Organic goods are big business these days, both for retailers and organic-food suppliers such as United Natural Foods
There are now plenty of outlets for organic goods; in its last 10-K, other United Natural Foods customers included BJ's Wholesale
It's no surprise that United Natural Foods has a big stake in Whole Foods Market's continued success. The distributor relies on continued relationships with its major customers, Whole Foods and Wild Oats. Its regulatory filings list the loss of either of these two customers as a risk to its business, and the risk that negotiations might fail was noted earlier this year. The new deal must be one worry off United Natural shareholders' minds, especially since Whole Foods is expected to continue on its successful growth trajectory as it opens new stores in new markets.
United Natural took the opportunity to reiterate its guidance for an 11% to 15% increase in revenues this year, and a 15% to 19% increase in earnings per share. In its most recent fiscal year, it reported a modest $5.9 million in positive cash flow; in the previous year, free cash flow had been $54.9 million in the hole.
These encouraging developments don't necessarily mean that United Natural is a good deal for investors at the moment. Its healthy growth is accompanied by a trailing P/E ratio of 31. There are plenty of things to like about this company, but it seems there could be more opportune times to take a bite out of United Natural Foods.
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Alyce Lomax does not own shares of any of the companies mentioned.