What happened

Shares of grocery supplier United Natural Foods (NYSE:UNFI) are surging this morning, after the company released preliminary results for the third quarter of fiscal 2020. As of 10:45 a.m EDT, the stock was up 31%. 

With today's move, the stock has doubled in just a week, and quadrupled in value since March lows, as investors realize that grocery products are still in high demand.

Two people prep food on a wooden table.

Image source: Getty Images.

So what

Quarterly net sales grew 12% year over year for United Natural Foods, as consumer spending shifted from restaurants to grocery. That led to impressive net income of $88 million by generally accepted accounting principles (GAAP) -- up 54% from last year. 

However, investors might cheering non-GAAP (adjusted) profitability most. Adjusted earnings per share (EPS) came in at $1.40 -- up 130% from a year ago. For perspective, adjusted EPS guidance for all of fiscal 2020 was $0.85 to $1.45. In other words, United Natural Foods hit the high end of its full-year guidance in a single quarter.

The COVID-19 pandemic impacted United Natural Foods more than other companies, due to the timing of its fiscal calendar. While many businesses record fiscal first quarters from January to March, United Natural Foods' fiscal third quarter ran from Feb. 2 to May 2. Consumer behavior in the U.S. didn't significantly change until the last two weeks of March -- a blip on most companies' quarterly results. By contrast, the shift toward grocery was in place for the majority of United Natural Foods' fiscal Q3.

All told, it was a great quarter for the consumer-staple stock

UNFI Chart

UNFI data by YCharts

Now what

Beyond just surging sales and strong profitability, United Natural Foods also got healthier in Q3 by reducing net debt by a whopping $290 million. The company's debt load is high at $2.7 billion. But much of it relates to its $2.9 billion acquisition of SuperValu in 2018. Management had promised to quickly pay this down, and this quarter demonstrated that commitment.

Finally, United Natural Foods withdrew its guidance for fiscal 2020, but not for the same reason other companies have. The company withdrew guidance because its business is strong, and management needs time to quantify the bump. It expects to give updated guidance when it reports official Q3 results in June.