What happened
Profits are plummeting for grocery wholesaler United Natural Foods (UNFI 3.05%), and that's why the stock was down a whopping 23% as of 10:30 a.m. ET on Tuesday morning.
Today, United Natural Foods reported completed financial results for its fiscal 2023. It's a low-growth business, so full-year net-sales growth of just 4.6% likely wouldn't have triggered such a negative response from the market. However, the company had net income of only $24 million for the year, a 90% drop from fiscal 2022, and it swung to a net loss of $68 million in its fiscal fourth quarter, which ended in July.
Moreover, United Natural Foods expects to report a net loss in its fiscal 2024 of up to $110 million, which was a big disappointment to investors.
So what
United Natural Foods cited inflation and inventory shrinkage as two factors impacting its profitability. Shrink is a pervasive issue in the retail sector right now, as theft rises and companies increasingly have little recourse for crimes under a certain dollar amount.
These are issues that management hopes to resolve, but these headwinds will keep blowing in fiscal 2024, leading to a full-year net loss.
Now what
Along with reporting financial results, United Natural Foods also announced that's its bolstering its board of directors to help with its transformation plan. Three new people are being added as independent directors, and three will be removed from the board following a shareholder vote.
From there, United Natural Foods' board will do a financial review and try to figure out how to maximize shareholder value. That said, it might be best to wait on the sidelines to see what moves management makes before buying into the transformation plan.
