United Natural Foods, Inc.

Thank you. Steve Blomquist, Vice President of Investor Relations. You may begin your conference.

Good morning, everyone, and thank you for joining us on UNFI's fourth quarter fiscal 2023 earnings conference call. By now, you should have received a copy of the earnings release issued earlier this morning. The press release and earnings presentation, which management will speak to, are available under the investor section of the company's website. We've also included a supplemental disclosure file in Microsoft Excel with key financial information. Joining me for today's call are Sandy Douglas, our Chief Executive Officer, and John Howard, our Chief Financial Officer. Sandy and John will provide a strategy and business update, after which we will take your questions. Before we begin, I'd like to remind everyone the comments made by management during today's call may contain forward-looking statements. These forward-looking statements include plans, expectations, estimates and projections that might involve significant risks and uncertainties. These risks are discussed in the company's earnings release and SEC filings. Actual results may differ materially from the results discussed in these forward-looking statements. And lastly, I'd like to point out that during today's call, management will refer to certain non-GAAP financial measures. Definitions and reconciliations to the most comparable gap financial measures are included in our press release and the end of our earnings presentation. I'd like to now ask you to turn to slide six of our presentation as I turn the call over to Sandy.

Thanks, Steve. We appreciate everyone joining us for our fourth quarter call. In my remarks this morning, I'll provide a brief overview of our results, the operating environment, and then provide an update on the actions that we are taking to continue to reset and restore our profitability and improve the value we create for our customers, suppliers, and in parallel, our shareholders. As you saw in our release, our fourth quarter results for sales and capital expenditures were in line with the updated outlook we provided in June. while adjusted EPS and adjusted EBITDA finished towards the high end of their respective ranges. UNFI has not been immune to the post-COVID, post-inflation challenges that the entire food industry is facing. Despite these challenges, we remain confident in our multi-year value creation opportunity and our plan to create and capture it. We are seeking to build upon our strengthening foundation in market leadership position by investing in the necessary capabilities to create a differentiated technology-enabled food retail services company that generates sustainable growth, profitability, and shareholder value. To this end, this morning, we also announced a refreshment of our board, adding three new members with deep food industry, business transformation, and investment stewardship experience, who we believe will be highly valuable in guiding our customer and supplier-focused multi-year transformation plan in a disciplined manner that generates compelling shareholder returns. UNFI has a strong industry leadership position with an expansive supply chain as the largest wholesale grocery distribution and value-added food retail services provider in North America. with nearly 11,000 suppliers and manufacturers serving over 30,000 retail outlets. And the long-term growth opportunity and pipeline we see in our core business remains significant within a $140 billion total addressable market for our core wholesale business. However, considerable progress remains to be made modernizing and unifying our technology and network platforms as previous plans have taken longer than expected as the company faced the onset of the COVID pandemic, unprecedented inflation, and supply chain disruptions over the past few years. These events and their enduring consequences have brought cost increases across our total customer service system as we serve our large, diverse, and growing customer base. In previous quarters, we've outlined a four-part plan to transform and realize the full value of our platform, including details on how we plan to strengthen our supply chain for our retailers and suppliers through distribution network automation and optimization, introducing smarter technology systems, and investing in operational excellence and efficiency. We believe that we will further differentiate UNFI from our peers by complementing our profitable growth strategy with our operational transformation. And specifically, we expect to execute our transformation in a manner that restores and grows our profitability to sustainably improve shareholder value creation. We see significant sales and profit growth opportunities, so significant that we are unwilling to be incremental in our approach as we drive change and investment. Our transformation agenda is challenging, and it will take time. In the meantime, our management team is focused on working through the near-term environmental challenges, resetting the business and taking action to turn profitability around, while simultaneously investing in the business to sustain and significantly accelerate profitable growth over time. While we lay the groundwork for our transformation, The management team is also taking decisive action to revamp and lower our sustaining cost structure in the near term. The benefits from these more easily executable profitability drivers that I outlined on our last call will largely go towards offsetting higher operating costs that include additional labor and supply chain costs and the acceleration of work on our transformation initiatives. We also believe this transformation, including our planned investments to modernize and optimize our infrastructure, will help us to create a more nimble, streamlined, and responsive company. Let me briefly report on the near-term actions I previously outlined. Since our third quarter call, we've captured nearly $100 million of benefits on a run-rate basis, from work around our organizational structure, SG&A spending, and wholesale efficiency initiatives. Having completed a deeper dive, we now believe a greater opportunity exists than we previously thought to continue to improve and become more efficient. As such, we're increasing the near-term value creation benefit from $100 million called out in June to nearly $150 million. These amounts do not include the potential opportunity from improving our shrink rate which, as I mentioned on our last call, is meaningfully higher than the pre-pandemic run rate and which we expect to improve over the course of the year as we operationalize process improvements. These value creation initiatives are expected to benefit fiscal 2024, which will be an important