around to find out.

So what

Before markets opened today, United Natural Foods reported fiscal first-quarter adjusted earnings of $0.12 per share, well short of the $0.26 consensus, despite revenue of $6.02 billion that beat estimates by more than $200 million. Gross margin in the quarter fell to 12.81% of net sales, down from 14.38% in the first quarter of fiscal 2019, due largely to the addition of SUPERVALU's less profitable inventory.

Fresh food being prepared around a table.

Image source: Getty Images.

The company ended the quarter with $3.05 billion in long-term debt, up from $2.8 billion on Aug. 3, 2019, due to an increase in working capital to support the holiday selling period. United Natural Foods said it expects that increase in working capital to reverse by the end of the current quarter.

CEO Steven L. Spinner issued a statement saying he believes his company is well positioned to improve results as the fiscal year goes on.

"We entered the new fiscal year operating with an unmatched geographic footprint, the largest variety of products and services in the industry and the critical scale needed to succeed over the long term," Spinner said. "As we look to the remainder of fiscal 2020, we are committed to converting our sales momentum into improved earnings and cash flow."

Now what

Despite the first-quarter weakness, management backed its full fiscal 2020 forecast for adjusted earnings of $1.22 to $1.76 per share on revenue between $23.5 billion and $24.3 billion. Going into the report, analysts were expecting full-year earnings of $1.38 per share on revenue of $23.84 billion.

This was United Natural Foods' second consecutive ugly quarter, and shares are now down 84% over the past three years. Given how far they have fallen, shares might be near a bottom. But investors would be wise to wait for some concrete evidence of a turnaround, and not just management optimism, before buying back in.