BMO Capital Reiterates Market Perform on United Natural Foods (UNFI) After Meeting with Management

BMO Capital reiterated a Market Perform rating and $40.00 price target on United Natural Foods (NASDAQ: UNFI) after meeting with management at the ICR conference in Orlando. Management characterized 2016 as a transition year following a challenging 2015. UNFI says that 2015 was pressured by a confluence of pressures in its key natural/organic grocery categories. BMO believes that UNFI’s core growth outlook could improve as the company’s initiatives to grow sales in perimeter categories gain traction, following a modest industry sales slowdown in recent quarters.

Analyst Kelly Bania commented, "Management characterized 2016 as a transition year following a challenging2015 that was pressured by a confluence of pressures in its key natural/organicgrocery categories, the build out of new centers (expected to slow in comingyears), a key customer loss (Albertsons/Safeway), FX and lack of fuelsurcharges – all of which underscored the need to shift toward faster-growing fresh/perimeter categories at an even more accelerated pace following itsacquisitions of Tony’s (in May 2014). We expect UNFI’s M&A priorities tofocus in the areas of: fresh, specialty, and conventional produce wheremanagement expressed confidence that the choices in the pipeline were goodand that valuations were fair. We believe the transition toward fresh and specialty categories could help re-accelerate UNFI’s core growth, yet we seerisk in adding conventional produce to its offerings given UNFI’s core focus onslower-moving, natural/organic categories as well as our research that suggestsretailers are increasingly opting to source produce direct – see our recent Produce Deep Dive note. Longer term, UNFI remains confident that it canreturn to an EBIT margin expansion profile (as it leverages efficiencies), yet we believe the near-term transition toward perimeter categories could make EBITmargin expansion challenging near term."

For an analyst ratings summary and ratings history on United Natural Foods click here. For more ratings news on United Natural Foods click here.

Shares of United Natural Foods closed at $37.47 yesterday.

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