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What changed in UNITED NATURAL FOODS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of UNITED NATURAL FOODS INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+318 added−324 removedSource: 10-K (2024-10-01) vs 10-K (2023-09-26)

Top changes in UNITED NATURAL FOODS INC's 2024 10-K

318 paragraphs added · 324 removed · 243 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

52 edited+23 added−21 removed54 unchanged
Biggest changeWe believe we can enhance our profitability and accelerate our growth through our transformation efforts, which we expect will improve our cost structure, increase sales of products and services, and position us to provide tailored, data-driven solutions to help our customers run their businesses more efficiently and contribute to customer acquisitions.
Biggest changeWe believe we can optimize our performance and profitability through our improvement efforts, which we expect will improve our cost structure, increase sales of products and services, and position us to provide tailored, data-driven solutions to help our customers run their businesses more efficiently and contribute to customer acquisitions. 1 Table of Contents Our Commitment to Social and Environmental Responsibility Creating a Better Future for Communities As North America’s premier grocery wholesaler, we are working to create a better future for our communities by improving access to quality food, empowering our associates to give back and protecting the planet we share.
The report is available on our website at www.betterforall.unfi.com and highlights progress toward goals including waste reduction, supplier diversity, food donations, and food safety. Our Better for All report and the contents of our Better for All webpage are not incorporated by reference into or considered to be part of this Annual Report.
The report is available on our website at www.betterforall.unfi.com and highlights progress toward our goals, including waste reduction, supplier diversity, food donations and food safety. Our Better for All report and the contents of our Better for All webpage are not incorporated by reference into or considered to be part of this Annual Report.
These services include pass-through programs in which vendors provide services directly to our Wholesale customers, as well as services and solutions we develop and provide directly.
These services include solutions we develop and provide directly, as well as pass-through programs in which vendors provide services directly to our Wholesale customers.
We now organize and operate our Wholesale reportable segment through three U.S. geographic regions: East, Central and West, each of which is led by a separate regional president responsible for product and service strategy, execution, and financial results; and Canada Wholesale, which is operated separately from the U.S. Wholesale business.
Wholesale We organize and operate our Wholesale reportable segment through three U.S. geographic regions: East, Central and West, each of which is led by a separate regional president responsible for product and service strategy, execution, and financial results; and Canada Wholesale, which is operated separately from the U.S. Wholesale business.
Our retail banners compete with traditional grocery stores, supercenters, deep discounters, mass merchandisers, limited assortment stores and eCommerce providers. The principal competitive factors in grocery retail include the location and image of the store; the price, quality, and variety of the fresh offering; and the quality, convenience, and consistency of service.
Our retail banners compete with traditional and specialty grocery stores, supercenters, deep discounters, mass merchandisers, limited assortment stores and eCommerce providers. The principal competitive factors in grocery retail include the location and image of the store; the price, quality, and variety of the fresh offering; and the quality, convenience, and consistency of service.
We continue to focus on the safety of our associates, customers and communities with increased safety measures. We continue to be committed to continuous learning and improvement, and we believe in the power of learning from past experiences to enhance our safety system and performance, including through root cause incident analysis.
We continue to focus on the safety of our associates, customers, communities and consumers with increased safety measures. We continue to be committed to continuous learning and improvement, and we believe in the power of learning from past experiences to enhance our safety system and performance, including through root cause incident analysis.
Our diversity council and seven associate-led Belonging & Innovation Groups actively strive to create a workplace where all associates feel welcome and are motivated to reach their full potential.
Our diversity and wellbeing council and seven associate-led Belonging & Innovation Groups actively strive to create a workplace where all associates feel welcome and are motivated to reach their full potential.
ESSENTIAL EVERYDAY® is our leading national brand equivalent private label solution with nearly 2,500 items for departments throughout the store. It is complemented by SHOPPERS VALUE®, which offers the budget conscious consumer quality alternatives to national brands. Our WILD HARVEST® brand offers a full range of products made with simple, wholesome ingredients across multiple categories, including pet foods.
ESSENTIAL EVERYDAY® is our leading national brand equivalent private label solution with nearly 2,200 items for departments throughout the store. It is complemented by SHOPPERS VALUE®, which offers the budget conscious consumer quality alternatives to national brands. Our WILD HARVEST® brand offers a full range of products made with simple, wholesome ingredients across multiple categories, including pet foods.
Upstream Our impact begins with the decisions made by our partners and suppliers, well before products reach our distribution centers. We are investing in programs and partnerships that will help build a more equitable system and carry our values further upstream. In fiscal 2023, we launched the UNFI Climate Action Partnership, encouraging suppliers to set credible climate goals.
Upstream Our impact begins with the decisions made by our partners and suppliers, well before products reach our distribution centers. We are investing in programs and partnerships that are designed to help build a more equitable system and carry our values further upstream. In fiscal 2023, we launched the UNFI Climate Action Partnership, encouraging suppliers to set credible climate goals.
We believe we are North America’s premier grocery wholesaler with 55 distribution centers and warehouses representing approximately 30 million square feet of warehouse space. We are a coast-to-coast distributor with customers in all 50 states as well as all ten provinces in Canada, making us a desirable partner for retailers and consumer product manufacturers.
We believe we are North America’s premier grocery wholesaler with 55 distribution centers and warehouses representing approximately 31 million square feet of warehouse space. We are a coast-to-coast distributor with customers in all 50 states as well as all ten provinces in Canada, making us a desirable partner for retailers and consumer product manufacturers.
A typical retail store carries approximately 17,000 to 21,000 core SKUs and ranges in size from approximately 50,000 to 70,000 square feet. We believe our retail banners have strong local and regional brand recognition in the markets in which they operate. Our Retail operations are principally supplied by five of our Wholesale distribution centers.
A typical retail store carries approximately 17,000 to 21,000 core SKUs and ranges in size from approximately 50,000 to 70,000 square feet. We believe our retail banners have strong local and regional brand recognition in the markets in which they operate. Our Retail operations are principally supplied by six of our Wholesale distribution centers.
Substantially all product categories that we distribute are available from a number of suppliers and, therefore, we are not dependent on any single supply source for any product category. In addition, although we have exclusive distribution arrangements and support programs with several suppliers, none of our suppliers accounted for more than 5% of our total purchases in fiscal 2023.
Substantially all product categories that we distribute are available from a number of suppliers and, therefore, we are not dependent on any single supply source for any product category. In addition, although we have exclusive distribution arrangements and support programs with several suppliers, none of our suppliers accounted for more than 5% of our total purchases in fiscal 2024.
Retail Our Retail segment includes 78 Cub Foods and Shoppers retail grocery stores. Our retail stores provide an extensive grocery offering and, depending on size, a variety of additional products, including general merchandise, home, health and beauty care, and pharmacy. We offer national and local brands, as well as our own private label products.
Retail Our Retail segment includes 76 Cub Foods and Shoppers retail grocery stores. Our retail stores provide an extensive grocery offering and, depending on size, a variety of additional products, including general merchandise, home, health and beauty care, and pharmacy. We offer national and local brands, as well as our own private label products.
Our Board of Directors is diverse in gender and ethnic background, as well as having a broad range of experience, with four out of 11 directors identifying as female, two members identifying as African American, one member identifying as Asian American, one member identifying as LGBTQ+ and two members identifying as veterans.
Our Board of Directors is diverse in gender and ethnic background, as well as having a broad range of experience, with four out of 11 directors identifying as female, two members identifying as African American, one member identifying as Asian American, one member identifying as LGBTQ+ and one member identifying as a veteran.
Our policy is to comply with all applicable federal, state, provincial and local provisions relating to the protection of the environment or the discharge of materials. Our international business operations are subject to various laws and regulations regarding the import and export of products and preventing corruption and bribery (including the US Foreign Corrupt Practices Act).
Our policy is to comply with all applicable federal, state, provincial and local provisions relating to the protection of the environment or the discharge of materials. Our international business operations are subject to various laws and regulations regarding the import and export of products and preventing corruption and bribery (including the U.S. Foreign Corrupt Practices Act).
We developed a multi-pronged approach to educate and engage associates that includes open discussions on various dimensions of diversity, a podcast, DEI trainings on our associate platforms, targeted volunteerism, and campaigns encouraging respect and empathy. Creating a Safe Environment Safety is at the forefront of everything we do.
We developed a multi-pronged approach to educate and engage associates that includes open discussions on various dimensions of diversity, a podcast, DEI and mental health awareness trainings on our associate platforms, targeted volunteerism, and campaigns encouraging respect and empathy. Creating a Safe Environment Safety is at the forefront of everything we do.
Our business is classified into two reportable segments: Wholesale and Retail; and also includes a manufacturing division and a branded product line division. Our Strategic Priorities We are continually striving to better serve our stakeholders, including our customers, suppliers, associates and communities, while driving profitable growth and sustainable shareholder value creation.
Our business is classified into two reportable segments: Wholesale and Retail; and also includes a manufacturing division and a branded product line division. Our Strategic Priorities We are continually striving to better serve our stakeholders, including our customers, suppliers, associates and communities, and to drive profitable growth and sustainable shareholder value creation.
ITEM 1. BUSINESS In this Annual Report on Form 10-K (“Annual Report” or “Report”), unless otherwise specified, references to “United Natural Foods”, “UNFI”, “we”, “us”, “our” or the “Company” mean United Natural Foods, Inc. together with its consolidated subsidiaries. We are a Delaware corporation based in Providence, Rhode Island and Eden Prairie, Minnesota. We conduct our business through various subsidiaries.
ITEM 1. BUSINESS In this Annual Report on Form 10-K (“Annual Report” or “Report”), unless otherwise specified, references to “United Natural Foods”, “UNFI”, “we”, “us”, “our” or the “Company” mean United Natural Foods, Inc. together with its consolidated subsidiaries. We are a Delaware corporation based in Providence, Rhode Island. We conduct our business through various subsidiaries.
The primary competitive factors in the Wholesale business include price, service level, product quality, variety, availability and other value-added services. In recent years, consolidation within the grocery industry has resulted in, and is expected to continue to result in, increased competition, including from some competitors that have greater financial, marketing and other resources than we do.
The primary competitive factors in the Wholesale business include price, service level, product quality, variety, availability, location of distribution centers and other value-added services. In recent years, consolidation within the grocery industry has resulted in, and is expected to continue to result in, increased competition, including from some competitors that have greater financial, marketing and other resources than we do.
Social and environmental responsibility remains integral to our overall business strategy, and we believe these practices deliver significant value to our stakeholders, including our stockholders, associates, customers, suppliers and communities. Our Customers We maintain long-standing relationships with many of our customers.
Social and environmental responsibility remains integral to our overall business strategy, and we believe these practices deliver significant value to our stakeholders, including our stockholders, associates, customers, suppliers and communities. 2 Table of Contents Our Customers We maintain long-standing relationships with many of our customers.
We continually evaluate and upgrade our systems to enhance efficiency, cost-effectiveness and responsiveness to customer needs. We believe these systems include best in class functionality in warehouse management systems, inventory control, labor management, scan-based fulfillment applications, mechanized pick-to-light systems and order management systems.
We continually evaluate and upgrade our systems and distribution center infrastructure to enhance security, efficiency, cost-effectiveness and responsiveness to customer needs. We believe these systems include best in class functionality in warehouse management systems, inventory control, labor management, scan-based fulfillment applications, mechanized pick-to-light systems and order management systems.
Now in the third year since unveiling our Better for All plan, we continue to evaluate the impacts we have along our value chain, focusing on proactively engaging with the people making and moving the products we distribute.
Now in the fourth year since unveiling our Better for All impact strategy, we continue to evaluate the impacts we have along our value chain, focusing on proactively engaging with the people making and moving the products we distribute.
We also offer our customers: • trends reports in the natural and organic industry: • product data information such as best seller lists, store usage reports and catalogs; • assistance with store layout designs, new store design and equipment procurement; • planogramming, shelf and category management support; • in-store signage and promotional materials, and assistance with product display planning and set up; • shelf tags for products; and • a robust retailer portal with product information, search and ordering capabilities, reports and publications.
We also offer our customers: • trends reports in the natural and organic industry: • product data information such as best seller lists, store usage reports and catalogs; • in-store signage and promotional materials, and assistance with product display planning and set up; • shelf tags for products; and • a robust retailer portal with product information, search and ordering capabilities, reports and publications.
The majority of our trucks are leased and are maintained by third-party national leasing companies, which in some cases maintain facilities on our premises for the maintenance and service of these vehicles. We also have facilities where we operate our own maintenance shops.
The majority of our trucks are leased and are maintained by third-party national leasing companies, which in some cases maintain facilities on our premises for the maintenance and service of these vehicles.
Our international Net sales primarily reflect UNFI Canada, Inc. (“UNFI Canada”), which represented approximately 1% of our Net sales in fiscal 2023. International business excludes sales transacted in U.S. dollars and shipped internationally, which is an even smaller component of our business.
(“UNFI Canada”), which represented approximately 1% of our Net sales in fiscal 2024. International business excludes sales transacted in U.S. dollars and shipped internationally, which is an even smaller component of our business.
In addition, our two Canadian distribution centers in British Columbia and Ontario each hold an organic distributor certification from QAI. We maintain a comprehensive quality assurance program. All of the products we sell that are represented as “organic” are required to be certified as such by an independent third-party agency.
In addition, our Canadian distribution center in British Columbia holds an Organic Distributor certification from QAI. We maintain a comprehensive quality assurance program. All products we sell that are represented as organic are required to be certified as such by an independent third-party agency.
We are committed to the continued support and development of our associates and provide access to robust leadership development programming, role-based training and other career development opportunities at every stage of an associate’s tenure with us.
To reduce turnover, we have an emphasized focus on and commitment to our associates, their experiences as well as their continued engagement. We are committed to the continued support and development of our associates and provide access to robust leadership development programming, role-based training and other career development opportunities at every stage of an associate’s tenure with us.
Our services include shelf and planogram management, retail store support, pricing strategy, electronic payments processing, advertising, couponing, store design, equipment sourcing, point-of-sale hardware and software, network and data hosting solutions, consumer convenience services, eCommerce, automation tools, sustainability services and administrative back-office solutions. The sales and operating results for these services are included within Wholesale.
We provide shelf and planogram management, retail store support, pricing strategy, electronic payments processing, advertising, couponing, store layout and design, equipment sourcing and procurement, point-of-sale hardware and software, network and data hosting solutions, consumer convenience services, eCommerce, automation tools, sustainability services and administrative back-office solutions.
In fiscal 2021, we launched Marketplace by UNFI, a business-to-business digital eCommerce solution for emerging brands looking to expand distribution with UNFI customers.
Marketplace by UNFI is our business-to-business digital eCommerce solution for emerging brands looking to expand distribution with UNFI customers.
The Compensation Committee of our Board of Directors has oversight of human capital management matters with a focus on associate wellbeing across a variety of measures. As of July 29, 2023, we had approximately 29,455 full and part-time employees within continuing operations, 10,667 of whom (approximately 36%) are covered by 49 collective bargaining agreements, including agreements under renegotiation.
The Compensation Committee of our Board of Directors has oversight of human capital management matters with a focus on associate wellbeing across a variety of measures. As of August 3, 2024, we had approximately 28,333 full and part-time employees, 10,704 of whom (approximately 38%) are covered by 48 collective bargaining agreements, including existing agreements under negotiation.
Products are delivered to our distribution centers primarily by our fleet of leased and owned trucks, contract carriers and the suppliers themselves. When financially advantageous, we pick up products from suppliers or satellite staging facilities and return them to our distribution centers using our own trucks.
When financially advantageous, we pick up products from suppliers or satellite staging facilities and return them to our distribution centers using our own trucks.
We ship certain orders for supplements or for items that are destined for areas outside of regular delivery routes through independent carriers. Deliveries to areas outside the continental United States and Canada are typically shipped by freight-forwarders through ocean-going containers. Organic Certification Our “Certified Organic Distributor” certification covers 26 of our distribution centers in the United States.
We also have facilities where we operate our own maintenance shops. 5 Table of Contents We ship certain orders for supplements or for items that are destined for areas outside of regular delivery routes through independent carriers. Deliveries to areas outside the continental United States and Canada are typically shipped by freight-forwarders through ocean-going containers.
Additionally, we provide to eligible associates a leading edge, no-cost wellness program, paid time off programs including paid parental leave, an employee assistance program, 401(k) plan, a back-up childcare program, and a recently enhanced education assistance program. 8 Table of Contents Diversity, Equity and Inclusion We pledge to promote equity, celebrate diversity and support justice and inclusion for all.
Additionally, we provide to eligible associates a leading edge, no-cost wellness program, paid time off programs including paid parental leave, an employee assistance program, 401(k) plan and a recently enhanced education assistance program.
We are also subject to the National Labor Relations Act, which provides employees the right to organize and bargain collectively with their employer and to engage in other protected concerted activity; and the Fair Labor Standards Act, which establishes minimum wages and overtime standards, among other requirements. 7 Table of Contents Our facilities in the United States and in Canada are subject to various environmental protection statutes and regulations, including those relating to the use of water resources and the discharge of wastewater.
We are also subject to the National Labor Relations Act, which provides employees the right to organize and bargain collectively with their employer and to engage in other protected concerted activity, and the Fair Labor Standards Act, which establishes minimum wages and overtime standards, among other requirements.
We serve over 30,000 unique customer locations, primarily located across the United States and Canada, which we classify into five customer types: Chains; Independent retailers; Supernatural; Retail; and Other.
