United Natural Foods Inc. (NYSE: UNFI) reported second quarter fiscal 2026 net income of $20 million, reversing a $3 million net loss in the same period a year ago, as cost discipline and distribution network restructuring more than offset a 2.6 percent decline in net sales to $7.9 billion.
Adjusted EBITDA rose 23.4 percent to $179 million, and free cash flow reached $243 million — up 25.9 percent year over year. The company also raised its full-year profitability and cash flow outlook while lowering its net sales guidance.
Revenue trade-off
The sales decline was largely intentional. Nearly 500 basis points of the drop stemmed from what UNFI calls “accretive optimization” – strategic decisions to exit lower-margin business, including the transition out of its Allentown, Pennsylvania, distribution center in Q1. Conventional sales fell 12.1 percent to $3.4 billion as a result, while natural channel sales grew 6.7 percent to $4.3 billion.
Operating expenses declined nearly 6 percent to $972 million and improved 40 basis points as a percentage of net sales, driven by distribution center productivity gains and network consolidation savings. Interest expense dropped to $32 million from $38 million a year ago, reflecting lower average debt balances.
CEO Sandy Douglas said the quarter validated the company’s strategic direction.
“In the second quarter, disciplined execution of our value creation strategy delivered growth in profitability and free cash flow ahead of our projections, which enabled us to further strengthen our balance sheet and increase our financial flexibility. With a sharpened focus on our growing $90 billion target addressable market, we are working to help differentiating retailers continue to accelerate profitable growth in a dynamic marketplace,” Douglas said.
“Looking ahead, our new business pipeline is strong. And we remain committed to continuously improving our effectiveness and efficiency, delivering our updated outlook and strengthening our capabilities to create long-term value for our customers, suppliers, associates and shareholders.”
Balance sheet progress
Net leverage fell to 2.7x as of Jan. 31 – the lowest since fiscal 2023 – down from higher levels earlier in the year. Total outstanding debt, net of cash, declined $368 million year over year to $1.68 billion. UNFI now expects to reach about 2.3x net leverage by fiscal year-end, meaningfully below its prior target of 2.5x or lower.
Total liquidity stood at about $1.34 billion, including $52 million in cash and $1.29 billion available under its asset-based lending facility. The company also repurchased 742,622 shares at an average price of $33.66, for a total of approximately $25 million.
Updated full-year outlook
UNFI revised its fiscal 2026 guidance, raising profitability targets across the board while trimming the net sales range. Full-year net sales are now projected at $31.0 to $31.4 billion, down from the prior range of $31.6 to $32.0 billion. Net income guidance was raised to $50 to $75 million (from $0 to $50 million), adjusted EPS to $2.30 to $2.70 (from $1.50 to $2.30), and adjusted EBITDA to $680 to $710 million (from $630 to $700 million). Free cash flow guidance was raised to about $330 million from $300 million, with capital expenditures held steady at about $250 million.
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