UNFI restructuring operations to increase efficiency, increase profits

United Natural Foods Inc. is consolidating its operating structure from four regions to three: East, Central and West, the food wholesaler announced Tuesday.

As a result of this restructuring, the grocery distributor and retailer plans to eliminate around 150 roles, mainly in management or supervisory positions, according to a released statement.

“These changes are in step with our transformation plan,” UNFI CEO Sandy Douglas said in a statement. “The regional realignment will decrease layers of administrative management, increase leaders’ span of geographic responsibility, better align us to serve customers with less complexity, and support faster decision making. These changes are also intended to make our company more efficient and more profitable.”

UNFI’s announcement that it will streamline its operations and reduce the size of its corporate workforce comes less than a week after the company reported a sharp decline in profitability and slashed its projections for the current fiscal year for the second quarter in a row.

While Q3 net sales increased 3.7% to $7.5 billion from the same period a year ago, its net income dropped more than 89% to $7 million and gross profit fell 1.2% to $12 million.

During the June 7 earnings call, Douglas said, "Customers continue to tell us we have the right products and value added services. They’re optimistic we’re taking the appropriate actions to help them plan and execute their go-to-market strategies and continuing to improve our execution capabilities in support of their business growth.

"We are confident that our short and longer term actions will make UNFI a stronger, more efficient company better positioned to serve customers and suppliers and deliver increasing shareholder value.”

However, UNFI's stock price fell steadily from June 6, the day before the earnings call, until June 9, when it closed at $20.44. Tuesday's announcement was released after the markets closed; UNFI's stock opened at $21.11 and closed at $21.65.

UNFI confronts long-term challenges

The company said the actions it outlined Tuesday stem from its decision in March to appoint Erin Horvath as chief operating officer and Louis Martin as president of wholesale, moves it said were intended to strengthen its leadership structure, improve deployment of resources and help it better serve customers and suppliers.

The company said its new East Region will include its operations in states from Maine to Florida and “as far west” as Tennessee, where it has 22 distribution centers and more than 10,000 customers. The Central Region includes 21 states from the Mississippi River to the Rockies that are home to 16 distribution centers and around 9,000 customers, while the West Region covers 10 states from Utah to Alaska, where UNFI runs 14 distribution facilities and has about 9,000 customers. The exact boundaries of the new regions were not specified in the announcement.

UNFI has been hampered by a range of obstacles that have hurt it financially and driven down its stock price, including competition from mass merchants like Walmart, weak retail sales and challenges melding Supervalu, which the company bought in 2018, with the rest of its business.

Speaking during UNFI’s third-quarter earnings call last Wednesday, Douglas expressed “deep disappointment” over the company’s weak results and promised to take decisive action to shave costs and make UNFI more nimble.

UNFI is “actively evaluating paths to a more efficient administrative structure, which should reduce SG&A,” Douglas said during the call, referring to selling, general and administrative expenses. “Importantly, we believe this more streamlined organizational approach will also make us more adaptable, will speed decision-making, and enhance communication and collaboration.”

UNFI is in the midst of a multi-prong “transformation agenda” introduced during the company’s second-quarter earnings call in March, when Douglas said the company realized that it did not have full visibility into its business data and forecasting abilities, in part because its technology was out of date.

When Douglas was named CEO in August 2021, UNFI had just begun to implement a new strategic plan, Fuel the Future, that his predecessor announced on Investor Day in June 2021.

During his first earnings calls with UNFI that September, Douglas said he liked the plan's details that he had seen.

"The plan is customer focused and growth oriented with an estimated $140 billion addressable opportunity that we’ve talked about with existing and also potential new customers," Douglas said at the time.

New Hope Network's Digital Content Specialist Victoria Camron contributed to this report.

A version of this piece originally appeared on Grocery Dive, an Informa sister website. Visit the site for information on news and trends shaping the grocery industry.