We serve over 30,000 unique customer locations, primarily located across the United States and Canada, which we classify into five customer types: Chains; Independent retailers; Supernatural; Retail; and Other. Refer to Note 3—Revenue Recognition in Part II, Item 8 of this Annual Report for additional information.
Our Marketing Services We offer a variety of marketing services designed to increase sales for our customers and suppliers, including consumer and trade marketing programs, as well as programs to support suppliers in understanding our markets. Trade and consumer marketing programs are supplier-sponsored programs that cater to a broad range of retail formats.
The sales and operating results for these services are included within Wholesale. 4 Table of Contents We offer a variety of marketing services designed to increase sales for our customers and suppliers, including consumer and trade marketing programs, as well as programs to support suppliers in understanding our markets.
Government Regulation Our operations and many of the products that we distribute in the United States are subject to regulation by state and local health departments, the USDA and the United States Food and Drug Administration (the “FDA”), which generally impose standards for product quality and sanitation and are responsible for the administration of bioterrorism legislation.
Our retail stores have continued to respond to growing competition from online and non-traditional retailers by adding options and services such as online ordering, curbside pick-up and home delivery. 6 Table of Contents Government Regulation Our operations and many of the products that we distribute in the United States are subject to regulation by state and local health departments, the USDA and the United States Food and Drug Administration (the “FDA”), which generally impose standards for product quality and sanitation and are responsible for the administration of bioterrorism legislation.
Each region is responsible for placing its own orders and can select the products that it believes will most appeal to its customers, although each region is able to participate in our company-wide purchasing programs. 5 Table of Contents Our Distribution Network Logistics We select the sites for our distribution centers to provide direct access to the markets we serve and configure them to minimize total operating costs.
Each region is responsible for placing its own orders and can select the products that it believes will most appeal to its customers, although each region is able to participate in our company-wide purchasing programs.
We operate an organic (USDA and Quality Assurance International (“QAI”)) and kosher (Circle K) certified packaging, roasting, and processing facility in New Jersey that is SQF (Safety Quality Food) level 2 certified.
We operate an organic (USDA and Quality Assurance International (“QAI”)) and kosher (Circle K) certified packaging, roasting, and processing facility in New Jersey that is SQF (Safety Quality Food) level 2 certified. Woodstock Farms Manufacturing sells items manufactured in bulk and through private label packaging arrangements with large health food, supermarket and convenience store chains and independent retailers.
Our investment in technology is intended to improve our supply chain effectiveness for our suppliers, associates and customers enabling our collective success. 6 Table of Contents Competition Our Wholesale and Retail businesses operate in a highly competitive and rapidly evolving industry, which is characterized by low profit margins, new business models and the entry of new, well-funded competitors that intensify competition.
Competition Our Wholesale and Retail businesses operate in a highly competitive and rapidly evolving industry, which is characterized by low profit margins, new business models and the entry of new, non-traditional competitors that intensify competition.
We have in the past been the focus of union-organizing efforts, and we believe it is likely that we will be the focus of similar efforts in the future. Developing Talent Attracting and retaining talent is one of our top priorities.
We have been the focus of union-organizing efforts, and we believe it is likely that similar efforts will continue in the future. 7 Table of Contents Developing Talent Attracting and retaining talent is one of our top priorities. Our goal is to differentiate ourselves in the market by offering flexibility to associates in the way, when and how they work.
Operations We remain focused on operating efficiently and sustainably, which includes managing the social and environmental impacts within our direct control. Our associates’ safety and well-being are of utmost importance to us. Our primary goal is to cultivate a culture that values care and safety for all.
These policies help us to work more efficiently and effectively with suppliers and vendors in pursuing our shared goals. Operations We remain focused on operating efficiently and sustainably, which includes managing the social and environmental impacts within our direct control. Our associates’ safety and well-being are of utmost importance to us.
Downstream We aim to be responsible community members, from how we provide information and services to our customers, to the local organizations our associates support with their volunteer hours.
UNFI’s solar array initiatives provide a strong return on investment and reduce the energy cost of operating a distribution center, while lowering the Company’s carbon footprint. Downstream We aim to be responsible community members, from how we provide information and services to our customers, to the local organizations our associates support with their volunteer hours.
In addition, route efficiency software assists us in developing the most efficient routes for our outbound trucks. As part of our “one company” approach, we continue an effort to standardize to best in industry software solutions for inventory procurement, order management, transportation operations and warehouse management systems throughout our network.
As part of our “one company” approach, we continue an effort to standardize to best in industry software solutions for inventory procurement, order management, transportation operations and warehouse management systems throughout our network. Our investment in technology is intended to improve our supply chain effectiveness for our suppliers, associates and customers enabling our collective success.
Through continuous efforts we are dedicated to achieving zero injuries and accidents, ensuring a safe and thriving environment for everyone. In fiscal 2023, we received a score of 100 on the Human Rights Campaign Foundation’s 2022 Corporate Equality Index and a score of 100 on the Disability Equality Index.
Our primary goal is to cultivate a culture that values care and safety for all. Through continuous efforts we are dedicated to minimizing the risk of injuries and accidents, ensuring a safe and thriving environment for everyone. In fiscal 2024, for the third year in a row, we received a score of 100 on the Disability Equality Index.
Our food distribution business competes with many traditional and specialty grocery wholesalers and retailers that maintain or develop self-distribution systems for the business of independent grocery retailers. We also increasingly compete with deep discount retailers, limited assortment stores, wholesale membership clubs, and eCommerce and other internet-based businesses.
Our food distribution business competes with many traditional and specialty grocery wholesalers and retailers that maintain or develop self-distribution systems for the business of independent grocery retailers. We also increasingly compete with retailers that maintain or develop self-distribution systems, as well as companies that offer services in digital advertising, fulfillment and delivery services, health and wellness and financial services.
In fiscal 2023, we published our 12th annual Better for All report, which offers a summary of our social, environmental, and governance impacts during the fiscal year, and the second update to this plan, which prioritizes nine areas of focus: Associate Safety & Well-being, Climate Action, Community Development, Customer Health & Safety, Diversity, Equity, and Inclusion, Energy Efficiency, Governance, Responsible Procurement, and Waste Reduction.
In fiscal 2024, we published our 13th annual Better for All report, which offers a summary of our social, environmental, and governance impacts during the fiscal year. The report demonstrates our enhanced focus on our six most pressing impact areas: safety, well-being, waste, climate, sourcing and community.
Although not designated as a “Certified Organic Distributor” by QAI, two of our California locations are certified as Organic by the State of California Department of Public Health Food and Drug Branch, and another California location is currently registered with the California Department of Food and Agriculture Organic Program as an organic handler.
Organic Certification We have 33 distribution centers in the United States that are “National Organic Program certified as Organic Handlers by QAI”. Our California locations are certified as Organic Handlers by QAI, and we are registered as Organic Handlers with the State of California Department of Public Health Food and Drug Branch and the California Department of Food and Agriculture.
Retail marketing programs offer web and digital marketing services, including websites, mobile applications and eCommerce capabilities; circular programs for our customers and vendors; and allow our suppliers to purchase advertising space on our trailers. Supplier marketing programs include information sharing programs designed to provide heightened transparency to suppliers through demand planning, forecasting and procurement insights.
Supplier marketing programs include information sharing programs designed to provide heightened transparency to suppliers through demand planning, forecasting and procurement insights.
This proximity allows us to reduce our transportation costs relative to those of our competitors that seek to service these customers from locations that are often further away. We believe that we incur lower inbound freight expense than our regional competitors because our scale allows us to buy full and partial truckloads of products.
We believe that we incur lower inbound freight expense than our regional competitors because our scale allows us to buy full and partial truckloads of products. Products are delivered to our distribution centers primarily by our fleet of leased and owned trucks, contract carriers and the suppliers themselves.
Competitive strategies vary based on many factors, such as the competitor’s format, strengths, weaknesses, pricing, and sales focus. Our retail stores have continued to respond to growing competition from online and non-traditional retailers by adding options and services such as online ordering, curbside pick-up and home delivery.
Competitive strategies vary based on many factors, such as the competitor’s format, strengths, weaknesses, pricing, and sales focus.
Woodstock Farms Manufacturing sells items manufactured in bulk and through private label packaging arrangements with large health food, supermarket and convenience store chains and independent retailers. 4 Table of Contents Our Service Offerings Our Professional Services We offer a broad array of professional services that provide Wholesale customers with cost-effective and scalable solutions.
Our Service Offerings We offer a broad array of professional services that provide Wholesale customers with cost-effective and scalable business solutions. Our services are designed to help customers address business challenges, better serve their customers and compete in the marketplace.
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We have recently introduced our transformation strategy designed to accomplish this. Our enterprise-wide business transformation strategy, which we believe will position us for customer service and cost structure improvement, consists of four areas: 1. Network Automation and Optimization: Enhancing our distribution network to drive efficiency and improve the customer experience, which we expect to increase network capacity and scalability. 2.
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We have undertaken a new strategy and have established new three-year financial objectives that begin in fiscal 2025 and are designed to make the Company more efficient while improving free cash flow generation and reducing net leverage.
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Commercial Value Creation: Generating more profitable revenue growth through simplified pricing and procurement, and enhancing analytical insights for our customers and suppliers, making it easier to do business with UNFI. 3. Digital Offering Enhancement: Integrating and enhancing the functionality of the digital platforms we offer and expanding the actionable intelligence we provide through these platforms. 4.
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Our strategy is centered on adding value to our customers and suppliers through our expansive assortment of products, services, programs, and insights that help them grow and compete.
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Infrastructure Unification and Modernization: Addressing legacy integration issues and continuing investments to upgrade and simplify our digital infrastructure, which we expect will streamline operations, provide greater visibility and enhance our scale. We are also working on near-term initiatives to help improve profitability while we execute our longer-term strategy.
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Our strategy is highly focused on actively positioning our Company to add value to a resilient portion of the food retail industry that totals over $90 billion of wholesale sales and includes many specialty, natural, multi-cultural and conventional retailers.
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These include actioning administrative structure efficiencies, reprioritizing our selling and administrative spending, optimizing our stock-keeping unit (“SKU”) assortment as well as reviewing commercial contracts in collaboration with our customers and suppliers.
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This new strategy capitalizes on UNFI’s strengths, including our heritage in natural and organic products, as well as our growing, value-added digital and professional services portfolio. Simultaneously, we are working to improve free cash flow generation and reduce net leverage by optimizing controllable variables including: 1.
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We expect to continue to use available capital to re-invest in our business, and we remain committed to improving our financial leverage and reducing outstanding debt over the long term. Since the close of our 2018 acquisition of SUPERVALU INC. (“Supervalu”), we have reduced net debt by $1.4 billion.
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Intensified Network Optimization : Streamlining our distribution center footprint to create a more efficient supply chain with a lower level of fixed capital invested. 2. Reduced Capital Intensity : Prioritizing capital investment needs and reducing the overall level of future spending while continuing to emphasize maintenance and targeted network enablement and technology enhancements.
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We believe the key drivers for value creation will be improved efficiency through the automation and optimization of our supply chain, as well as new customer growth associated with the benefits of our significant scale, product and service offerings and nationwide footprint. 1 Table of Contents Our Commitment to Social and Environmental Responsibility Building a Food System That’s Better for All As North America’s premier grocery wholesaler, we are using our scale to drive progress across the food industry, focusing on the areas where we can affect the greatest change.
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We also plan to lower overall working capital levels while driving higher customer satisfaction. 3. Optimized Cost Structure : Reducing ongoing operating expenses and better aligning corporate resources to reflect our updated strategy and customer and supplier-facing work.
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In 2023, we launched our seventh associate-led Belonging & Innovation Group, the Asian Coalition for Engagement, to celebrate Asian Pacific Islander heritage, promote career development and foster a safe space for all.
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During fiscal 2024, we continued to implement near-term initiatives to help improve profitability and strengthen our foundation while we finalized and began implementing our revised strategy. We expect to continue to use available capital to re-invest in our business and are committed to improving our free cash flow and financial leverage while reducing outstanding debt.
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We also completed key initiatives in support of our science-based climate targets, including the completion of LED lighting installations at all distribution centers, the installation of our largest solar array to date in Howell, New Jersey, and achievement of our goal of sourcing 20% of our electricity from renewable sources.
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We look for ways to use our scale to drive progress across the food industry, while focusing on sustainability initiatives that drive efficiency and cost savings and create sustainable value for our stakeholders.
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In fiscal 2023, we significantly grew associate volunteerism and the UNFI Foundation, a 501(c)(3) organization, began a five-year strategic planning process intended to make a more profound impact on the communities we serve.
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In fiscal 2024, our seven associate-led Belonging & Innovation Groups continued to cultivate a culture of innovation, learning and impact across the Company. In addition, we began work on a new roof-mounted solar array installation at our Riverside, California distribution center, which will be our largest to date.
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We also made strides toward our food waste reduction goal and expanded our partnership with Too Good to Go, an innovative food waste reduction app and the largest business-to-consumer marketplace for surplus food.
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In fiscal 2024, we significantly grew associate volunteerism, and the UNFI Foundation, a 501(c)(3) organization, began implementation of its five-year plan and awarded over $1.5 million in grants. We also made significant strides toward our food waste reduction goal and deployed a Reverse Logistics Disposition Reporting system at all UNFI distribution centers to enhance inventory visibility and operational efficiency.
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Refer to Note 3—Revenue Recognition in Part II, Item 8 of this Annual Report for additional information. 2 Table of Contents We have been the primary distributor to Whole Foods Market for more than 20 years.
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This initiative is expected to reduce food waste, minimize waste disposal costs and decrease shrink in the distribution centers.
Removed
We continue to serve as the primary distributor to Whole Foods Market in all of its regions in the United States pursuant to an amended distribution agreement with a term through September 27, 2027. Whole Foods Market is our only customer that represented more than 10% of total Net sales in fiscal 2023.
Added
One Wholesale customer, which includes customers under common control, constituted more than 10% of total Net sales in fiscal 2024. On May 21, 2024, we amended and restated our distribution agreement with our largest customer which, among other things, extended the term of that agreement through May 20, 2032. Our international Net sales primarily reflect UNFI Canada, Inc.
Removed
Wholesale In June 2023, we realigned our regional structure by consolidating from four operating regions to three.
Added
Trade and consumer marketing programs are supplier-sponsored programs that cater to a broad range of retail formats. Retail marketing programs offer web and digital marketing services, including websites, mobile applications and eCommerce capabilities, and circular programs for our customers and vendors.
Removed
Acquisitions A key component of our historical growth has been to acquire distribution companies differentiated by product offerings, service offerings and market area. We believe the expanded product and service offerings from these acquisitions have enhanced and will continue to support our ability to acquire new customers and present opportunities for cross-selling complementary product lines.
Added
We have also created a retail media network, the UNFI Media Network (“UMN”), that enables retailers to reach their consumers digitally while connecting to our large network of suppliers, who in turn, can utilize the platform for personalized and targeted digital marketing.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

63 edited+8 added−22 removed130 unchanged
Biggest changeIf we fail to optimize the volume of supply operations in our distribution center network, do not retain existing business or do not utilize added network capacity in line with our expectations, excess capacity may exist, which may lead to inefficiencies and adversely affect our business, financial condition or results of operations, including as a result of incurring operating costs for these facilities without sufficient corresponding sales revenue to cover these costs.
Biggest changeIf we fail to optimize the volume of supply operations in our distribution center network, do not retain existing business or do not utilize added network capacity in line with our expectations, excess capacity may exist, which may lead to inefficiencies and adversely affect our business, financial condition or results of operations, including as a result of incurring operating costs for these facilities without sufficient corresponding sales revenue to cover these costs. 13 Table of Contents If we are unable to successfully optimize our distribution center network or open additional distribution centers in new or existing markets if needed to accommodate or facilitate growth or if our distribution centers have increased operational challenges it could have a material impact on our ability to grow.
In addition, product cost inflation may negatively impact the consumer discretionary spending trends and reduce the demand for higher-margin natural and organic products, which could adversely affect profitability. Conversely, our profit levels may be negatively impacted during periods of slowing inflation or product cost deflation even though our Gross profit as a percentage of Net sales may remain relatively constant.
In addition, product cost inflation may negatively impact consumer discretionary spending trends and reduce the demand for higher-margin natural and organic products, which could adversely affect profitability. Conversely, our profit levels may be negatively impacted during periods of slowing inflation or product cost deflation even though our Gross profit as a percentage of Net sales may remain relatively constant.
These factors include governmental regulations such as The Patient Protection and Affordable Care Act, which has resulted in changes to the U.S. healthcare system and imposes mandatory types of coverage, reporting and other requirements; return on plan assets; changes in actuarial valuations, estimates, or assumptions used to determine our benefit obligations for certain benefit plans, which require the use of significant estimates, including the discount rate, expected long-term rate of return on plan assets, mortality rates and the rates of increase in compensation and healthcare costs; for multiemployer plans, the outcome of collective bargaining and actions taken by trustees who manage the plans; and potential changes to applicable legislation or regulation.
These factors include governmental regulations such as The Patient Protection and Affordable Care Act, which resulted in changes to the U.S. healthcare system and imposes mandatory types of coverage, reporting and other requirements; return on plan assets; changes in actuarial valuations, estimates, or assumptions used to determine our benefit obligations for certain benefit plans, which require the use of significant estimates, including the discount rate, expected long-term rate of return on plan assets, mortality rates and the rates of increase in compensation and healthcare costs; for multiemployer plans, the outcome of collective bargaining and actions taken by trustees who manage the plans; and potential changes to applicable legislation or regulation.
