United Natural Foods reported a sharp swing in profitability for the third quarter of fiscal 2026, with net income rising to $33 million from a $7 million loss a year earlier.
Net sales fell 4.2% to $7.723 billion from $8.059 billion. The company said the decline included about 450 basis points of impact from optimization actions. Within the sales mix, natural sales rose 4.4% to $4.342 billion, while conventional sales dropped 13.6% to $3.136 billion and retail sales fell 10.1% to $515 million.
Profitability improved more quickly than revenue. Gross profit declined 3.0% to $1.049 billion, but gross margin edged up to 13.6% of sales from 13.4%. Operating expenses fell to $954 million from $1.025 billion, and as a share of sales dropped to 12.4% from 12.7%.
Adjusted EBITDA climbed 16.6% to $183 million from $157 million. Adjusted earnings per share increased to $0.77 from $0.44, while diluted EPS moved to $0.52 from a loss of $0.12.
Interest expense declined to $31 million from $36 million, reflecting lower average debt balances. The tax rate shifted to an expense rate of 21.4% from a 56.3% benefit rate a year earlier, following the move from a pre-tax loss to pre-tax income.
Cash generation weakened. Net cash from operating activities fell to $98 million from $173 million, and free cash flow dropped to $54 million from $119 million. Capital expenditures were $44 million, down from $54 million.
Debt also moved lower. Net debt finished the quarter at $1.63 billion, down $46 million from the prior quarter and $296 million from a year earlier. Net leverage improved to 2.5x, the lowest level since fiscal 2018. Liquidity was about $1.25 billion, including $43 million in cash and roughly $1.20 billion of unused borrowing capacity.
During the quarter, the company repurchased 82,233 shares for about $4 million at an average price of $48.64. Through the end of May, repurchases totaled about 990,000 shares for approximately $38 million.
For the full fiscal year, United Natural Foods narrowed its outlook ranges while keeping midpoint targets unchanged. Net sales are now expected at $31.1 billion to $31.3 billion, net income at $55 million to $70 million, EPS at $0.90 to $1.10, adjusted EPS at $2.40 to $2.60, and adjusted EBITDA at $685 million to $705 million. Following these announcements, the company's shares moved -13.88%, and are now trading at a price of $44.475. If you want to know more, read the company's complete 8-K report here.