year for UNFI as we take action to reset and begin to accelerate and expand our transformation program. including critical investments to our supply chain and technology infrastructure. Let me provide some more details on our transformation program progress and our plan going forward. Let me point you to slide six, which includes a summary of our transformation plan to truly leverage the power of our competitive advantages through what we're calling One UNFI. We're working to modernize and unify our technologies, infrastructure, and processes to drive better service for our customers and suppliers, as well as improve our internal analytical capabilities to guide the company and help us be as dynamic and responsive as possible. Slide seven shows a broad roadmap of the key work streams we're pursuing over the next few years under the four transformation pillars that we previously identified. First is the work we're doing around our supply chain, what we've called network automation and optimization. We formally announced that Centralia, Washington will be the first location where Symbiotics automation technology will be installed. On our last call, we also stated that we've begun the design phases for the next two installs and expect to be running up to four of these projects simultaneously as we further expand the automation levels in our distribution systems. We'll take learnings from Centralia to fine-tune the implementation of ensuing projects prior to completion and expect to accelerate the pace of installs as we gain confidence in our processes and the intricacies of the system. Collectively, when we complete, these projects are designed to increase our capacity, improve our service levels, enhance the customer experience, make for a safer workplace, and importantly, create meaningful operating efficiencies. We're also continuing our evaluation of fast and slow moving facilities and regional DCs and how best to migrate our network in a way that will further enhance our capacity, lower our cost structure, and optimize DC footprints and working capital levels. Next is our work around commercial value creation. which aims to enable us to generate more profitable and scalable growth through UNFI and a more streamlined experience for our customers and suppliers. We see significant potential to increase the visibility of profitable growth opportunities and data-driven real-time insights across our ecosystem. Said simply, our suppliers want to see our customers and their shoppers better so they can make productive investments in sales, merchandising, and marketing opportunities across the 30,000 plus retail locations that make up our customer base. Our customers want them to do so, and UNFI's opportunity is to build the capabilities necessary for this to happen seamlessly. We're also focused on building related capabilities and streamlining legacy processes to help customers and suppliers grow faster and more profitably together and to ensure that UNFI is rewarded appropriately for the value created. Over time, our goal is to evolve our go-to-market programs to reduce complexity and drive accelerated supplier brand growth with and for UNFI customers. The third area of our transformation focus is enhancing our digital offering, which is another way that we can more effectively connect our customers and suppliers to grow their businesses collectively and profitably. Digital transformation is the key enabler to fully activate the commercial opportunities in our ecosystem, opportunities that many of the large retail chains are activating now. While we will be providing more specifics as we progress in digital, let me give you a quick example of early progress in this area to help illustrate how important elements of this plan are coming to life. Our newest value-added supplier program, UNFI Insights powered by CRISP, provides suppliers with a granular understanding of sell-through data across natural and conventional channels directly through the myUNFI.com supplier portal. The UNFI Insights team is dedicated to uncovering the latest data and actionable intelligence so suppliers and customers can see each other and their shoppers and drive mutual benefits. We have seen solid early adoption and positive initial feedback from suppliers of this early stage program. And finally, our fourth transformation program is the work of technology infrastructure unification and modernization, where we plan to reduce the number of systems used to run the business across areas such as finance, warehouse management, procurement, promotions, and data management. We're planning for our first go-live implementation of a common warehouse management system accompanied by what we're calling hyper support to ensure success. which will serve as the pilot for the continued rollout of a single solution. As we talked about before, this is consistent with our goal to simplify the business model, to lower our cost structure, and improve the customer experience. Common platforms are expected to lead to enhanced efficiencies, more uniform data sets, and improved business management. Similar work streams are moving forward in other parts of the business, guided by executive leaders and cross-functional teams. While we expect our transformation program to be a multi-year endeavor, we're already making progress, adding incremental growth and profit-accretive drivers to our business, while also making long-term structural improvements to our efficiency, processes, and cost space. So, in summary, I'd want to make sure that I leave you with three things. Fiscal 2024 is an important year as we emerge from three years of unprecedented volatility and look to reset our profitability in the near term while investing in critical foundational skills, infrastructure, and capabilities that we believe will accelerate growth in sales and profitability for UNFI, our customers, and our suppliers. Second, there have been and continue to be challenges that impact the entire food industry. but we're taking decisive action to strengthen the business and drive improved performance. We run a complex business and know the path forward will take time, tenacity, and discipline, and that we'll need to be adaptable along the way. But we also know the way to fully realize our vision and maximize shareholder value creation is through a proactive combination of near-term action and the multi-year transformation path that I've outlined. And finally, with the steps we are taking to continue to strengthen both our leadership team and our board, we are positioning our company to capture the significant profitable growth opportunities that lie ahead. We look forward to updating you on our progress along the way. And let me now turn the call over to John for his insights on our financials.