Our leverage, and any increase therein, could have important potential consequences, including, but not limited to: • increasing our vulnerability to, and reducing our flexibility in planning for and responding to, adverse general economic and industry conditions and changes in our business and the competitive environment and placing us at a disadvantage to our competitors that are less leveraged; • requiring us to use a substantial portion of operating cash flow to pay principal of, and interest on, indebtedness, instead of other purposes, such as funding working capital, capital expenditures, acquisitions, returning capital to stockholders through dividends or share repurchases or other corporate purposes; • increasing our vulnerability to a downgrade of our credit rating, which could adversely affect our cost of funds, liquidity, and access to capital markets; • restricting us from making desired strategic acquisitions in the future or causing us to make non-strategic divestitures; • increasing our exposure to the risk of increased interest rates insofar as current and future borrowings are subject to variable rates of interest; • making it more difficult for us to repay, refinance, or satisfy our obligations with respect to our indebtedness; • limiting our ability to borrow additional funds and increasing the cost of any such borrowing; and • imposing restrictive covenants on our operations, which could result in an event of default if we are unable to comply, and absent any cure or waiver of such default ultimately could result in the acceleration of the such debt and potentially other debt with cross-acceleration or cross-default provisions.
Our leverage, and any increase therein, could have important potential consequences, including, but not limited to: • increasing our vulnerability to, and reducing our flexibility in planning for and responding to, adverse general economic and industry conditions and changes in our business and the competitive environment and placing us at a disadvantage to our competitors that are less leveraged; • requiring us to use a substantial portion of operating cash flow to pay principal of, and interest on, indebtedness, instead of other purposes, such as funding working capital, capital expenditures, acquisitions, returning capital to stockholders through dividends or share repurchases or other corporate purposes; • increasing our vulnerability to downgrades of our credit rating, which could adversely affect our cost of funds, liquidity, and access to capital markets; • restricting us from making desired strategic acquisitions in the future or causing us to make non-strategic divestitures; • increasing our exposure to the risk of increased interest rates insofar as current and future borrowings are subject to variable rates of interest; • making it more difficult for us to repay, refinance, or satisfy our obligations with respect to our indebtedness; • limiting our ability to borrow additional funds and increasing the cost of any such borrowing; and • imposing restrictive covenants on our operations, which could result in an event of default if we are unable to comply, and absent any cure or waiver of such default ultimately could result in the acceleration of the such debt and potentially other debt with cross-acceleration or cross-default provisions.
Increases in healthcare, pension and other costs under the Company’s and multiemployer benefit plans could adversely affect our financial condition and results of operations. We provide single employer and multiemployer health, defined benefit pension and defined contribution benefits to many of our employees and, in some cases, former employees.
Increases in healthcare, pension and other costs under the Company’s single employer benefit plan and multiemployer benefit plans could adversely affect our financial condition and results of operations. We provide single employer and multiemployer health, defined benefit pension and defined contribution benefits to many of our employees and, in some cases, former employees.
As a merchant that accepts debit and credit cards for payment, we are subject to the Payment Card Industry Data Security Standard (“PCI DSS”), issued by the PCI Council.
Information Security : As a merchant that accepts debit and credit cards for payment, we are subject to the Payment Card Industry Data Security Standard (“PCI DSS”), issued by the PCI Council.
If we are unable to control these benefits and costs, we may experience increased operating costs, which may adversely affect our financial condition and results of operations. 16 Table of Contents Additionally, certain multiemployer pension plans in which we participate are underfunded with the projected benefit obligations exceeding the fair value of those plans’ assets, in certain cases, by a wide margin.
If we are unable to control these benefits and costs, we may experience increased operating costs, which may adversely affect our financial condition and results of operations. 15 Table of Contents Additionally, certain multiemployer pension plans in which we participate are underfunded with the projected benefit obligations exceeding the fair value of those plans’ assets, in certain cases, by a wide margin.
If we do not have adequate insurance or contractual indemnification available, product liability claims and costs associated with product recalls, including a loss of business, could have a material adverse effect on our business, financial condition or results of operations. 22 Table of Contents We may be unable to adequately protect our intellectual property rights, which could harm our business.
If we do not have adequate insurance or contractual indemnification available, product liability claims and costs associated with product recalls, including a loss of business, could have a material adverse effect on our business, financial condition or results of operations. 21 Table of Contents We may be unable to adequately protect our intellectual property rights, which could harm our business.
For example: 20 Table of Contents Environmental, Health and Safety : Our operations are subject to extensive and increasingly stringent laws and regulations pertaining to the protection of the environment, including those relating to the discharge of materials into the environment, the disposal of food by-products, the handling, treatment, and disposal of wastes, maintenance of refrigeration systems, and remediation of soil and groundwater contamination.
For example: 19 Table of Contents Environmental, Health and Safety : Our operations are subject to extensive and increasingly stringent laws and regulations pertaining to the protection of the environment, including those relating to the discharge of materials into the environment, the disposal of food by-products, the handling, treatment, and disposal of wastes, maintenance of refrigeration systems, and remediation of soil and groundwater contamination.
If we are unable to reduce our expenses as a percentage of Net sales, including our expenses related to servicing this lower gross margin business, our business, financial condition, or results of operations could be materially and adversely impacted. We may not realize the anticipated benefits of our transformation initiatives.
If we are unable to reduce our expenses as a percentage of Net sales, including our expenses related to servicing this lower gross margin business, our business, financial condition or results of operations could be materially and adversely impacted. We may not realize the anticipated benefits of our strategic initiatives.
Should the value of long-lived assets become impaired, our financial condition and results of operations may be adversely affected. 18 Table of Contents Economic Risks Changes in consumer purchasing habits could materially and adversely affect our business, financial condition, or results of operations. Changes in consumer purchasing habits may reduce demand for certain of the products we distribute.
Should the value of long-lived assets become impaired, our financial condition and results of operations may be adversely affected. 17 Table of Contents Economic Risks Changes in consumer purchasing habits could materially and adversely affect our business, financial condition or results of operations. Changes in consumer purchasing habits may reduce demand for certain of the products we distribute.
If any of the events described below occurs, our business, financial condition or results of operations could be materially adversely affected and our stock price could decline. 9 Table of Contents We provide these factors for investors as permitted by and to obtain the rights and protections under the Private Securities Litigation Reform Act of 1995.
If any of the events described below occurs, our business, financial condition or results of operations could be materially adversely affected and our stock price could decline. We provide these factors for investors as permitted by and to obtain the rights and protections under the Private Securities Litigation Reform Act of 1995.
If there were a rapid reduction in demand for the products we distribute, our results and cash flows may be negatively impacted if we are unable to reduce working capital maintained to support current sales levels. Our success also depends in part on the financial success and cooperation of our wholesale customers.
If there were a rapid reduction in demand for the products we distribute or services we offer, our results and cash flows may be negatively impacted if we are unable to reduce working capital maintained to support current sales levels. Our success also depends in part on the financial success and cooperation of our wholesale customers.
Our wholesale distribution business could be adversely affected if we are not able to attract new customers, increase sales to or retain existing customers or if our customers are unable to grow their businesses. The profitability of our wholesale segment is dependent upon sufficient volume to support our operating infrastructure.
Our wholesale distribution and services businesses could be adversely affected if we are not able to attract new customers, increase sales to or retain existing customers or if our customers are unable to grow their businesses. The profitability of our wholesale segment is dependent upon sufficient volume to support our operating infrastructure.
Our debt agreements, including the loan agreement (the “ABL Loan Agreement”) related to our $2,600 million asset-based revolving credit facility (the “ABL Credit Facility”) entered into in June 2022, and the term loan agreement (the “Term Loan Agreement”) related to our $1,950 million term loan facility (the “Term Loan Facility”) entered into on October 22, 2018, as amended, and the indenture governing our unsecured 6.750% Senior Notes due October 15, 2028 (the “Senior Notes”) contain financial covenants and other restrictions that limit our operating flexibility and our flexibility in planning for or reacting to changes in our business.
Our debt agreements, including the loan agreement (the “ABL Loan Agreement”) related to our $2,730 million asset-based revolving credit facility (the “ABL Credit Facility”) entered into in June 2022, as amended, and the term loan agreement (the “Term Loan Agreement”) related to our $500 million term loan facility (the “Term Loan Facility”) entered into on October 22, 2018, as amended, and the indenture governing our unsecured 6.750% Senior Notes due October 15, 2028 (the “Senior Notes”) contain financial covenants and other restrictions that limit our operating flexibility and our flexibility in planning for or reacting to changes in our business.
Changing consumer preferences also result from generational shifts, including younger generations seeking new and different foods, as well as more ethnic, menu options and menu innovation. However, there can be no assurance that such trends will continue.
Changing consumer preferences also result from generational shifts, including younger generations seeking new and different foods, as well as more multi-cultural menu options and menu innovation. However, there can be no assurance that such trends will continue.
Any such claims can be time consuming and costly to defend and may distract management’s attention and resources, even if the claims are without merit, and may prevent us from using our trademarks in certain geographies or in connection with certain products and services, any of which could adversely affect our business. ITEM 1B.
Any such claims can be time consuming and costly to defend and may distract management’s attention and resources, even if the claims are without merit, and may prevent us from using our trademarks in certain geographies or in connection with certain products and services, any of which could adversely affect our business. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
If fuel costs continue to increase in the future, we may experience difficulties in passing all or a portion of these costs along to our customers, which may adversely affect our business, financial condition or results of operations. Disruption of our distribution network or to the operations of our customers could adversely affect our business.
If fuel costs continue to increase in the future, we may experience difficulties in passing all or a portion of these costs along to our customers, which may adversely affect our business, financial condition or results of operations.
In addition, such disruption may interrupt or impede access to, or otherwise reduce the number of consumers who visit, our customers’ facilities, all of which could have a material adverse effect on our business, financial condition or results of operations.
In addition, such disruption may interrupt or impede access to, or otherwise reduce the number of consumers who visit, our customers’ facilities, all of which could have a material adverse effect on our business, financial condition or results of operations. Increased fuel costs may adversely affect our results of operations.
Our ability to achieve the expected benefits of acquisitions will depend on, among other things, our ability to effectively execute on our business strategies, integrate and manage the combined operations, retain customers and suppliers on terms similar to those in place with the acquired businesses, achieve desired operating efficiencies and sales growth, optimize delivery routes, coordinate administrative and distribution functions, integrate management information systems, expand into new markets to include markets of the acquired business, retain and assimilate the acquired businesses’ employees, and maintain our financial and internal controls and systems as we expand our operations.
Our ability to achieve the expected benefits of strategic transactions will depend on, among other things, our ability to effectively execute on our business strategies, integrate and manage the combined operations for acquisitions, retain customers and suppliers on terms similar to those in place prior to the transaction, achieve desired operating efficiencies and sales growth, optimize delivery routes, coordinate administrative and distribution functions, integrate management information systems, expand into new markets to include markets of the acquired business, retain our associates and retain and assimilate the acquired businesses’ employees and maintain our financial and internal controls and systems as we evolve our operations.
Our future growth may be limited by strong growth by certain of our largest customers or our inability to optimize our network of distribution centers to serve our customers, retain existing customers, successfully integrate acquired entities or significant new customers, implement information systems and automation initiatives, or adequately manage our personnel.
Our future growth may be limited by our ability to optimize our network of distribution centers to serve our customers, retain existing customers, successfully integrate acquired entities or significant new customers, implement information systems and automation initiatives, or adequately manage our personnel.
Mass market grocery distributors, many with substantially greater financial and other resources than us and that may be better established in their markets, continue to increase their offerings of natural and organic products, are competing more directly with our natural and organic product offerings.
Mass market grocery distributors, many with substantially greater financial and other resources than us and that may be better established in their markets, continue to increase their offerings of natural and organic products, resulting in more direct competition with our natural and organic product offerings.
In addition, increased costs of imported goods, including due to tariffs, global conflict or otherwise, may reduce customer demand for affected products if the parties experiencing those increased costs increase their prices. We cooperatively engage in a variety of promotional programs with our suppliers. We manage these programs to maintain or improve our margins and increase sales.
In addition, increased costs of imported goods, including due to tariffs, import restrictions, global conflict or otherwise, may reduce customer demand for affected products if the parties experiencing those increased costs increase their prices. We cooperatively engage in and support a variety of promotional programs and services with our suppliers.
Relatively low barriers to entry have resulted in new entrants in our markets. We also encounter indirect competition as a result of the fact that our customers with physical locations compete with online retailers and distributors that seek to sell certain products directly to consumers.
Relatively low barriers to entry have led to the emergence of alternative business models and channels in our markets. We also encounter indirect competition as a result of the fact that our customers with physical locations compete with online retailers and distributors that seek to sell certain products directly to consumers.
We may not realize all or any of the anticipated benefits, or may not realize the anticipated benefits within the expected time frame, due to financial or operational challenges, delays, lower than expected levels of customer and supplier acceptance and implementation, or unexpected costs.
In addition, the initiatives may not advance our business strategy as expected. We may not realize all or any of the anticipated benefits, or may not realize the anticipated benefits within the expected time frame, due to financial or operational challenges, delays, lower than expected levels of customer and supplier acceptance and implementation or unexpected costs.
If we are unable to realize the anticipated benefits of our efforts to improve labor efficiency, including through automation and other technology initiatives, or to increase productivity and efficiency through other methods, including as a result of delays in executing our business transformation and integration efforts, we may be more susceptible to labor shortages than our competitors.
If we are unable to realize the anticipated benefits of our efforts to improve labor efficiency, including through automation and other technology initiatives, or to increase productivity and efficiency through other methods, we may be more susceptible to labor shortages than our competitors.
In this regard, our wholesale customers are affected by the same economic conditions, including food inflation and deflation, and competition that our retail segment faces.
In this regard, our wholesale customers are affected by the same economic conditions, including food inflation and deflation, and competition that our retail segment faces. The magnitude of these risks increases as the size of our wholesale customers increases.
If these customers were to terminate or fail to perform under these contracts prior to their scheduled termination, or if we or the customer elected not to renew or extend the term of the contract at its expiration or not to renew or extend at historical purchase levels, it may have a material adverse effect on our business, financial condition or results of operations, including additional operational expenses to transition out of the business or to adjust our facilities and staffing costs to cover the reduction in Net sales.
If these customers were to terminate or fail to perform under these contracts prior to their scheduled termination, or if we or the customer elected not to renew or extend the term of the contract at its expiration or not to renew or extend at historical purchase levels, it may have a material adverse effect on our business, financial condition or results of operations, including additional operational expenses to transition out of the business or to adjust our facilities and staffing costs to cover the reduction in Net sales. 14 Table of Contents Disruptions to our or third-party information technology systems, including cyber-attacks and security breaches, and the costs of maintaining secure and effective information technology systems could negatively affect our business and results of operations .
For example, in 2019, the Company settled with the Drug Enforcement Administration alleged violations of the Controlled Substances Act relating to an administrative subpoena received by Supervalu that requested, among other things, information on the Company’s pharmacy policies and procedures generally, as well as the production of documents that are required to be kept and maintained pursuant to the Controlled Substances Act and its accompanying regulations. 21 Table of Contents The failure to comply or maintain compliance with applicable governmental laws and regulations, including those referred to above and in Item 1.
For example, in 2019, the Company settled with the Drug Enforcement Administration alleged violations of the Controlled Substances Act relating to an administrative subpoena received by Supervalu that requested, among other things, information on the Company’s pharmacy policies and procedures generally, as well as the production of documents that are required to be kept and maintained pursuant to the Controlled Substances Act and its accompanying regulations.
We experienced a reduction in promotional spending and payment of slotting fees for new products by our suppliers as a result of the COVID-19 pandemic, and we may experience further reductions or changes in promotional spending (including as a result of increased demand for natural and organic products), which could have a significant impact on our profitability.
We experienced a reduction in promotional spending and payment of slotting fees for new products by our suppliers as a result of the COVID-19 pandemic, including decreased promotional forward-buying opportunities, and we may experience further reductions or changes in promotional spending (including as a result of the increasing attractiveness of alternative retail channels), which could have a significant impact on our profitability.
Failure to comply with such laws, standards, and guidelines, or payment card industry standards such as those involving MasterCard, Visa and Europay (EMV) transactions, could have a material adverse impact on our business, financial condition, or results of operations.
Failure to comply with such laws, standards, and guidelines, or payment card industry standards such as those involving MasterCard, Visa and Europay (EMV) transactions, could have a material adverse impact on our business, financial condition or results of operations. Foreign Operations : Our supplier base includes domestic and foreign suppliers. In addition, we have customers located outside the United States.
Consequently, the ability of such businesses to repay their obligations to us may deteriorate, and in some cases this deterioration may occur quickly, which could materially and adversely impact our business, financial condition or results of operations. Impairment charges for long-lived assets could adversely affect the Company’s financial condition and results of operations.
Consequently, the ability of such businesses to make payments to us may deteriorate, and in some cases this deterioration may occur quickly, which could materially and adversely impact our business, financial condition or results of operations.
Any inability to generate sufficient cash flow or refinance our indebtedness on favorable terms could have a material adverse effect on our business, financial condition or results of operations. 19 Table of Contents Increased fuel costs may adversely affect our results of operations. Increased fuel costs may have a negative impact on our results of operations.
