UNFI
#If you're talking about the fresh perimeter business, where UNFI has a full product offering in organic produce, fresh produce, bakery, deli, specialty cheese, protein, et cetera.
I think that we have the most built-out network closest to the consumer, regardless of whether the customer is mass, conventional, independent, et cetera.
And so I think we're optimistic that there's going to continue to be business wins.
We've already had a few.
And quite frankly, I would prefer that they tend to be smaller wins that gain sequential improvement quarter over quarter, year over year.
But we are also in front of a lot of the big conventional or other retailers that we feel should be using some, or all, of the services that we offer.
When we're at a point where any of those need to be announced, you will be the first to know.
We've been working hard at building the infrastructure and having the technology and the resources and the intellectual capital to be a true national provider of cold chain.
It's a lot different than handling chips.
And we've put a lot of work into it, and feel we're in a great place to start taking advantage of that network.
No, I don't think there was anything in the quarter.
I think that the gross margin was, as we discussed, primarily driven by FX.
But some improvements in our trade spend, some seasonality, associated with it.
Listen, our strategy is to get better-for-you products into as many consumers' hands as we possibly can, regardless of the channel and regardless of the mechanism by which that product gets ultimately to the consumer.
So whether it's click and collect, direct-to-consumer, direct-to-store, we want to make it easy for a retailer to use UNFI in order to make that happen.
I think that's the best explanation I can give you.
Sure.
Not going to give you specifics around how we see the actual numbers playing out, but I will provide you this explanation.
The reason we bought Nor-Cal is because they were 70% conventional produce, 30% organic.
We really needed to have a conventional produce offering.
As you might imagine, at Albert's, as the largest distributor of organic produce across the country, we've been competing pretty hard with conventional distributors who have started to take on organic over the last four or five years.
And so we felt as though conventional was a very important part of our strategy.
Today, we only have it in half of California.
Nor-Cal serves as our base to move conventional throughout every Albert's distribution center.
Our expectation would be a significant amount of growth from Nor-Cal in Albert's as we move conventional into the Albert's DCs.
The same thing applies to Haddon.
We had specialty gourmet ethnic.
We just didn't have it in all of the right geographies.
And I would say that I don't think we really fully understood the service portion of that business in terms of the quality and the type of the individual that was calling on the store on a weekly basis to actually do the work around order entry, receipt, reset, et cetera.
And so, with Haddon, we now have full coverage in the eastern half of the US.
And we will begin rapidly deploying the Haddon model across most our major DCs and urban markets over the next year.
So we would expect a fairly significant amount of growth associated with both conventional produce and specialty.
We redid our credit facility.
We are starting to throw off more cash than we've ever thrown off before.
We have the capacity, in certain markets, to take on some new business.
So I think that we're going to continue to be opportunistic.
Despite what's happened in the last year or 18 months, we still view ourselves as a growth Company.
And so, that's where we see using our cash.
That's where we see using our balance sheet.
Now, having done three in the last couple months, it would be nice if we could breathe a bit.
But sometimes you don't have that luxury.
So I guess it's a long way of saying that we will continue to be opportunistic when it comes to M&A.
I think it's hard to answer that at this point in the quarter and the year, Andy.
And I would say I think we'll be in a much better position to give you more color around that in our guidance for 2017.
I'd say directionally that's right.
But again, we'll get into more confirmation of that, or discussion of that, in September.
The 90-basis-points decline versus second quarter down to 1.25 for inflation, there are elements of that.
As you know, meat deflation; cheese has been flat to deflationary over time.
And those are driving the numbers down for sure.
It depends on the perishable.
Generally, commodity proteins would carry no trades.
Any processed products, delis and food service, bakery would probably have some.
It's harder to increase your gross margin with no inflation because we would typically buy into rising markets.
So it's largely grocery.
It can be frozen; it can be dry; center store---+ but certainly, index to grocery versus perishable.
Yes, Andy, we've pointed to continued positive cash flow as we move forward to the end of the year.
I put the range out there at $200 million to $220 million.
We anticipate that we'll continue to be where we've been year-to-date on CapEx, so we won't see it there.
But beyond that, it really comes down to our performance on our working capital metrics.
And we are focusing there.
We're trying to improve our working capital.
We've done a nice job of that.
And to the extent we can do that, that can improve our number going forward, too.
The cash generation for the business is strong.
And you're absolutely right that Q4 has been a good quarter for UNFI historically.
And we assume it will be nice, solid, positive quarter again for UNFI.
We expected that we would get this question.
But I think what we've provided was the aggregated acquisition numbers in the quarter and in the anticipated for the year.
And we'll provide a lot more of the color in 2017.
Keep in mind that it's going to be getting harder and harder to report them separately as we integrate these businesses into our business systems.
Global will be integrated into our Albert's system relatively soon.
Nor-Cal will be integrated into our business systems certainly within the next ---+ third quarter next year.
And then Haddon will be integrated into our systems around this time next year.
A lot of the business is going to move around as we do this.
So it's going to get a little bit clunky to get to that data, but we'll try in September.
I think that our numbers have been relatively flat.
They're not getting consistently better.
They're not getting consistently worse.
I'm not sure that it's choppy, per se; but a little yawny.
But given the initiatives that we have in fresh and produce and specialty, those are the things that get us pretty jacked about moving forward.
I'm not sure that we're going to provide that.
We haven't thought about that actually.
I'm hesitant to give the data because, quite frankly, I don't know the exact data off the top of my head.
And I'm pretty sure nobody else does as well.
So we're going to have to table that one and think about how we want to deal with that question.
We outlined some of the costs that are included in the numbers for the Gilroy startup.
The fuel is an interesting one because while we lose the fuel surcharge, which affects our gross margin, we get back a benefit down in operating expense from the reduction in fuel expense.
So we've seen nice pick up there.
And the net fuel impact overall then for us is positive.
We have done some price locking to do some hedging.
Some of that is in the money; some of it's out of the money.
But it's certainly been a tailwind for us in the quarter relative to last year and in the quarter relative to last quarter.
Well, is your question what is our plan regarding the free cash that we are creating.
No.
Definitely not.
Thank you very much for joining us this evening.
Have a terrific summer, and we'll talk to you in September.
