United Natural Foods, Inc.

Hello and welcome to the UNFI first quarter fiscal 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, again press the star 1. I will now turn the conference over to Steve Blomquist, Vice President, Investor Relations. Please go ahead.

Good morning, everyone. Thank you for joining us on UNFI's first quarter fiscal 2024 earnings conference call. By now, you should have received a copy of the earnings release issued this morning. The press release and earnings presentation, which management will speak to, are available under the investor section of the company's website at www.unfi.com on the events tab. 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'll take your questions. Before we begin, I'd like to remind everyone that 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 last, 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 GAAP financial measures are included in our press release and the end of our earnings presentation. I'd 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 first quarter call. In my remarks this morning, I will provide a brief overview of our results, the operating environment, and then an update on the progress we're making resetting and restoring our profitability and enhancing the value we create for our customers, suppliers, and in parallel, our shareholders. As you saw in our release, our first quarter results exceeded our expectations and reflected a sequential improvement in adjusted EBITDA of $24 million. This resulted from improved operational execution and progress on near-term value creation initiatives, which helped deliver savings earlier in the year than we previously expected. We accomplished this despite an industry backdrop that continues to be challenging. Inflation rates are declining sequentially, yet consumers continue to endure the impact of structurally higher food prices. We saw inflation decline by over 200 basis points compared to last fiscal year's fourth quarter, but it remains modestly above historical levels. To manage these higher prices, consumers continue to buy less and shift their purchases away from the grocery channel. This has led to negative volumes on average across the retail food industry and share gains by mass merchandisers and discounters. These challenges create even greater urgency for us to be successful in both our short-term and longer-term transformation efforts so that we can help our retail customers remain as competitive as possible as the environment continues to evolve. Many of our customers are performing well. even in this environment, but all of them need UNFI and our supplier partners to step up for them. Our revamped leadership team is rising to this challenge, gaining even more UNFI experience and starting to drive tangible operating improvement. We expect this will increasingly benefit our financial performance throughout the remainder of fiscal 2024 and beyond as we manage for the short term and build for the future. An encouraging area is our progress on shrink. As we've detailed previously, the volatility created by COVID and the post-pandemic environment created challenges managing shrink throughout our supply chain. This weighted significantly on our results as we exited last fiscal year. And while it's still early in fiscal 2024, our strengthening operating performance reduced shrink year over year and sequentially. In fact, we reduced shrink in the quarter by over $7 million more than we had previously planned, and we continue to expect additional improvement as we move through the year. We're beginning to see the benefits of improved management routines and standardized processes that we've implemented over the last few quarters, as well as the benefits of more stabilized supply chains and labor force, with turnover in our distribution centers near a record low. Separately, we're rapidly realizing our near-term value creation initiatives and continue to expect these will deliver about $150 million of operating efficiencies to our fiscal 2024 results. Importantly, some of these initiatives, particularly the wholesale efficiency actions we've taken, also help lay the groundwork for our longer-term transformation aspirations, giving us increased confidence as we move down this path. As we've delivered on these near-term goals, we've also been making early progress on our transformation plan with advancements on network optimization and automation during the quarter. We finished the consolidation of our Logan Township facility into our Allentown Distribution Center, which brings our fresh and conventional businesses in the region under one roof. Separately, we also finished the expansion of our automation system to our Carlisle DC which expands its unit pick capabilities and is expected to support increased capacity and throughput. Additionally, we continue to augment our management team by recruiting a new CEO for our retail business and a new chief information officer, both of whom have helped lead successful transformations previously. We also completed the onboarding of three new board members during the quarter and held our first board meeting since they joined us just last week. Their input was proactive and constructive, and we strongly believe the perspectives of our new members will add meaningful value. I also want to thank our three departing directors for their contributions and their years of service to UNFI. While it's still early in the year and in our transformation plan, we're confident that we're headed in the right direction to sustainably create value for our stakeholders, especially our customers, suppliers, and shareholders. We remain focused on maintaining our operating and transformation momentum as we service our customers throughout the busy holiday season. We will continue to drive operational improvement and transformation as quickly as possible. Given the tremendous long-term shareholder value creation opportunity that we see by improving the economics of our business and enhancing the value we bring to customers and suppliers, we refuse to be incremental in our approach. With that, let me now turn the call over to John for his remarks. John?