Any inability to generate sufficient cash flow or refinance our indebtedness on favorable terms could have a material adverse effect on our business, financial condition or results of operations. 18 Table of Contents Disruption of our distribution network or to the operations of our customers could adversely affect our business.
As a result, our operating margins may stagnate or further decline. Further, because many of our sales are at prices that are based on our product cost plus a percentage markup, volatile food costs have a direct impact upon our profitability.
As a result, our operating margins may stagnate or decline. Further, because many of our sales are at prices that are based on our product cost plus a percentage markup, volatile food costs have a direct impact upon our profitability. We have experienced volatile levels of inflation during the past few years, which has had varying impacts on our business.
Our business is highly regulated at the federal, state, and local levels, and our products and distribution operations require various licenses, permits and approvals, including: • the products that we distribute in the United States are subject to inspection by the United States Food and Drug Administration; • our warehouse and distribution centers are subject to inspection by the United States Department of Agriculture, the United States Department of Labor Occupational and Health Administration and various state health and workplace safety authorities; and • our United States trucking operations are subject to regulation by the United States Department of Transportation and the United States Federal Highway Administration.
For example: • The products that we distribute in the United States are subject to inspection by the United States Food and Drug Administration. • Our warehouse and distribution centers are subject to inspection by the United States Department of Agriculture, the United States Department of Labor Occupational and Health Administration, the Environmental Protection Agency and various state health and workplace safety authorities. • Our United States trucking operations are subject to regulation by the United States Department of Transportation and the United States Federal Highway Administration.
We are also subject to delays caused by interruption in production and increases in product costs based on conditions outside of our control.
We are also subject to supply chain uncertainties and increases in product costs based on conditions outside of our control.
We serve as the primary distributor of natural, organic, and specialty non-perishable products, and also distribute certain specialty protein, cheese, culinary items, deli items and products from health, beauty and supplement categories to Whole Foods Market in all of its regions in the United States under the terms of our distribution agreement, which expires on September 27, 2027.
We serve as the primary distributor of natural, organic and specialty non-perishable products, and also distribute certain specialty protein, cheese, culinary items, deli items and products from health, beauty and supplement categories to this customer under the terms of our distribution agreement, which expires on May 20, 2032.
Legal and Regulatory Risks We are subject to significant governmental regulation and failure to comply with such regulations may have a material adverse effect on our business, financial condition or results of operations.
Legal and Regulatory Risks We are subject to significant governmental regulation and failure to comply with such regulations may have a material adverse effect on our business, financial condition or results of operations. Our business is highly regulated at the federal, state, and local levels, and our products and distribution operations require various licenses, permits and approvals.
Foreign Operations : Our supplier base includes domestic and foreign suppliers. In addition, we have customers located outside the United States. Accordingly, laws and regulations affecting the importation and taxation of goods, including duties, tariffs and quotas, or changes in the enforcement of those laws and regulations could adversely impact our financial condition and results of operations.
Accordingly, laws and regulations affecting the importation and taxation of goods, including duties, tariffs and quotas, or changes in the enforcement of those laws and regulations could adversely impact our financial condition and results of operations.
Our competition comes from a variety of sources, including other distributors, as well as specialty or independent grocery and mass market grocery distributors and cooperatives, and customers with their own distribution channels.
Our ability to compete successfully is largely dependent on our ability to provide quality products and services at competitive prices. Our competition comes from a variety of sources, including other distributors, as well as specialty or independent grocery and mass market grocery distributors and cooperatives, and customers with their own distribution channels.
Consumers also have more choices for grocery and consumable purchases, including mass merchandisers, eCommerce providers, deep discount retailers, limited assortment stores, wholesale membership clubs and meal-delivery services, which may reduce the demand for products supplied by our wholesale customers. The pandemic accelerated the consumer shift to eCommerce and new ways to purchase food, including increased restaurant and other delivery options.
Consumers also have more choices for grocery and consumable purchases, including mass merchandisers, eCommerce providers, deep discount retailers, limited assortment stores, wholesale membership clubs and meal-delivery services, which may reduce the demand for products supplied by our wholesale customers. We may not be able to compete effectively against current and future competitors.
As a result, increases in the cost of capital available to us, which could result from volatility in the credit markets, downgrades of our credit ratings, our not being in compliance with restrictive covenants under our debt agreements or our inability to access additional capital to finance acquisitions and capital expenditures through borrowed funds could restrict our ability to grow our business organically or through acquisitions, which could have a material adverse effect on our business, financial condition or results of operations.
As a result, increases in the cost of capital available to us, which could result from volatility in the credit markets, downgrades of our credit ratings, our not being in compliance with restrictive covenants under our debt agreements or our inability to access additional capital to finance acquisitions and capital expenditures through borrowed funds could restrict our ability to grow our business organically or through acquisitions, which could have a material adverse effect on our business, financial condition or results of operations. 16 Table of Contents In addition, our profit margins depend on strategic buying initiatives, such as discounted bulk purchases, which require spending significant amounts of working capital up-front to purchase products that we then sell over a multi-month time period.
Certain of our customers have from time to time experienced bankruptcy, insolvency or an inability to pay their debts to us as they come due.
We have experienced losses due to the uncollectibility of accounts in the past and could experience losses in the future if our customers are unable to timely pay their debts to us. Certain of our customers have from time to time experienced bankruptcy, insolvency or an inability to pay their debts to us as they come due.
Achieving the anticipated benefits of acquisitions also depends on the adequacy of our implementation plans and the ability of management to oversee and operate effectively the combined operations.
Achieving the anticipated benefits of strategic transactions also depends on the adequacy of our implementation plans and the ability of management to oversee and operate effectively any changes to the operations. Our growth plans may not produce the results that we expect.
We cannot assure you that our existing personnel, systems, procedures and controls will be adequate to support the future growth of our operations. In addition, we have recently appointed several new executive leaders, and these transitions may be disruptive.
Our existing personnel, systems, procedures and controls may not be adequate to support the future growth of our operations. In addition, we have recently appointed new executive leaders, and these transitions may be disruptive. Our inability to manage our growth effectively could have a material adverse effect on our business, financial condition or results of operations.
As of July 29, 2023, we had approximately $2.0 billion of long-term debt outstanding.
As of August 3, 2024, we had approximately $2.1 billion of long-term debt outstanding.
Additionally, the terms of some of our collective bargaining agreements may limit our ability to increase efficiencies. As of July 29, 2023, approximately 10,667 of our 29,455 employees (approximately 36%) were covered by 49 collective bargaining agreements, including agreements under negotiation, which expire through May 31, 2027.
Additionally, the terms of some of our collective bargaining agreements may limit our ability to increase efficiencies. As of August 3, 2024, approximately 10,704 of our 28,333 employees (approximately 38%) were covered by 48 collective bargaining agreements, including existing agreements under negotiation, which expire through June 1, 2029.
Increased sales to these customers results in downward pressure on our gross margins, which may or may not be offset by increases in sales or a reduction in expenses incurred to service these customers.
Increased sales to these customers results in downward pressure on our gross margins, which may or may not be offset by increases in sales or a reduction in expenses incurred to service these customers. 10 Table of Contents If we are not able to capture scale efficiencies and enhance our merchandise offerings, we may not be able to achieve our goals with respect to our operating margins.
We depend heavily on our ability to purchase merchandise in sufficient quantities at competitive prices, and we benefit from our ability to purchase product in advance of price increases. We have no assurances of continued supply, pricing or access to new products and suppliers could change the terms upon which they sell to us or discontinue selling to us.
We have no assurances of continued supply, pricing or access to new products, and suppliers could change the terms upon which they sell to us, the services they request from us or discontinue selling to us altogether.
Increased competition may result in price reductions, reduced gross margins, lost business and loss of market share, any of which could materially and adversely affect our business, financial condition or results of operations. 10 Table of Contents The continuing consolidation of retailers, the growth of chains and closures of grocery locations may reduce our gross margins in the future should more customers qualify for greater volume discounts, and should we experience pricing pressure from suppliers and retailers.
The continuing consolidation of retailers, the growth of chains and closures of grocery locations may reduce our gross margins in the future should more customers qualify for greater volume discounts, and should we experience pricing pressure from suppliers and retailers.
Increases in the cost of capital or our inability to access additional capital on satisfactory terms could restrict our ability to engage in strategic buying initiatives, which could reduce our profit margins and have a material adverse effect on our business, financial condition or results of operations. 15 Table of Contents Disruptions to our or third-party information technology systems, including cyber-attacks and security breaches, and the costs of maintaining secure and effective information technology systems could negatively affect our business and results of operations .
Increases in the cost of capital or our inability to access additional capital on satisfactory terms could restrict our ability to engage in strategic buying initiatives, which could reduce our profit margins and have a material adverse effect on our business, financial condition or results of operations. Our debt agreements contain restrictive covenants that may limit our operating flexibility.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations—Cautionary Note Regarding Forward-Looking Statements in Part II, Item 7 of this Annual Report for more information on our business and the forward-looking statements included in this Annual Report.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations—Cautionary Note Regarding Forward-Looking Statements in Part II, Item 7 of this Annual Report for more information on our business and the forward-looking statements included in this Annual Report. 9 Table of Contents Strategic and Operational Risks A significant portion of our revenues are from our principal customers, and our success is heavily dependent on retaining this business and on our principal customers’ ability to maintain and grow their businesses.
The loss or revocation of any existing licenses, permits, or approvals or the failure to obtain any additional licenses, permits, or approvals in new jurisdictions where we intend to do business could have a material adverse effect on our business, financial condition or results of operations.
The loss or revocation of any existing licenses, permits, or approvals or the failure to obtain any additional licenses, permits, or approvals in new jurisdictions where we intend to do business could have a material adverse effect on our business, financial condition or results of operations. 20 Table of Contents Pharmacy : We are required to meet various security and operating standards and comply with the Controlled Substances Act and its accompanying regulations governing the sale, marketing, packaging, holding, record keeping and distribution of controlled substances.
We believe that the ability to distribute these products will differentiate us from our competitors and increase demand for our products. If we are unable to grow this portion of our business and manage that growth effectively, our business, financial condition or results of operations may be materially and adversely affected.
If we are unable to increase these differentiated products and services, our business, financial condition or results of operations may be materially and adversely affected.
If we suffer a substantial loss that exceeds our self-insurance reserves and any excess insurance coverage, the loss and attendant expenses could harm our business, financial condition, or results of operations. 17 Table of Contents Our debt agreements contain restrictive covenants that may limit our operating flexibility.
If actual losses incurred are greater than those anticipated, our reserves may be insufficient and additional costs could be recorded in our consolidated financial statements. If we suffer a substantial loss that exceeds our self-insurance reserves and any excess insurance coverage, the loss and attendant expenses could harm our business, financial condition, or results of operations.
We have engaged in, and could continue to pursue, strategic transactions as we transform our business. Acquisitions present significant challenges and risks relating to the integration of acquired businesses.
We may fail to realize the expected benefits of strategic transactions or fail to effectively integrate the businesses we acquire, which may adversely affect our business, financial condition and results of operations. We have engaged in, and could continue to pursue, strategic transactions. Strategic transactions present significant challenges and risks relating to execution.
Further, club stores, commercial wholesale outlets, direct food wholesalers and online food retailers have developed lower cost structures, creating increased pressure on the industry’s profit margins.
Further, club stores, commercial wholesale outlets, direct food wholesalers and online food retailers have developed lower cost structures, creating increased pressure on the industry’s profit margins. Our current or potential competitors may provide products or services comparable or superior to those provided by us or adapt more quickly than we do to evolving industry trends or changing market requirements.
Failure to comply with these covenants could have a material adverse effect on our business, financial condition, or results of operations. We have experienced losses due to the uncollectibility of accounts in the past and could experience losses in the future if our customers are unable to timely pay their debts to us.
Failure to comply with these covenants could have a material adverse effect on our business, financial condition, or results of operations. Impairment charges for long-lived assets could adversely affect the Company’s financial condition and results of operations.
Our ability to maintain a close, mutually beneficial relationship with our principal customers is an important element to our continued growth. Similarly, if our largest customer diverts purchases from us beyond the minimum amounts it is required to purchase under our distribution agreement, our business, financial condition or results of operations may be materially and adversely affected.
Similarly, if our largest customer diverts some or all of its purchases from us, our business, financial condition or results of operations may be materially and adversely affected.
For example, Whole Foods Market, a subsidiary of Amazon.com, Inc., accounted for approximately 21% of our Net sales in fiscal 2023.
For example, our largest customer accounted for approximately 23% of our Net sales in fiscal 2024.
We have in the past been the focus of union-organizing efforts, and we believe it is likely that we will be the focus of similar efforts in the future. As we increase our employee base and broaden our distribution operations to new geographic markets, our increased visibility could result in increased or expanded union-organizing efforts.
We have been the focus of union-organizing efforts, and we believe it is likely that similar efforts will continue in the future. We are in the process of negotiating collective bargaining agreements with newly certified units. New contracts could have substantially less favorable terms than our existing contracts.
The successful design, implementation and management of these initiatives may present significant challenges, many of which are beyond our control. In addition, the initiatives may not advance our business strategy as expected.
Simultaneously, we are working to improve free cash flow by focusing on what we can control around the areas of network optimization, reduced levels of capital intensity and optimization of our cost structure. The successful design, implementation and management of these initiatives may present significant challenges, many of which are beyond our control.
Our inability to manage our growth effectively could have a material adverse effect on our business, financial condition or results of operations. Further, a key element of our current growth strategy is to increase the amount of fresh, perishable products that we distribute.
Further, a key element of our current growth strategy is to increase the amount of differentiated products that we distribute and services that we offer. We believe that the ability to distribute these products and offer these services will distinguish us from our competitors and increase demand for our products.
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Strategic and Operational Risks A significant portion of our revenues are from our principal customers, and our success is heavily dependent on retaining this business and on our principal customers’ ability to maintain and grow their businesses.
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A loss or significant decrease in volume with our largest customer could impact our ability to efficiently serve other, smaller customers in these categories who utilize these distribution centers. Our ability to maintain a close, mutually beneficial relationship with our principal customers is an important element to our continued growth.
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We cannot provide assurance that we will be able to compete effectively against current and future competitors. Our ability to compete successfully will be largely dependent on our ability to provide quality products and services at competitive prices.
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It is also possible that alliances among competitors may develop and that competitors may rapidly acquire significant market share. Increased competition may result in price reductions, reduced gross margins, lost business and loss of market share, any of which could materially and adversely affect our business, financial condition or results of operations.
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We cannot assure you that our current or potential future competitors will not provide products or services comparable or superior to those provided by us or adapt more quickly than we do to evolving industry trends or changing market requirements. It is also possible that alliances among competitors may develop and that competitors may rapidly acquire significant market share.
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For example, we experienced negative impacts on our profitability as inflation slowed in recent years and decreased the positive impact of inflation-related buying activities.
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If we are not able to capture scale efficiencies and enhance our merchandise offerings, we may not be able to achieve our goals with respect to operating margins.
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Our long-term strategy is centered on adding value to our customers and suppliers through our expansive assortment of products, services, programs and insights that help them grow and compete.
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We have experienced elevated levels of inflation during the past few years, which has had varying impacts on our business.
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We manage these programs and services to increase sales while maintaining or improving our margins.
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Our long-term strategy includes transforming our business, particularly the areas of network automation and optimization, which is designed to make our distribution network more efficient and improve the customer experience; commercial value creation, which is aimed at generating more profitable revenue growth through simplified pricing and procurement, as well as enhancing analytical insights for customers and suppliers; digital offering enhancement, which is intended to enhance the functionality of our digital commercial platforms, including through the use of artificial intelligence and machine learning; and infrastructure unification and modernization, which is intended to upgrade and simplify our digital infrastructure.
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We depend heavily on our ability to purchase merchandise in sufficient quantities at competitive prices, and we benefit from our ability to purchase product in advance of price increases.
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New contracts with existing unions could have substantially less favorable terms than those negotiated prior to such expanded union-organizing efforts. We have engaged, and may continue to engage in, acquisitions and may encounter difficulties integrating acquired businesses and may not realize the anticipated benefits of our acquisitions.
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Increased fuel costs may have a negative impact on our results of operations.
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The integration of businesses that we acquire might also cause us to incur unforeseen costs, which would lower our future earnings and would prevent us from realizing the expected benefits of these acquisitions.
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The failure to comply or maintain compliance with applicable governmental laws and regulations, including those referred to above and in Item 1.
