What happened

Shares of United Natural Foods (NYSE: UNFI) were moving higher today after the supermarket wholesaler delivered a better-than-expected profit in its fiscal second quarter.

As a result, the stock was up 18.3% as of 11:53 a.m. EST on Wednesday.

The produce section of a supermarket

Image source: Getty Images.

So what

Revenue at United Natural Foods, the country's largest publicly traded grocery wholesaler, rose 7.1% in the quarter to $6.89 billion. That was actually slightly below analyst estimates at $6.91 billion, but the company made up for it by gaining leverage and delivering strong growth on the bottom line.

Gross margin ticked up slightly from 14.26% to 14.38% due to fewer markdowns at its own retail stores, and operating expenses as a percentage of revenue fell by 82 basis points to 12.59% as the company leveraged higher sales, had lower benefit costs, and lapped a quarter that included $28.9 million in bad-debt expense. That helped drive an increase in adjusted operating income from $54.1 million to $123.1 million, and adjusted earnings per share jumped from $0.25 in the quarter a year ago to $1.25, which was well ahead of estimates at $0.81.

During the quarter, United also announced the extension of its contract with Whole Foods, its biggest customer, through 2027, eliminating one of its biggest risks.

CEO Steven Spinner said, "Our strong second-quarter results demonstrate that UNFI continues to execute at a high level as we again leveraged strong year-over-year sales increases into even stronger bottom-line growth."

Now what

United Natural Foods was also bullish on the rest of the fiscal year, maintaining its guidance but saying it expected results to keep near the top of its previously stated ranges for adjusted EBITDA and adjusted EPS. That guidance includes revenue of $27 billion to $27.8 billion, up 3.3% at the midpoint, and adjusted EPS of $3.05 to $3.55, representing 21.3% growth at the midpoint.

Given that forecast, the consumer staples stock looks well priced at a price-to-earnings ratio of just 11.