Trading Earnings: United Natural Foods following Whole Foods Lead?

United Natural Foods Inc (UNFI) is set to report earnings before the market opens on Wednesday, September 3. United Natural Foods is the largest publicly traded wholesale distributor to the natural and organic foods industry. Carrying more than 60,000 products,

the Company supplies over 17,000 customers nationwide and services a wide variety of retail formats, including super natural chains, independent natural products retailers and conventional supermarkets

United Foods is expected to earn a profit 30 cents per share for its 4th quarter. We expect the organic food distributor to announce earnings that will miss investors’ and analysts’ expectations as UNFI has failed to deliver an upside surprise in the last 4 quarters.

One of United’s biggest customers is Whole Foods (WFMI) and we saw the natural foods giant report a bad quarter and provide lower guidance. At the time we wrote the following about Whole Foods, “With the rise in food prices, we believe the average consumer is looking to lower their food bill, placing a premium on price and possibly forgoing organic brands. The grocer hasn’t grown its year-over-year quarterly earnings in 18 months. WFMI has missed 3 straight quarters and we expect them to make it four.” We were right. Given one of their top distributors struggles and this environment, we expect (UNFI) to fall prey to the same circumstances.

Typically, UNFI’s shares have performed poorly following earnings announcements. It’s not uncommon to see a 5-10% drop in share price in the days immediately following United Natural’s quarterly check-up.

Suggested Stop: $21.29

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