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Any businesses we acquire may also have liabilities or adverse operating issues, including some that are not known by us before the acquisition, and our indemnity for such liabilities may be limited or nonexistent. 13 Table of Contents Additionally, our ability to pursue any future acquisitions may depend upon obtaining additional financing, which may not be available on acceptable terms or at all.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table shows our dry and cold storage distribution and warehouse facilities and their associated owned and leased square footage occupied as of July 29, 2023: Location (1) Owned Square Footage Leased Square Footage Total Square Footage (in thousands) Hopkins, Minnesota (2) 1,866 — 1,866 Allentown, Pennsylvania — 1,327 1,327 Stockton, California — 1,290 1,290 Mechanicsville, Virginia (2) 1,249 — 1,249 Riverside, California — 1,171 1,171 Centralia, Washington — 1,155 1,155 Green Bay, Wisconsin — 1,080 1,080 York, Pennsylvania — 1,039 1,039 Joliet, Illinois — 988 988 Champaign, Illinois — 910 910 Pompano Beach, Florida — 903 903 Harrisburg, Pennsylvania — 883 883 Fort Wayne, Indiana (2) 871 — 871 Commerce, California — 858 858 Ridgefield, Washington (2) 779 — 779 Quincy, Florida (2) 758 — 758 Sarasota, Florida — 743 743 Montgomery, New York (2) 500 180 680 Pittsburgh, Pennsylvania 679 — 679 Atlanta, Georgia (2) 389 259 648 Lancaster, Texas — 590 590 Anniston, Alabama 465 105 570 Indianola, Mississippi 543 — 543 Aurora, Colorado — 529 529 Rocklin, California (2) 469 — 469 Stevens Point, Wisconsin (2) 314 146 460 Gilroy, California (2) 447 — 447 Sturtevant, Wisconsin (2) 442 — 442 Moreno Valley, California — 434 434 Carlisle, Pennsylvania — 423 423 Howell Township, New Jersey (2) 397 — 397 Chesterfield, New Hampshire (2) 300 69 369 Richburg, South Carolina (2) 342 — 342 Fargo, North Dakota (2) 336 — 336 Oglesby, Illinois — 325 325 Dayville, Connecticut (2) 317 — 317 Greenwood, Indiana (2) 308 — 308 Prescott, Wisconsin (2) 307 — 307 Santa Fe Springs, California — 298 298 Iowa City, Iowa 271 — 271 24 Table of Contents Location (1) Owned Square Footage Leased Square Footage Total Square Footage (in thousands) West Sacramento, California (2) 251 — 251 Bismarck, North Dakota (2) 244 — 244 Anniston, Alabama — 231 231 Billings, Montana (2) 220 — 220 Vaughan, Ontario — 180 180 Edison, New Jersey — 178 178 West Newell, Illinois 155 — 155 Richmond, British Columbia — 126 126 Londonderry, New Hampshire — 124 124 Philadelphia, Pennsylvania — 100 100 West Sacramento, California (2) 85 — 85 Logan Township, New Jersey — 70 70 Fife, Washington — 39 39 Montreal, Quebec — 31 31 Truckee, California — 8 8 Total 13,304 16,792 30,096 (1) Distribution centers and warehouses as presented here reflect the location of the main distribution center campus and warehouse combined with their related offsite storage used to supply customers from these locations.
Biggest changeThe following table shows our dry and cold storage distribution and warehouse facilities and their associated owned and leased square footage occupied as of August 3, 2024: Location (1) Owned Square Footage Leased Square Footage Total Square Footage (in thousands) Hopkins, Minnesota (2) 1,866 — 1,866 Allentown, Pennsylvania — 1,327 1,327 Manchester, Pennsylvania — 1,319 1,319 Stockton, California — 1,290 1,290 Mechanicsville, Virginia (2) 1,249 — 1,249 Riverside, California — 1,171 1,171 Centralia, Washington — 1,155 1,155 Green Bay, Wisconsin — 1,080 1,080 York, Pennsylvania — 1,039 1,039 Joliet, Illinois — 988 988 Champaign, Illinois — 910 910 Pompano Beach, Florida — 903 903 Harrisburg, Pennsylvania — 883 883 Fort Wayne, Indiana (2) 871 — 871 Commerce, California — 858 858 Ridgefield, Washington (2) 779 — 779 Quincy, Florida (2) 758 — 758 Sarasota, Florida — 743 743 Pittsburgh, Pennsylvania 679 — 679 Atlanta, Georgia (2) 389 259 648 Lancaster, Texas — 590 590 Anniston, Alabama 465 105 570 Indianola, Mississippi (2) 543 — 543 Aurora, Colorado — 529 529 Montgomery, New York (2) 500 — 500 Rocklin, California (2) 469 — 469 Stevens Point, Wisconsin (2) 314 146 460 Gilroy, California (2) 447 — 447 Sturtevant, Wisconsin (2) 442 — 442 Moreno Valley, California — 434 434 Carlisle, Pennsylvania — 423 423 Howell Township, New Jersey (2) 397 — 397 Chesterfield, New Hampshire (2) 300 69 369 Richburg, South Carolina (2) 342 — 342 Fargo, North Dakota (2) 336 — 336 Oglesby, Illinois — 325 325 Dayville, Connecticut (2) 317 — 317 Greenwood, Indiana (2) 308 — 308 Prescott, Wisconsin (2) 307 — 307 Santa Fe Springs, California — 298 298 24 Table of Contents Location (1) Owned Square Footage Leased Square Footage Total Square Footage (in thousands) Iowa City, Iowa (2) 271 — 271 West Sacramento, California (2) 251 — 251 Bismarck, North Dakota (2) 244 — 244 Anniston, Alabama — 231 231 Billings, Montana (2) 220 — 220 Vaughan, Ontario — 180 180 Edison, New Jersey — 178 178 West Newell, Illinois (2) 155 — 155 Richmond, British Columbia — 126 126 Londonderry, New Hampshire — 124 124 Philadelphia, Pennsylvania — 100 100 West Sacramento, California (2) 85 — 85 Fife, Washington — 39 39 Montreal, Quebec — 31 31 Truckee, California — 8 8 Total 13,304 17,861 31,165 (1) Distribution centers and warehouses as presented here reflect the location of the main distribution center campus and warehouse combined with their related offsite storage used to supply customers from these locations.
ITEM 2. PROPERTIES Distribution Centers We maintained 55 distribution centers and warehouses at July 29, 2023, which were utilized by our Wholesale segment and our other operating segments.
ITEM 2. PROPERTIES Distribution Centers We maintained 55 distribution centers and warehouses at August 3, 2024, which were utilized by our Wholesale segment and our other operating segments.
Retail Stores The following table summarizes continuing operations retail stores utilized by our Retail segment as of July 29, 2023: Retail Banner Number of Stores Owned Square Footage Leased Square Footage Total Square Footage (square footage in thousands) Cub Foods (1) 54 1,194 2,517 3,711 Shoppers 24 — 1,355 1,355 Total 78 1,194 3,872 5,066 (1) Cub Foods stores include stores in which we have a controlling ownership interest and excludes 32 franchised Cub Foods full-line and separate liquor stores in which we have no ownership interest or a minority interest.
Retail Stores The following table summarizes retail stores utilized by our Retail segment as of August 3, 2024: Retail Banner Number of Stores Owned Square Footage Leased Square Footage Total Square Footage (square footage in thousands) Cub Foods (1)(2) 54 1,194 2,507 3,701 Shoppers 22 — 1,273 1,273 Total 76 1,194 3,780 4,974 (1) Cub Foods stores include stores in which we have a controlling ownership interest and excludes 32 franchised Cub Foods full-line and separate liquor stores in which we have no ownership interest or a minority interest.
As of July 29, 2023, we utilized approximately 454 thousand square feet of office space primarily related to our corporate offices located in Providence, Rhode Island and Eden Prairie, Minnesota, as well as other smaller administrative offices across the United States.
As of August 3, 2024, we utilized approximately 253 thousand square feet of office space primarily related to our corporate offices located in Providence, Rhode Island as well as other smaller administrative offices across the United States. We own approximately 61 thousand square feet and lease the remaining 192 thousand square feet of our corporate office space.
Corporate As of July 29, 2023, we had approximately 600 thousand square feet, 86% of which was leased, of surplus retail stores and warehouses, excluding assigned leases.
(2) Includes 7 Cub Foods stores securing our Term Loan Facility. Corporate As of August 3, 2024, we had approximately 900 thousand square feet, 90% of which was leased, of surplus retail stores and warehouses, excluding assigned leases.
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We own approximately 240 thousand square feet and lease the remaining 214 thousand square feet of our corporate office space. 25 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOther than as set forth in Note 17—Commitments, Contingencies and Off-Balance Sheet Arrangements in Part II, Item 8 of this Annual Report, which is incorporated herein, there are no pending material legal proceedings to which we are a party or to which our property is subject. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II.
Biggest changeOther than as set forth in Note 17—Commitments, Contingencies and Off-Balance Sheet Arrangements in Part II, Item 8 of this Annual Report, which is incorporated herein, there are no pending material legal proceedings to which we are a party or to which our property is subject. 25 Table of Contents ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeComparative Stock Performance The following graph compares the yearly change in cumulative total stockholder returns on our common stock for the last five fiscal years with the cumulative return on the Standard & Poor’s (“S&P”) SmallCap 600 Index and the S&P SmallCap 600 Food Distributors Index.
Biggest changeOur Term Loan Facility, ABL Credit Facility and Senior Notes contain terms that limit our ability to make cash dividends. 26 Table of Contents Comparative Stock Performance The following graph compares the yearly change in cumulative total stockholder returns on our common stock for the last five fiscal years with the cumulative return on the Standard & Poor’s (“S&P”) SmallCap 600 Index and the S&P SmallCap 600 Food Distributors Index.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information, Holders and Dividends Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “UNFI”. On September 21, 2023, we had 79 stockholders of record.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information, Holders and Dividends Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “UNFI”. On September 26, 2024, we had 73 stockholders of record.
The stock price performance shown below is not necessarily indicative of future performance. 26 Table of Contents This performance graph shall not be deemed “soliciting material” or be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.
This performance graph shall not be deemed “soliciting material” or be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.
Under the 2022 Repurchase Program, we repurchased approximately 1,888,000 shares of our common stock for a total cost of $62 million in fiscal 2023. We did not repurchase any shares of our common stock in fiscal 2022 or 2021. As of July 29, 2023, we had $138 million remaining authorized under the 2022 Repurchase Program.
Under the 2022 Repurchase Program, we repurchased approximately 1,888,000 shares of our common stock for a total cost of $62 million in fiscal 2023. We did not repurchase any shares of our common stock in fiscal 2024.
Any repurchases are intended to be made in accordance with applicable securities laws from time to time in the open market, through privately negotiated transactions or otherwise.
As of August 3, 2024, we had $138 million remaining authorized under the 2022 Repurchase Program. 27 Table of Contents Any repurchases are intended to be made in accordance with applicable securities laws from time to time in the open market, through privately negotiated transactions or otherwise.
The comparison assumes the investment of $100 on July 28, 2018 in our common stock and in each of the indices and, in each case, assumes reinvestment of all dividends.
The comparison assumes the investment of $100 on August 3, 2019 in our common stock and in each of the indices and, in each case, assumes reinvestment of all dividends. The stock price performance shown below is not necessarily indicative of future performance.
July 28, 2018 August 3, 2019 August 1, 2020 July 31, 2021 July 30, 2022 July 29, 2023 United Natural Foods, Inc. $ 100.00 $ 25.90 $ 61.06 $ 101.88 $ 130.76 $ 63.73 S&P SmallCap 600 Index $ 100.00 $ 91.48 $ 85.79 $ 134.64 $ 126.24 $ 131.70 S&P SmallCap 600 Food Distributors Index $ 100.00 $ 56.80 $ 58.18 $ 95.58 $ 129.29 $ 104.97 Issuer Purchases of Equity Securities On September 21, 2022, our Board of Directors authorized a new repurchase program for up to $200 million of our common stock over a term of four years (the “2022 Repurchase Program”).
August 3, 2019 August 1, 2020 July 31, 2021 July 30, 2022 July 29, 2023 August 3, 2024 United Natural Foods, Inc. $ 100.00 $ 235.75 $ 393.35 $ 504.87 $ 246.08 $ 173.40 S&P SmallCap 600 Index $ 100.00 $ 93.77 $ 147.18 $ 137.99 $ 143.97 $ 155.88 S&P SmallCap 600 Food Distributors Index $ 100.00 $ 102.43 $ 168.28 $ 227.64 $ 184.82 $ 175.57 Issuer Purchases of Equity Securities On September 21, 2022, our Board of Directors authorized a repurchase program for up to $200 million of our common stock over a term of four years (the “2022 Repurchase Program”).
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Our Term Loan Facility, ABL Credit Facility and Senior Notes contain terms that limit our ability to make cash dividends.
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We manage the timing of any repurchases in response to market conditions and other relevant factors, including any limitations on our ability to make repurchases under the terms of our ABL Credit Facility, Term Loan Facility and Senior Notes. ITEM 6. RESERVED
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We manage the timing of any repurchases in response to market conditions and other relevant factors, including any limitations on our ability to make repurchases under the terms of our ABL Credit Facility, Term Loan Facility and Senior Notes. 27 Table of Contents The following table presents purchases of our common stock and related information for each of the months in the quarter ended July 29, 2023: (in millions, except shares and per share amounts) Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (2) Period (1) : April 30, 2023 to June 3, 2023 599,506 $ 27.09 599,506 $ 143 June 4, 2023 to July 1, 2023 191,115 $ 24.59 191,115 $ 138 July 2, 2023 to July 29, 2023 — $ — — $ 138 Total 790,621 $ 26.49 790,621 $ 138 (1) The reported periods conform to our fiscal calendar.
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(2) The amounts shown in this column represent the amount remaining under the 2022 Repurchase Program as of June 3, 2023, July 1, 2023 and July 29, 2023. ITEM 6. RESERVED

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeLIQUIDITY AND CAPITAL RESOURCES Highlights • Total liquidity as of July 29, 2023 was $1,517 million and consisted of the following: ◦ Unused credit under our $2,600 million asset-based revolving credit facility (the “ABL Credit Facility”) was $1,480 million as of July 29, 2023, which decreased $147 million from $1,627 million as of July 30, 2022, primarily due to reduced total availability under the ABL Credit Facility driven by lower levels of assets comprising the facility’s borrowing base. ◦ Cash and cash equivalents was $37 million as of July 29, 2023, which decreased $7 million from $44 million as of July 30, 2022. • Our total debt decreased $160 million to $1,963 million as of July 29, 2023 from $2,123 million as of July 30, 2022, primarily driven by debt repayments from net cash flow from operating activities, partially offset by payments for capital expenditures, repurchases of common stock and employee restricted stock tax withholdings during fiscal 2023. • Working capital decreased $322 million to $1,058 million as of July 29, 2023 from $1,380 million as of July 30, 2022, primarily due to lower accounts receivable levels resulting from the monetization of certain receivables and lower inventory levels, partially offset by lower liabilities related to accrued compensation and benefits. • In the second quarter of fiscal 2023, we monetized certain receivables previously presented within accounts receivable, pursuant to a purchase agreement with a third-party financial institution for the sale of certain receivables on a revolving basis up to $300 million.
Biggest changeLIQUIDITY AND CAPITAL RESOURCES Highlights • Total liquidity as of August 3, 2024 was $1,275 million and consisted of the following: ◦ $1,235 million of unused credit under our asset-based revolving credit facility (the “ABL Credit Facility”) as of August 3, 2024, which decreased $245 million from $1,480 million as of July 29, 2023, primarily due to increased borrowings under the ABL Credit Facility utilized to fund voluntary prepayments on the Term Loan Facility (as described below) and payments used in investing activities, partially offset by net cash flow from operating activities and higher levels of availability under the ABL Credit Facility resulting from the First ABL Amendment (defined below); and ◦ $40 million of cash and cash equivalents as of August 3, 2024, which increased $3 million from $37 million as of July 29, 2023. • Total debt increased $122 million to $2,085 million as of August 3, 2024 from $1,963 million as of July 29, 2023, primarily related to additional net borrowings under the ABL Credit Facility to fund payments used in investing activities and for debt issuance costs, partially offset by net cash flow from operating activities. • Working capital decreased $21 million to $1,037 million as of August 3, 2024 from $1,058 million as of July 29, 2023, primarily due to a decrease in inventory levels and an increase in accrued compensation and benefits, which were partially offset by a decrease in accounts payable combined with an increase in accounts receivable. • In the fourth quarter of fiscal 2024, we entered into an amendment to the ABL Loan Agreement (the “First ABL Amendment”) to execute on a First In, Last Out (“FILO”) tranche of incremental loans (the “ABL FILO Loan”) and used the $130 million in proceeds from the ABL FILO Loan and borrowings under the ABL Credit Facility to fund a $145 million voluntary prepayment on the Term Loan Facility. • Concurrent with the voluntary prepayment on the Term Loan Facility, we entered into an amendment to the Term Loan Agreement (the “Fourth Term Loan Amendment”) to reduce the principal amount of the Term Loan Facility to $500 million and extend the maturity to May 1, 2031. • In fiscal 2025, scheduled debt maturities are expected to be $6 million.
Segment Results of Operations In evaluating financial performance in each business segment, management primarily uses Net sales and Adjusted EBITDA of its business segments as discussed and reconciled within Note 16—Business Segments within Part II, Item 8 of this Annual Report and the above table within the Executive Overview section.
Segment Results of Operations In evaluating financial performance in each business segment, management primarily uses Net sales and Adjusted EBITDA of its business segments as discussed and reconciled within Note 16—Business Segments in Part II, Item 8 of this Annual Report and the above table within the Executive Overview section.
We believe food-at-home expenditures as a percentage of total food expenditures are subject to these trends, including changes in consumer behaviors in response to social and economic trends, such as levels of disposable income and the health of the economy in which our customers and our stores operate. 29 Table of Contents The U.S. economy has experienced economic volatility in recent years, which has had, and we expect may continue to have, an impact on consumer confidence.
We believe food-at-home expenditures as a percentage of total food expenditures are subject to these trends, including changes in consumer behaviors in response to social and economic trends, such as levels of disposable income and the health of the economy in which our customers and our stores operate. 29 Table of Contents The U.S. economy has experienced economic volatility in recent years, which has had, and we expect may continue to have, an impact on consumer confidence and behavior.
We evaluate inventory shortages (shrink) throughout each fiscal year based on actual physical counts in our facilities. The majority of our inventory is valued under the LIFO method, which allows for matching of costs and revenues, as the current acquisition cost is used to value cost of goods sold as inventory is sold in an inflationary environment.
We evaluate inventory shortages (shrink) throughout each fiscal year based on physical counts in our facilities. The majority of our inventory is valued under the LIFO method, which allows for matching of costs and revenues, as the current acquisition cost is used to value cost of goods sold as inventory is sold in an inflationary environment.
Share Repurchases In September 2022, our Board of Directors authorized a new repurchase program for up to $200 million of our common stock over a term of four years (the “2022 Repurchase Program”). Under the 2022 Repurchase Program, we repurchased approximately 1,888,000 shares of our common stock for a total cost of $62 million in fiscal 2023.
Share Repurchases In September 2022, our Board of Directors authorized a repurchase program for up to $200 million of our common stock over a term of four years (the “2022 Repurchase Program”). Under the 2022 Repurchase Program, we repurchased approximately 1,888,000 shares of our common stock for a total cost of $62 million in fiscal 2023.
Refer to Note 9—Long-Term Debt in Part II, Item 8 of this Annual Report for further detail of our scheduled debt maturities by fiscal year and by debt instrument, which excludes debt prepayments that may be required from Excess Cash Flow (as defined in the Term Loan Agreement) generated or sales of mortgaged properties in fiscal 2024 or beyond.
Refer to Note 9—Long-Term Debt in Part II, Item 8 of this Annual Report for further detail of our scheduled debt maturities by fiscal year and by debt instrument, which excludes debt prepayments that may be required from Excess Cash Flow (as defined in the Term Loan Agreement) generated or sales of mortgaged properties in fiscal 2025 or beyond.
We believe we are North America’s premier grocery wholesaler with 55 distribution centers and warehouses representing approximately 30 million square feet of warehouse space. We are a coast-to-coast distributor with customers in all 50 states as well as all ten provinces in Canada, making us a desirable partner for retailers and consumer product manufacturers.
We believe we are North America’s premier grocery wholesaler with 55 distribution centers and warehouses representing approximately 31 million square feet of warehouse space. We are a coast-to-coast distributor with customers in all 50 states as well as all ten provinces in Canada, making us a desirable partner for retailers and consumer product manufacturers.
Refer to Note 9—Long-Term Debt in Part II, Item 8 of this Annual Report for a detailed discussion of the provisions of our credit facilities and certain long-term debt agreements. Our Term Loan Agreement and Senior Notes do not include any financial maintenance covenants.
Refer to Note 9—Long-Term Debt in Part II, Item 8 of this Annual Report for a detailed discussion of the provisions of our credit facilities and certain long-term debt agreements and additional information. Our Term Loan Agreement and Senior Notes do not include any financial maintenance covenants.
For fiscal 2023, the effective tax rate was impacted by solar credits, including the tax credit impact of a fiscal 2023 investment in an equity method partnership and solar credits associated with a solar array installation at the Company’s Howell Township, New Jersey facility.
For fiscal 2023, the effective tax rate was impacted by solar credits, including the tax credit impact of a fiscal 2023 investment in an equity method partnership and solar credits associated with a solar array installation at our Howell Township, New Jersey facility.
Refer to Note 9—Long-Term Debt, Note 11—Leases, Note 13—Benefit Plans, Note 1—Significant Accounting Policies and Note 17—Commitments, Contingencies and Off-Balance Sheet Arrangements to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report for more information on the nature and timing of obligations for debt, leases, benefit plans, self-insurance and purchase obligations, respectively.
Refer to Note 9—Long-Term Debt, Note 11—Leases, Note 13—Benefit Plans, Note 1—Significant Accounting Policies and Note 17—Commitments, Contingencies and Off-Balance Sheet Arrangements in Part II, Item 8 of this Annual Report for more information on the nature and timing of obligations for debt, leases, benefit plans, self-insurance and purchase obligations, respectively.
If these healthcare provisions cannot be renegotiated in a manner that reduces the prospective healthcare cost as we intend, our Operating expenses could increase in the future. Refer to Note 13—Benefit Plans in Part II, Item 8 of this Annual Report for additional information regarding the plans in which we participate.
If these healthcare provisions cannot be renegotiated in a manner that reduces the prospective healthcare cost as we intend, our Operating expenses could increase in the future. 40 Table of Contents Refer to Note 13—Benefit Plans in Part II, Item 8 of this Annual Report for additional information regarding the plans in which we participate.
Our continued access to short-term and long-term financing through credit markets depends on numerous factors, including the condition of the credit markets and our results of operations, cash flows, financial position and credit ratings. 37 Table of Contents Primary uses of cash include debt service, capital expenditures, working capital maintenance, investments in cloud technologies and income tax payments.
Our continued access to short-term and long-term financing through credit markets depends on numerous factors, including the condition of the credit markets and our results of operations, cash flows, financial position and credit ratings. Primary uses of cash include debt service, capital expenditures, working capital maintenance, investments in cloud technologies and income tax payments.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to: • our dependence on principal customers; • the relatively low margins of our business, which are sensitive to inflationary and deflationary pressures and intense competition, including as a result of the continuing consolidation of retailers and the growth of consumer choices for grocery and consumable purchases; • our ability to realize the anticipated benefits of our transformation initiatives; • changes in relationships with our suppliers; • our ability to operate, and rely on third parties to operate, reliable and secure technology systems; • labor and other workforce shortages and challenges; • the addition or loss of significant customers or material changes to our relationships with these customers; • our ability to realize anticipated benefits of our acquisitions; • our ability to continue to grow sales, including of our higher margin natural and organic foods and non-food products, and to manage that growth; • our ability to maintain sufficient volume in our wholesale segment to support our operating infrastructure; • the impact and duration of any pandemics or disease outbreaks; • our ability to access additional capital; • increases in healthcare, pension and other costs under our and multiemployer benefit plans; • the potential for additional asset impairment charges; 28 Table of Contents • our sensitivity to general economic conditions including inflation, changes in disposable income levels and consumer purchasing habits; • our ability to timely and successfully deploy our warehouse management system throughout our distribution centers and our transportation management system across the Company and to achieve efficiencies and cost savings from these efforts; • the potential for disruptions in our supply chain or our distribution capabilities from circumstances beyond our control, including due to lack of long-term contracts, severe weather, labor shortages or work stoppages or otherwise; • moderated supplier promotional activity, including decreased forward buying opportunities; • union-organizing activities that could cause labor relations difficulties and increased costs; • our ability to maintain food quality and safety; and • volatility in fuel costs.
Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to: • our dependence on principal customers; • the relatively low margins of our business, which are sensitive to inflationary and deflationary pressures and intense competition, including as a result of the continuing consolidation of retailers and the growth of consumer choices for grocery and consumable purchases; • our ability to realize the anticipated benefits of our strategic initiatives; • changes in relationships with our suppliers; • our ability to operate, and rely on third parties to operate, reliable and secure technology systems; • labor and other workforce shortages and challenges; • the addition or loss of significant customers or material changes to our relationships with these customers; • our ability to realize anticipated benefits of strategic transactions; • our ability to continue to grow sales, including of our higher margin natural and organic foods and non-food products; • our ability to maintain sufficient volume in our wholesale distribution and services businesses to support our operating infrastructure; • our ability to access additional capital; • increases in healthcare, pension and other costs under our single employer benefit plan and multiemployer benefit plans; • the potential for additional asset impairment charges; • our sensitivity to general economic conditions including inflation, changes in disposable income levels and consumer purchasing habits; 28 Table of Contents • our ability to timely and successfully deploy our warehouse management system throughout our distribution centers and our transportation management system across the Company and to achieve efficiencies and cost savings from these efforts; • the potential for disruptions in our supply chain or our distribution capabilities from circumstances beyond our control, including due to lack of long-term contracts, severe weather, labor shortages or work stoppages or otherwise; • moderated supplier promotional activity, including decreased forward buying opportunities; • union-organizing activities that could cause labor relations difficulties and increased costs; • our ability to maintain food quality and safety; and • volatility in fuel costs.
Expected rate of return on plan assets Our expected long-term rate of return on plan assets assumption is determined based on the portfolio’s actual and target composition, current market conditions, forward-looking return and risk assumptions by asset class, and historical long-term investment performance. The assumed long-term rate of return on pension assets was 6.00% for fiscal 2023.
Expected rate of return on plan assets Our expected long-term rate of return on plan assets assumption is determined based on the portfolio’s actual and target composition, current market conditions, forward-looking return and risk assumptions by asset class, and historical long-term investment performance. The assumed long-term rate of return on pension assets was 6.25% for fiscal 2024.
We typically finance working capital needs with cash provided from operating activities and short-term borrowings. Inventories are managed primarily through demand forecasting and replenishing depleted inventories. We currently do not pay a dividend on our common stock.
We typically finance working capital needs with cash provided from operating activities and short-term borrowings. Inventories are managed primarily through demand forecasting and replenishing depleted inventories. 37 Table of Contents We currently do not pay a dividend on our common stock.
Expense is recognized in connection with these plans as contributions are funded, in accordance with GAAP. We made contributions to these plans, and recognized expense of $48 million, $45 million and $48 million in fiscal 2023, 2022 and 2021, respectively.
Expense is recognized in connection with these plans as contributions are funded, in accordance with GAAP. We made contributions to these plans, and recognized expense of $47 million, $48 million and $45 million in fiscal 2024, 2023 and 2022, respectively.
When holding inventory levels and mix constant, as of July 29, 2023, we estimate a 50 basis point increase in the inflation rate on our ending LIFO-based inventory would result in an $8 million increase in the LIFO charge on an annualized basis. Vendor funds We receive funds from many of the vendors whose products we buy for resale.
When holding inventory levels and mix constant, as of August 3, 2024, we estimate a 50 basis point increase in the inflation rate on our ending LIFO-based inventory would result in an $8 million increase in the LIFO charge on an annualized basis. Vendor funds We receive funds from many of the vendors whose products we buy for resale.
For a comparison of our consolidated results of operations, segment results and financial position for fiscal years 2022 and 2021, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, in our Annual Report on Form 10-K for the fiscal year ended July 30, 2022, filed with the Securities and Exchange Commission on September 27, 2022.
For a comparison of our consolidated results of operations, segment results and financial position for fiscal years 2023 and 2022, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, in our Annual Report on Form 10-K for the fiscal year ended July 29, 2023, filed with the Securities and Exchange Commission on September 26, 2023.
Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Income taxes The Company accounts for income taxes under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Generally, in an inflationary environment as a wholesaler, rising vendor costs result in higher Net sales driven by higher vendor prices when other variables such as quantities sold and vendor promotions are constant. In the latter half of fiscal 2023, we experienced fewer and less significant vendor product cost increases as compared to fiscal 2022.
Generally, in an inflationary environment as a wholesaler, rising vendor costs result in higher Net sales driven by higher vendor prices when other variables such as quantities sold and vendor promotions are constant. In fiscal 2024, we experienced fewer and less significant vendor product cost increases as compared to fiscal 2023.
These decreases negatively impacted our gross profit rate when comparing fiscal 2023 to fiscal 2022.
These decreases negatively impacted our gross profit rate when comparing fiscal 2024 to fiscal 2023.
The decrease in Net periodic benefit income, excluding service cost was primarily driven by higher interest costs from a higher discount rate utilized in the measurement of pension liabilities, partially offset by $13 million of higher income from expected returns on plan assets.
The decrease in Net periodic benefit income, excluding service cost was primarily driven by higher interest costs from a higher discount rate utilized in the measurement of pension liabilities and $3 million of lower income from expected returns on plan assets.
We believe we can enhance our profitability and accelerate our growth through our transformation efforts, which we expect will improve our cost structure, increase sales of products and services, and position us to provide tailored, data-driven solutions to help our customers run their businesses more efficiently and contribute to customer acquisitions.
We believe we can optimize our performance and profitability through our improvement efforts, which we expect will improve our cost structure, increase sales of products and services, and position us to provide tailored, data-driven solutions to help our customers run their businesses more efficiently and contribute to customer acquisitions.
We plan to continue to invest in our Retail segment in areas such as customer-facing merchandising initiatives, physical facilities, technology and operational tools. Cub Foods and Shoppers Food Warehouse anticipate continued investment in improving the customer and associate experience through express remodels focused on customer facing elements.
In addition, we operate 24 “Cub Wine and Spirit” and “Cub Liquor” stores. We plan to continue to invest in our Retail segment in areas such as customer-facing merchandising initiatives, physical facilities, technology and operational tools. Cub Foods and Shoppers Food Warehouse anticipate continued investment in improving the customer and associate experience through express remodels focused on customer facing elements.
In fiscal 2024, we expect to contribute approximately $50 million to multiemployer plans, subject to the outcome of collective bargaining and capital market conditions.
In fiscal 2025, we expect to contribute approximately $51 million to multiemployer plans, subject to the outcome of collective bargaining and capital market conditions.
See Note 8—Derivatives in Part II, Item 8 and —Interest Rate Risk in Part II, Item 7A of this Annual Report for additional information. From time-to-time, we enter into fixed price fuel supply agreements and foreign currency hedges . As of July 29, 2023, we had fixed price fuel contracts and foreign currency forward agreements outstanding.
Refer to Note 8—Derivatives in Part II, Item 8 and Interest Rate Risk in Part II, Item 7A of this Annual Report for additional information. From time-to-time, we enter into fixed price fuel supply agreements and foreign currency hedges . As of August 3, 2024, we had fixed price fuel contracts and foreign currency forward agreements outstanding.
Our ABL Loan Agreement subjects us to a fixed charge coverage ratio of at least 1.0 to 1.0 calculated at the end of each of our fiscal quarters on a rolling four quarter basis, if the adjusted aggregate availability is ever less than the greater of (i) $210 million and (ii) 10% of the aggregate borrowing base.
Our ABL Loan Agreement subjects us to a fixed charge coverage ratio of at least 1.0 to 1.0 calculated at the end of each of our fiscal quarters on a rolling four quarter basis, if the adjusted aggregate availability is ever less than the greater of (i) $220 million, or $210 million if no ABL FILO Loans are then outstanding at such time and (ii) 10% of the aggregate borrowing base.
Excluding the non-cash LIFO charge, gross profit rate was 14.0% of Net sales and 15.0% of Net sales for fiscal 2023 and fiscal 2022, respectively.
Excluding the non-cash LIFO charge, gross profit rate was 13.6% of Net sales and 14.0% of Net sales for fiscal 2024 and fiscal 2023, respectively.
The effective tax rate was also impacted by the recognition of previously unrecognized tax benefits and excess tax deductions attributable to share-based compensation. The combined impact of these fiscal 2023 tax benefits exceeded pre-tax income, generating an overall tax benefit rate for fiscal 2023.
The effective tax rate was also impacted by the recognition of previously unrecognized tax benefits and excess tax deductions attributable to share-based compensation. The combined impact of these fiscal 2023 tax benefits exceeded pre-tax income, generating an overall tax benefit rate for fiscal 2023. 35 Table of Contents Net (Loss) Income Attributable to United Natural Foods, Inc.
Net sales also include amounts charged by us to customers for shipping and handling and fuel surcharges. 30 Table of Contents Cost of sales and Gross profit The principal components of our Cost of sales include the amounts paid to suppliers for product sold, plus transportation costs necessary to bring the product to, or move product between, our distribution centers and retail stores, partially offset by consideration received from suppliers in connection with the purchase or promotion of the suppliers’ products.
Cost of Sales and Gross Profit The principal components of our Cost of sales include the amounts paid to suppliers for product sold, plus transportation costs necessary to bring the product to, or move product between, our distribution centers and retail stores, partially offset by consideration received from suppliers in connection with the purchase or promotion of the suppliers’ products.
If the first-in, first-out (“FIFO”) method had been used, Inventories, net, would have been higher by approximately $344 million and $225 million at July 29, 2023 and July 30, 2022, respectively.
If the first-in, first-out (“FIFO”) method had been used, Inventories, net, would have been higher by approximately $351 million and $344 million at August 3, 2024 and July 29, 2023, respectively.
Each 25-basis point reduction in the discount rate would increase our projected pension benefit obligation by $37 million, as of July 29, 2023, and for fiscal 2023 would increase Net periodic benefit income by approximately $3 million.
Each 25-basis point reduction in the discount rate would increase our projected pension benefit obligation by $36 million, as of August 3, 2024, and for fiscal 2024 would increase Net periodic benefit income by approximately $2 million.
Our business is classified into two reportable segments: Wholesale and Retail; and also includes a manufacturing division and a branded product line division. We are focused on executing our transformation strategy, which we believe will position us for long-term profitable growth.
Our business is classified into two reportable segments: Wholesale and Retail; and also includes a manufacturing division and a branded product line division. We are focused on becoming a more effective and efficient business partner to our customers, which we believe will position us for long-term profitable growth.
Our credit facilities are secured by a substantial portion of our total assets. We expect to be able to fund debt maturities and finance lease liabilities through fiscal 2024 with internally generated funds and borrowings under the ABL Credit Facility. Our primary sources of liquidity are from internally generated funds and from borrowing capacity under the ABL Credit Facility.
We expect to be able to fund debt maturities and finance lease liabilities through fiscal 2025 with internally generated funds and borrowings under the ABL Credit Facility. Our primary sources of liquidity are from internally generated funds and from borrowing capacity under the ABL Credit Facility.
As of July 29, 2023, approximately 2.0 billion or 81% of inventory was valued under the LIFO method, before the application of any LIFO reserve, and primarily included grocery, frozen food and general merchandise products, with the remaining inventory valued under the first-in, first-out method and primarily included meat, dairy and deli products.
As of August 3, 2024, approximately $1.9 billion or 82% of inventory was valued under the LIFO method, before the application of any LIFO reserve, and primarily included grocery, frozen food and general merchandise products, with the remaining inventory valued under the first-in, first-out method and primarily included meat, dairy and deli products.
The decrease in Operating income was primarily driven by an increase in Operating expenses, a loss on sale of assets and other asset charges in fiscal 2023 compared to a gain in fiscal 2022 as described above, and a decrease in Gross profit, partially offset by lower Restructuring, acquisition and integration related expenses.
The decrease in Operating income was primarily driven by an increase in Operating expenses, an increase in Restructuring, acquisition and integration related expenses and an increase in Loss on sale of assets and other asset charges, partially offset by an increase in Gross profit.
Reflecting the factors described in more detail above, Net income attributable to United Natural Foods, Inc. was $24 million, or $0.40 per diluted common share, in fiscal 2023, compared to $248 million, or $4.07 per diluted common share, in fiscal 2022.
Reflecting the factors described in more detail above, Net loss attributable to United Natural Foods, Inc. was $112 million, or $1.89 per diluted common share, for fiscal 2024, compared to Net income attributable to United Natural Foods, Inc. of $24 million, or $0.40 per diluted common share, for fiscal 2023.
As of the end of fiscal 2023, one plan to which the Company contributes has received SFA, and two other plans to which the Company contributes are currently on the waiting list to apply for SFA funding. We continue to evaluate our exposure to underfunded multiemployer pension plans.
As of the end of fiscal 2024, one plan to which the Company contributes has received SFA, and two other plans to which the Company contributes are currently on the waiting list to apply for SFA funding.
Our defined benefit pension plan and certain supplemental executive retirement plans are closed to new participants and service crediting. 41 Table of Contents While we believe the valuation methods used to determine the fair value of plan assets are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
While we believe the valuation methods used to determine the fair value of plan assets are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
We believe Adjusted EBITDA is useful to investors and financial institutions because it provides additional information regarding factors and trends affecting our business, which are used in the business planning process to understand expected operating performance, to evaluate results against those expectations, and because of its importance as a measure of underlying operating performance, as the primary compensation performance measure under certain compensation programs and plans.
Adjusted EBITDA excludes certain items because they are non-cash items or items that do not reflect management’s assessment of ongoing business performance. 31 Table of Contents We believe Adjusted EBITDA is useful because it provides additional information regarding factors and trends affecting our business, which are used in the business planning process to understand expected operating performance, to evaluate results against those expectations, and because of its importance as a measure of underlying operating performance, as the primary compensation performance measure under certain compensation programs and plans.
Net Periodic Benefit Income, Excluding Service Cost Net periodic benefit income, excluding service cost decreased $11 million to $29 million in fiscal 2023, from $40 million in fiscal 2022.
Net Periodic Benefit Income, Excluding Service Cost Net periodic benefit income, excluding service cost decreased $14 million to $15 million in fiscal 2024, from $29 million in fiscal 2023.
Accruals for workers’ compensation, general and automobile liabilities totaled $97 million and $98 million as of July 29, 2023 and July 30, 2022, respectively.
Accruals for workers’ compensation, general and automobile liabilities totaled $89 million and $97 million as of August 3, 2024 and July 29, 2023, respectively.
Our Gross profit as a percentage of Net sales decreased to 13.6% in fiscal 2023 compared to 14.5% in fiscal 2022. The LIFO charge was $119 million and $158 million in fiscal 2023 and fiscal 2022, respectively.
Our Gross profit as a percentage of Net sales was 13.6% in fiscal 2024, which was approximately flat compared to fiscal 2023. The LIFO charge was $7 million and $119 million in fiscal 2024 and fiscal 2023, respectively.
As we continue to work to find solutions to underfunded multiemployer pension plans, it is possible we could incur withdrawal liabilities for certain additional multiemployer pension plan obligations in the future as we actively negotiate new collective bargaining agreements with a number of our unions in due course. 42 Table of Contents The American Rescue Plan Act (“ARPA”) established the Special Financial Assistance (“SFA”) Program for financially troubled multi-employer pension plans.
As we continue to work to find solutions to underfunded multiemployer pension plans, it is possible we could incur withdrawal liabilities for certain additional multiemployer pension plan obligations in the future as we actively negotiate new collective bargaining agreements with a number of our unions in due course.
We fund our defined benefit pension plan based on the minimum contribution required under ERISA, the Pension Protection Act of 2006 and other applicable laws and additional contributions made at our discretion.
An insignificant amount of contributions are expected to be made to defined benefit pension plans and postretirement benefit plans in fiscal 2025. We fund our defined benefit pension plan based on the minimum contribution required under ERISA, the Pension Protection Act of 2006 and other applicable laws and additional contributions made at our discretion.
As of July 29, 2023, we had $138 million remaining authorized under the 2022 Repurchase Program. 40 Table of Contents We will manage the timing of any repurchases of our common stock in response to market conditions and other relevant factors, including any limitations on our ability to make repurchases under the terms of our ABL Credit Facility, Term Loan Facility and Senior Notes.
We will manage the timing of any repurchases of our common stock in response to market conditions and other relevant factors, including any limitations on our ability to make repurchases under the terms of our ABL Credit Facility, Term Loan Facility and Senior Notes.
Vendor funds that have been earned as a result of completing the required performance under the terms of the underlying agreements but for which the product has not yet been sold are recognized as reductions to the value of on-hand inventory.
Vendor funds that have been earned as a result of completing the required performance under the terms of the underlying agreements but for which the product has not yet been sold are recognized as reductions to the value of on-hand inventory. 41 Table of Contents The amount and timing of recognition of vendor funds as well as the amount of vendor funds to be recognized as a reduction to ending inventory requires management judgment and estimates.
Based on our Consolidated First Lien Net Leverage Ratio (as defined in the Term Loan Agreement) at the end of fiscal 2023, no prepayment from Excess Cash Flow in fiscal 2023 is required to be made in fiscal 2024.
Based on our Excess Cash Flow (as defined in the Term Loan Agreement) in fiscal 2024, no prepayment from Excess Cash Flow in fiscal 2024 is required to be made in fiscal 2025.
Our capital spending for fiscal 2023 and 2022 principally included information technology and supply chain expenditures including maintenance expenditures and investments in growth initiatives. Fiscal 2023 included $290 million of distribution center improvements, technology and other expenditures, and $33 million of Retail expenditures.
Our capital spending for fiscal 2024 and 2023 principally included supply chain and information technology expenditures, including investments in growth initiatives and maintenance expenditures. Fiscal 2024 included $281 million of distribution center improvements, technology and other expenditures, $41 million of investments in new distribution centers, primarily the new Manchester, Pennsylvania distribution center, and $23 million of Retail expenditures.
These fixed rates range from 2.360% to 2.875%, with maturities between September 2023 and October 2025. The fair values of these interest rate derivatives represent a total net asset of $22 million and are subject to volatility based on changes in market interest rates.
These fixed rates range from 2.403% to 4.130%, with maturities between October 2024 and June 2028. The fair values of these interest rate derivatives represent a total net asset of $0 million as of August 3, 2024, and are subject to volatility based on changes in market interest rates.
There are significant limitations to using Adjusted EBITDA as a financial measure including, but not limited to, it not reflecting the cost of cash expenditures for capital assets or certain other contractual commitments, finance lease obligation and debt service expenses, income taxes and any impacts from changes in working capital. 31 Table of Contents We define Adjusted EBITDA as a consolidated measure inclusive of continuing and discontinued operations results, which we reconcile by adding Net income (loss) from continuing operations, less Net income attributable to noncontrolling interests, plus Non-operating income and expenses, including Net periodic benefit income, excluding service cost, Interest expense, net and Other (income) expense, net, plus Provision (benefit) for income taxes and Depreciation and amortization all calculated in accordance with GAAP, plus adjustments for Share-based compensation, non-cash LIFO charge or benefit, Restructuring, acquisition and integration related expenses, Goodwill impairment charges, Loss (gain) on sale of assets and other asset charges, certain legal charges and gains, certain other non-cash charges or other items, as determined by management, plus Adjusted EBITDA of discontinued operations calculated in a manner consistent with the results of continuing operations, outlined above.
We define Adjusted EBITDA as a consolidated measure which we reconcile by adding Net (loss) income including noncontrolling interests, less Net income attributable to noncontrolling interests, plus Non-operating income and expenses, including Net periodic benefit income, excluding service cost, Interest expense, net and Other (income) expense, net, plus (Benefit) provision for income taxes and Depreciation and amortization all calculated in accordance with GAAP, plus adjustments for Share-based compensation, non-cash LIFO charge or benefit, Restructuring, acquisition and integration related expenses, Goodwill impairment charges, Loss (gain) on sale of assets and other asset charges, certain legal charges and gains, and certain other non-cash charges or other items, as determined by management.
The future amount and timing of interest expense payments are expected to vary with the amount and then prevailing contractual interest rates over our debt as discussed in Interest Rate Risk in Part II, Item 7A of this Annual Report. 39 Table of Contents Pension and Other Postretirement Benefit Obligations We contributed $1 million and $1 million to our defined benefit pension and other postretirement benefit plans, respectively, in fiscal 2023.
The future amount and timing of interest expense payments are expected to vary with the amount and then prevailing contractual interest rates over our debt as discussed in Interest Rate Risk in Part II, Item 7A of this Annual Report.
Wholesale’s Operating expense increased $75 million, which excludes depreciation and amortization, share-based compensation and other adjustments as outlined in Note 16—Business Segments in Part II, Item 8 of this Annual Report.
Wholesale Operating expense, which excludes depreciation and amortization, share-based compensation and other adjustments as outlined in Note 16—Business Segments in Part II, Item 8 of this Annual Report, increased $15 million when excluding an estimated $59 million impact from the 53rd week in fiscal 2024.
Under the last-in, first out (“LIFO”) method of inventory accounting, product cost increases are recognized within Cost of sales based on expected year-end inventory quantities and costs, which generally has the effect of decreasing Gross profit and the carrying value of inventory during periods of inflation.
Under the last-in, first out (“LIFO”) method of inventory accounting, product cost increases are recognized within Cost of sales based on expected year-end inventory quantities and costs, which generally has the effect of decreasing Gross profit and the carrying value of inventory during periods of inflation. 30 Table of Contents Our pricing to our customers is determined at the time of sale primarily based on the then prevailing vendor listed base cost, and includes discounts we offer to our customers.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized within the provision for income tax in the period that includes the enactment date. 43 Table of Contents The calculation of the Company’s tax liabilities includes addressing uncertainties in the application of complex tax regulations and is based on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
The calculation of the Company’s tax liabilities includes addressing uncertainties in the application of complex tax regulations and is based on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
Fiscal 2023 includes a $25 million intangible asset impairment charge related to a rationalization of our brands portfolio in an effort to focus on our core private brand offerings. Fiscal 2022 primarily reflects the $87 million gain on sale of our Riverside, California distribution center.
Fiscal 2023 primarily includes a $25 million intangible asset impairment charge attributable to a rationalization of our brands portfolio in an effort to focus on our core private brand offerings and $14 million in losses on the sales of receivables .
Retirement Plan over the remaining life expectancy of inactive participants based on our determination that almost all of the defined benefit pension plan participants are inactive and the plan is frozen to new participants. For the purposes of inactive participants, we utilized a 90% threshold established under our policy.
We recognize the amortization of net actuarial loss on the SUPERVALU INC. Retirement Plan over the remaining life expectancy of inactive participants based on our determination that almost all of the defined benefit pension plan participants are inactive and the plan is frozen to new participants.
In addition, we supply another 26 Cub Foods stores operated by our Wholesale customers through franchise and equity ownership arrangements. We operate 81 pharmacies primarily within the stores we operate and the stores of our franchisees. In addition, we operate 25 “Cub Wine and Spirit” and “Cub Liquor” stores.
Retail Operations We currently operate 76 retail grocery stores, including 54 Cub Foods corporate stores and 22 Shoppers Food Warehouse stores. In addition, we supply another 26 Cub Foods stores operated by our Wholesale customers through franchise and equity ownership arrangements. We operate 81 pharmacies primarily within the stores we operate and the stores of our franchisees.
Integration related expenses include certain professional consulting expenses and incremental expenses related to combining facilities required to optimize our distribution network as a result of acquisitions.
Restructuring, Acquisition and Integration Related Expenses Restructuring, acquisition and integration related expenses reflect expenses resulting from restructuring activities, including severance costs, share-based compensation acceleration charges and acquisition and integration related expenses. Integration related expenses include certain professional consulting expenses and incremental expenses related to combining facilities required to optimize our distribution network as a result of acquisitions.
Future investments may be financed through long-term debt or borrowings under our ABL Credit Facility and cash from operations.
We expect to finance fiscal 2025 capital and cloud implementation expenditures requirements with cash generated from operations and borrowings under our ABL Credit Facility. Future investments may be financed through long-term debt or borrowings under our ABL Credit Facility and cash from operations.
Impact of Product Cost Inflation We experienced a mix of inflation across product categories during fiscal 2023. In the aggregate across our businesses, including the mix of products, management estimates our businesses experienced product cost inflation of approximately nine percent in fiscal 2023. Cost inflation estimates are based on individual like items sold during the periods being compared.
Impact of Product Cost Changes We experienced a mix of inflation and deflation across product categories during fiscal 2024. In the aggregate across our businesses, including the mix of products, management estimates our businesses experienced product cost inflation of approximately one percent in fiscal 2024 as compared to fiscal 2023.
Consumer spending may be impacted by levels of discretionary income and consumers trading down to a less expensive mix of products for grocery items or buying fewer items. In addition, inflation remains at elevated levels and continues to be unpredictable.
Consumer spending may continue to be impacted by levels of discretionary income and consumers trading down to a less expensive mix of products for grocery items or buying fewer items. In addition, inflation continues to affect our business, and fluctuating commodity and labor input costs may continue to impact the prices of products we procure from manufacturers.
Retirement Plan under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). An insignificant amount of contributions are expected to be made to defined benefit pension plans and postretirement benefit plans in fiscal 2024.
Pension and Other Postretirement Benefit Obligations We contributed $1 million and $1 million to our defined benefit pension and other postretirement benefit plans, respectively, in fiscal 2024. In fiscal 2025, no minimum pension contributions are required to be made to the SUPERVALU INC. Retirement Plan under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).
Cash Flow Information The following summarizes our Consolidated Statements of Cash Flows: Increase (Decrease) (in millions) 2023 (52 weeks) 2022 (52 weeks) 2021 (52 weeks) 2023 2022 Net cash provided by operating activities of continuing operations $ 624 $ 331 $ 614 $ 293 $ (283) Net cash used in investing activities of continuing operations (339) (49) (239) (290) 190 Net cash used in financing activities (292) (279) (384) (13) 105 Net cash flows from discontinued operations — — 2 — (2) Effect of exchange rate on cash — — 1 — (1) Net (decrease) increase in cash and cash equivalents (7) 3 (6) (10) 9 Cash and cash equivalents, at beginning of period 44 41 47 3 (6) Cash and cash equivalents at end of period, including discontinued operations $ 37 $ 44 $ 41 $ (7) $ 3 Fiscal 2023 compared to Fiscal 2022 The increase in Net cash provided by operating activities of continuing operations was primarily due to lower levels of cash utilized in net working capital, including the monetization of certain receivables discussed above, partially offset by lower cash generated from net income in fiscal 2023.
Cash Flow Information The following summarizes our Consolidated Statements of Cash Flows: (in millions) 2024 (53 weeks) 2023 (52 weeks) Change Net cash provided by operating activities $ 253 $ 624 $ (371) Net cash used in investing activities (342) (339) (3) Net cash provided by (used in) financing activities 92 (292) 384 Effect of exchange rate on cash — — — Net increase (decrease) in cash and cash equivalents 3 (7) 10 Cash and cash equivalents, at beginning of period 37 44 (7) Cash and cash equivalents at end of period $ 40 $ 37 $ 3 Fiscal 2024 compared to Fiscal 2023 The decrease in net cash provided by operating activities was primarily due to lower levels of cash generated by net working capital, including lower proceeds received from the monetization of certain receivables compared to fiscal 2023 and higher receivables levels from sales growth in fiscal 2024.
Sources and Uses of Cash We expect to continue to replenish operating assets and pay down debt obligations with internally generated funds. A significant reduction in operating earnings or the incurrence of operating losses could have a negative impact on our operating cash flow, which may limit our ability to pay down our outstanding indebtedness as planned.
A significant reduction in operating earnings or the incurrence of operating losses could have a negative impact on our operating cash flow, which may limit our ability to pay down our outstanding indebtedness as planned. Our credit facilities are secured by a substantial portion of our total assets.
Trustees are typically responsible for determining the level of benefits to be provided to participants as well as such matters as the investment of the assets and the administration of the plans. We continue to evaluate and address our potential exposure to underfunded multiemployer pension plans as it relates to our associates who are or were beneficiaries of these plans.
We continue to evaluate and address our potential exposure to underfunded multiemployer pension plans as it relates to our associates who are or were beneficiaries of these plans.
Multiemployer pension plans We contribute to various multiemployer pension plans based on obligations arising from collective bargaining agreements. These multiemployer pension plans provide retirement benefits to participants based on their service to contributing employers. The benefits are paid from assets held in trust for that purpose.
For the purposes of inactive participants, we utilized a 90% threshold established under our policy. Multiemployer pension plans We contribute to various multiemployer pension plans based on obligations arising from collective bargaining agreements. These multiemployer pension plans provide retirement benefits to participants based on their service to contributing employers.
These judgments and estimates impact our reported Gross profit, Operating income and inventory amounts. The historical estimates have been reliable in the past, and we believe our methodology will continue to be reliable in the future. Based on previous experience, we do not expect significant changes in the level of vendor support.
The historical estimates have been reliable in the past, and we believe our methodology will continue to be reliable in the future. Based on previous experience, we do not expect significant changes in the level of vendor support. However, if such changes were to occur, Cost of sales and Net sales could change, depending on the specific vendors involved.
Wholesale Distribution Center Network We evaluate our distribution center network to optimize performance and expect to incur incremental expenses related to any future network realignment, expansion or improvements, including initiatives under the network automation and optimization pillar of our transformation agenda.
We plan to continue to evaluate our distribution center network to further optimize performance and expect to incur incremental expenses related to any future network realignment, expansion or improvements, including network optimization and automation initiatives. We are working to both minimize these potential future costs and obtain new business to further improve the efficiency of our transforming distribution network.
(in millions) 2023 (52 weeks) 2022 (52 weeks) 2021 (52 weeks) Net income from continuing operations $ 30 $ 254 $ 149 Adjustments to continuing operations net income: Less net income attributable to noncontrolling interests (6) (6) (6) Net periodic benefit income, excluding service cost (1) (29) (40) (85) Interest expense, net 144 155 204 Other income, net (2) (2) (8) (Benefit) provision for income taxes (23) 56 34 Depreciation and amortization 304 285 285 Share-based compensation 38 43 49 LIFO charge 119 158 24 Restructuring, acquisition and integration related expenses (2) 8 21 56 Loss (gain) on sale of assets and other asset charges (3) 30 (87) (4) Multiemployer pension plan withdrawal charges (benefit) (4) 1 (8) 63 Other retail expense (5) 1 — 5 Business transformation costs (6) 25 — — Adjusted EBITDA of continuing operations 640 829 766 Adjusted EBITDA of discontinued operations (7) — — 4 Adjusted EBITDA $ 640 $ 829 $ 770 Income from discontinued operations, net of tax (7) $ — $ — $ 6 Adjustments to discontinued operations net income: Benefit for income taxes — — (1) Restructuring, store closure and other charges, net (8) — — (1) Adjusted EBITDA of discontinued operations (7) $ — $ — $ 4 (1) Fiscal 2021 includes a postretirement settlement gain of $17 million associated with the termination of remaining corporate plans.
(in millions) 2024 (53 weeks) 2023 (52 weeks) Net (loss) income including noncontrolling interests $ (110) $ 30 Adjustments to net (loss) income including noncontrolling interests: Less net income attributable to noncontrolling interests (2) (6) Net periodic benefit income, excluding service cost (15) (29) Interest expense, net 162 144 Other income, net (2) (2) Benefit for income taxes (27) (23) Depreciation and amortization 319 304 Share-based compensation 37 38 LIFO charge 7 119 Restructuring, acquisition and integration related expenses (1) 36 8 Loss on sale of assets and other asset charges (2) 57 30 Multiemployer pension plan withdrawal charges (3) — 1 Other retail expense (4) — 1 Business transformation costs (5) 52 25 Other adjustments (6) 4 — Adjusted EBITDA $ 518 $ 640 (1) Fiscal 2024 and fiscal 2023 primarily reflects costs associated with certain employee severance.
Interest Expense, Net (in millions) 2023 (52 weeks) 2022 (52 weeks) Increase (Decrease) Interest expense on long-term debt, net of capitalized interest $ 130 $ 126 $ 4 Interest expense on finance lease obligations 3 11 (8) Amortization of financing costs and discounts 10 12 (2) Loss on debt extinguishment 3 7 (4) Interest income (2) (1) (1) Interest expense, net $ 144 $ 155 $ (11) The decrease in Interest expense, net for fiscal 2023 compared to fiscal 2022 was primarily driven by lower outstanding debt balances and finance leases, partially offset by higher average interest rates. 35 Table of Contents (Benefit) Provision for Income Taxes The effective income tax rate for continuing operations was a benefit rate of 328.6% in fiscal 2023 compared to an expense rate of 18.1% in fiscal 2022.
Interest Expense, Net (in millions) 2024 (53 weeks) 2023 (52 weeks) Increase (Decrease) Interest expense on long-term debt, net of capitalized interest $ 144 $ 130 $ 14 Interest expense on finance lease obligations 2 3 (1) Amortization of financing costs and discounts 9 10 (1) Loss on debt extinguishment 10 3 7 Interest income (3) (2) (1) Interest expense, net $ 162 $ 144 $ 18 The increase in Interest expense, net for fiscal 2024 compared to fiscal 2023 was primarily driven by higher average interest rates, an increase in losses on debt extinguishment, and an estimated $3 million impact from the 53rd week in fiscal 2024.
Changes in merchandising, customer buying habits and competitive pressures create inherent difficulties in measuring the impact of inflation on Net sales and Gross profit. Absent any changes in units sold or the mix of units sold, inflation generally has the effect of increasing sales.
Cost inflation and deflation estimates are based on individual like items sold during the periods being compared. Changes in merchandising, customer buying habits and competitive pressures create inherent difficulties in measuring the impact of inflation and deflation on Net sales and Gross profit.
The changes to the definition of Adjusted EBITDA from prior periods reflect changes to line item references in our Consolidated Financial Statements, which do not impact the calculation of Adjusted EBITDA. Assessment of Our Business Results The following table sets forth a summary of our results of operations and Adjusted EBITDA for the periods indicated.
Assessment of Our Business Results The following table sets forth a summary of our results of operations and Adjusted EBITDA for the periods indicated.
Gains and losses and the outstanding assets and liabilities from these arrangements are insignificant. 38 Table of Contents Payments for Capital Expenditures Our capital expenditures increased $72 million in fiscal 2023 to $323 million compared to $251 million for fiscal 2022, primarily due to automation investments in our supply chain.
Gains and losses and the outstanding assets and liabilities from these arrangements are insignificant. Payments for Capital Expenditures and Cloud Technology Implementation Expenditures Our capital expenditures for fiscal 2024 were $345 million compared to $323 million for fiscal 2023, an increase of $22 million.
The remaining increase in Operating expenses as a percent of Net sales was primarily driven by higher occupancy-related costs. Restructuring, Acquisition and Integration Related Expenses Restructuring, acquisition and integration related expenses were $8 million for fiscal 2023, compared to $21 million for fiscal 2022.
The increase in Operating expenses as a percentage of Net sales was primarily driven by approximately $49 million higher incentive compensation expense in fiscal 2024 and incremental transformation costs, which were partially offset by lower transportation costs and other operational supply chain efficiencies. 34 Table of Contents Restructuring, Acquisition and Integration Related Expenses Restructuring, acquisition and integration related expenses were $36 million for fiscal 2024, compared to $8 million for fiscal 2023.
As of July 29, 2023, we had an aggregate of $800 million of floating rate notional debt subject to active interest rate swap contracts, which effectively hedge the SOFR component of our interest rate payments through pay fixed and receive floating interest rate swap agreements.
Interest rate swap contracts are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. 38 Table of Contents As of August 3, 2024, we had an aggregate of $750 million of floating rate notional debt subject to active interest rate swap contracts, which effectively fix the SOFR component of our floating interest payments through pay fixed and receive floating interest rate swap agreements.
Refer to Note 6—Goodwill and Intangible Assets, Net in Part II, Item 8 of this Annual Report for additional information. Fiscal 2022 primarily reflects the gain on sale of our Riverside, California distribution center in the third quarter of fiscal 2022. (4) Fiscal 2023 and fiscal 2022 reflect adjustments to multiemployer withdrawal charge estimates.
Refer to Note 3—Revenue Recognition, Note 5—Property and Equipment, Net and Note 6—Goodwill and Intangible Assets, Net in Part II, Item 8 of this Annual Report for additional information. (3) Fiscal 2023 reflects adjustments to multiemployer pension plan withdrawal charge estimates. (4) Fiscal 2023 reflects store closure costs, operational wind-down and inventory charges.
The amount and timing of recognition of vendor funds as well as the amount of vendor funds to be recognized as a reduction to ending inventory requires management judgment and estimates. Management determines these amounts based on estimates of current year purchase volume using forecast and historical data and a review of average inventory turnover data.
Management determines these amounts based on estimates of current year purchase volume using forecast and historical data and a review of average inventory turnover data. These judgments and estimates impact our reported Gross profit, Operating income and inventory amounts.
Retail’s Operating expense increased $13 million, which excludes depreciation and amortization, share-based compensation and other adjustments as outlined in Note 16—Business Segments in Part II, Item 8 of this Annual Report. Retail’s operating expense rate increased 41 basis points primarily driven by higher employee-related costs and new store start-up costs.
Retail Operating expense, which excludes depreciation and amortization, share-based compensation and other adjustments as outlined in Note 16—Business Segments in Part II, Item 8 of this Annual Report, increased $10 million when excluding an estimated $11 million impact from the 53rd week in fiscal 2024.
We did not repurchase any shares of our common stock in fiscal 2022 or 2021.
We did not repurchase any shares of our common stock in fiscal 2024. As of August 3, 2024, we had $138 million remaining authorized under the 2022 Repurchase Program.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeJuly 29, 2023 Expected Fiscal Year of Maturity Fair Value Total 2024 2025 2026 2027 2028 Thereafter (in millions, except interest rates) Long-term Debt: Variable rate—principal payments $ 1,483 $ 1,482 $ — $ — $ 670 $ 812 $ — $ — Weighted average interest rate (1) 7.3 % — % — % 8.5 % 6.3 % — % — % Fixed rate—principal payments $ 421 $ 509 $ 8 $ 1 $ — $ — $ — $ 500 Weighted average interest rate 6.7 % 4.8 % 4.4 % — % — % — % 6.8 % Interest Rate Swaps (2) : Notional amounts hedged under pay fixed, receive variable swaps $ 21 $ 800 $ 350 $ 250 $ 200 $ — $ — $ — Weighted average pay rate 2.6 % 2.5 % 2.5 % 2.8 % — % — % — % Weighted average receive rate 4.8 % 5.3 % 5.1 % 4.5 % — % — % — % (1) Excludes the effect of interest rate swaps effectively converting certain of our variable rate obligations to fixed rate obligations.
Biggest changeAugust 3, 2024 Expected Fiscal Year of Maturity Fair Value Total 2025 2026 2027 2028 2029 Thereafter (in millions, except interest rates) Long-term Debt: Variable rate—principal payments $ 1,613 $ 1,612 $ 5 $ 5 $ 1,118 $ 5 $ 5 $ 474 Weighted average interest rate (1) 7.7 % 10.1 % 10.1 % 6.7 % 10.1 % 10.1 % 10.1 % Fixed rate—principal payments $ 458 $ 501 $ 1 $ — $ — $ — $ 500 $ — Weighted average interest rate 6.7 % 4.4 % — % — % — % 6.8 % — % Interest Rate Swaps (2) : Notional amounts hedged under pay fixed, receive variable swaps $ — $ 750 $ 250 $ 200 $ 200 $ 100 $ — $ — Weighted average pay rate 3.1 % 2.5 % 2.8 % 3.8 % 4.1 % — % — % Weighted average receive rate 3.6 % 5.1 % 4.0 % 3.5 % 3.4 % — % — % (1) Excludes the effect of interest rate swaps effectively converting certain of our variable rate obligations to fixed rate obligations.
Refer to Note 8—Derivatives in Part II, Item 8 of this Annual Report for further information on interest rate swap contracts. 44 Table of Contents The table below provides information about our financial instruments that are sensitive to changes in interest rates, including debt obligations and interest rate swaps.
Refer to Note 8—Derivatives in Part II, Item 8 of this Annual Report for further information on interest rate swap contracts. The table below provides information about our financial instruments that are sensitive to changes in interest rates, including debt obligations and interest rate swaps.
(2) Refer to Note 8—Derivatives in Part II, Item 8 of this Annual Report for further information on interest rate swap contracts. Investment Risk The SUPERVALU INC.
(2) Refer to Note 8—Derivatives in Part II, Item 8 of this Annual Report for further information on interest rate swap contracts. 45 Table of Contents Investment Risk The SUPERVALU INC.
Retirement Plan (entirely within the return-seeking portion of the plan assets) would not have had an impact on our minimum contributions required under ERISA for fiscal 2023, but would have resulted in an unfavorable change in net periodic pension income for fiscal 2024 of $2 million and would have reduced Stockholders’ equity by $156 million on a pre-tax basis as of July 29, 2023.
Retirement Plan (entirely within the return-seeking portion of the plan assets) would not have had an impact on our minimum contributions required under ERISA for fiscal 2024, but would have resulted in an unfavorable change in net periodic pension income for fiscal 2025 of $2 million and would have reduced Stockholders’ equity by $153 million on a pre-tax basis as of August 3, 2024.
For debt obligations, the table presents principal amounts due and related weighted average interest rates by expected maturity dates using interest rates as of July 29, 2023, excluding any original issue and purchase accounting discounts and deferred financing costs. For interest rate swaps, the table presents the notional amounts and related weighted average interest rates by maturity.
For debt obligations, the table presents principal amounts due and related weighted average interest rates by expected maturity dates using interest rates as of August 3, 2024, excluding any original issue and purchase accounting discounts and deferred financing costs. For interest rate swaps, the table presents the notional amounts and related weighted average interest rates by maturity.
As of July 29, 2023, we estimate that a 100-basis point increase in the interest rates related to our variable rate borrowings would increase our annualized Interest expense by approximately $7 million, net of the floating interest rate receivable on our interest rate swaps.
As of August 3, 2024, we estimate that a 100-basis point increase in the interest rates related to our variable rate borrowings would increase our annualized interest expense by approximately $9 million, net of the floating interest rate receivable on our interest rate swaps.
Interest Rate Risk We are exposed to market pricing risk consisting of interest rate risk related to certain of our debt instruments and notes receivable outstanding. Our debt obligations are more fully described in Note 9—Long-Term Debt to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data of this Annual Report.
Interest Rate Risk We are exposed to market pricing risk consisting of interest rate risk related to certain of our debt instruments and notes receivable outstanding. Our debt obligations are more fully described in Note 9—Long-Term Debt in Part II, Item 8 of this Annual Report.
As of July 29, 2023, a 100-basis point increase in forward SOFR interest rates would increase the fair value of the interest rate swaps by approximately $8 million; while a 100-basis point decrease in forward SOFR interest rates would decrease the fair value of the interest rate swaps by approximately $8 million.
As of August 3, 2024, a 100-basis point increase in forward SOFR interest rates would increase the fair value of the interest rate swaps by approximately $11 million; while a 100-basis point decrease in forward SOFR interest rates would decrease the fair value of the interest rate swaps by approximately $11 million.
As of July 29, 2023, a 10% unfavorable change in the total value of investments held by the SUPERVALU INC.
As of August 3, 2024, a 10% unfavorable change in the total value of investments held by the SUPERVALU INC.
As of July 29, 2023, the fair value and expected exposure risk based on aggregate notional values are insignificant. 45 Table of Contents
As of August 3, 2024, the fair value and expected exposure risk based on aggregate notional values are insignificant. 46 Table of Contents
Financial Statements and Supplementary Data of this Annual Report, we have used interest rate swap agreements to mitigate our exposure to adverse changes in interest rates by effectively converting certain of our variable rate obligations to fixed rate obligations.
As more fully described in Note 8—Derivatives in Part II, Item 8 of this Annual Report, we have used interest rate swap agreements to mitigate our exposure to adverse changes in interest rates by effectively converting certain of our variable rate obligations to fixed rate obligations.
Changes in interest rates could also affect the interest rates we pay on future borrowings under our ABL Credit Facility and Term Loan Facility, which rates are typically related to SOFR.
Our variable rate borrowings consist primarily of SOFR-based loans, which is the benchmark interest rate being hedged in our interest rate swap agreements. 44 Table of Contents Changes in interest rates could also affect the interest rates we pay on future borrowings under our ABL Credit Facility and Term Loan Facility, which rates are typically related to SOFR.
These interest rate swaps are derivative instruments designated as cash flow hedges on the forecasted interest payments related to a certain portion of our debt obligations. Our variable rate borrowings consist primarily of SOFR-based loans, which is the benchmark interest rate being hedged in our interest rate swap agreements.
These interest rate swaps are derivative instruments designated as cash flow hedges on the forecasted interest payments related to a certain portion of our debt obligations.
Interest rate risk is managed through the strategic use of fixed and variable rate debt and derivative instruments. As more fully described in Note 8—Derivatives to the Consolidated Financial Statements included in Item 8.
Interest rate risk is managed through the strategic use of fixed and variable rate debt and derivative instruments.

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