Q3 2026 United Natural Foods Inc Earnings Call

June 9, 2026

Operator: Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the UNFI Third Quarter Fiscal 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question at that time, simply press star then the number one on your telephone keypad. If you'd like to withdraw that question, again, press star one. Thank you. I would now like to turn the conference over to Kristyn Farahmand, Chief Strategy Officer. Please go ahead.

Speaker #2: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question at that time, simply press star, then the number one on your telephone keypad.

Speaker #2: And if you'd like to withdraw that question, again, press star one. Thank you. I would now like to turn the conference over to Kristen Fahrenbein.

Speaker #2: Chief Strategy Officer, please go ahead. Good morning, everyone. Thank you for joining us on UNFI's third quarter fiscal 2026 earnings conference call. As many of you may have heard, Steve Bloomquist, our Vice President of Investor Relations and longtime leader within UNFI's finance team, has moved to a part-time consulting role.

Kristyn Farahmand: Good morning, everyone. Thank you for joining us on UNFI's Third Quarter Fiscal 2026 Earnings Conference Call. As many of you may have heard, Steve Bloomquist, our Vice President of Investor Relations and longtime leader within UNFI's finance team, has moved to a part-time consulting role. Given this, I'll be leading our earnings calls going forward. We invite you to continue to reach out to Steve or any other member of our investor relations team as needed going forward. By now, you should have received a copy of the earnings release from this morning. The press release and earnings presentation, which management will speak to, are available under the investor section of the company's website at www.unfi.com on the Events tab. We've also included a supplemental disclosure file in Microsoft Excel with key financial information and our quarterly investor letter with more detail on our Q3 progress.

Kristyn Farahmand: Good morning, everyone. Thank you for joining us on UNFI's Third Quarter Fiscal 2026 Earnings Conference Call. As many of you may have heard, Steve Bloomquist, our Vice President of Investor Relations and longtime leader within UNFI's finance team, has moved to a part-time consulting role. Given this, I'll be leading our earnings calls going forward. We invite you to continue to reach out to Steve or any other member of our investor relations team as needed going forward. By now, you should have received a copy of the earnings release from this morning. The press release and earnings presentation, which management will speak to, are available under the investor section of the company's website at www.unfi.com on the events tab. We've also included a supplemental disclosure file in Microsoft Excel with key financial information and our quarterly investor letter with more detail on our Q3 progress.

Speaker #2: Given this, I'll be leading our earnings calls going forward. We invite you to continue to reach out to Steve or any other member of our Investor Relations team as needed going forward.

Speaker #2: By now, you should have received a copy of the earnings release from this morning. The press release and earnings presentation which management will speak to are available under the Investors section of the company's website at www.unfi.com/events tab.

Speaker #2: We've also included a supplemental disclosure file and Microsoft Excel with key financial information and our quarterly investor letter with more detail on our third quarter progress.

Speaker #2: Our letter this quarter includes a video link detailing some of our recent supply chain improvements driving increasing effectiveness and efficiency. Joining me for today's call are Sandy Douglas, our Chief Executive Officer; and Mateo Tarditi, our President and Chief Financial Officer.

Kristyn Farahmand: Our letter this quarter includes a video link detailing some of our recent supply chain improvements, driving increasing effectiveness and efficiency. Joining me for today's call are Sandy Douglas, our Chief Executive Officer, and Matteo Tarditi, our President and Chief Financial Officer. Sandy and Matteo will provide a business update, after which we'll take your questions. Before we begin, I'd like to remind everyone that comments made by management during today's call may contain forward-looking statements. These forward-looking statements include plans, expectations, estimates, and projections that might involve significant risks and uncertainties. These risks are discussed in the company's earnings release and SEC filings. Actual results may differ materially from these results discussed in these forward-looking statements. I'd like to point out that during today's call, management will refer to certain non-GAAP financial measures.

Speaker #2: Sandy and Mateo will provide a business update, after which we'll take your questions. Before we begin, I'd like to remind everyone that comments made by management during today's call may contain forward-looking statements.

Speaker #2: These forward-looking statements include plans, expectations, estimates, and projections that might involve significant risks and uncertainties. These risks are discussed in the company's earnings release and SEC filings.

Speaker #2: Actual results may differ materially from these results discussed in these forward-looking statements. I'd like to point out that during today's call, management will refer to certain non-GAAP financial measures.

Speaker #2: Definitions and reconciliations to the most comparable GAAP financial measures are included in our press release and at the end of our earnings presentation. I'd now ask you to turn to slide six of our presentation as I turn the call over to Sandy.

Kristyn Farahmand: Definitions and reconciliations to the most comparable GAAP financial measures are included in our press release and at the end of our earnings presentation. I'd now ask you to turn to slide six of our presentation as I turn the call over to Sandy.

Speaker #3: Thanks, Kristen. And thank you, everyone, for joining us this morning. In the third quarter of fiscal 2026, UNFI continued to make steady progress on our value creation strategy that's focused on adding value for our customers and suppliers and becoming a more effective and efficient company.

Sandy Douglas: Thanks, Kristen. Thank you everyone for joining us this morning. In Q3 of fiscal 2026, UNFI continued to make steady progress on our value creation strategy that's focused on adding value for our customers and suppliers and becoming a more effective and efficient company. Through disciplined execution of our strategy, we generated strong profitability and free cash flow while continuing to strengthen our balance sheet and increase our financial flexibility. Throughout the quarter, we remained focused on helping our customers and suppliers execute their strategies in a dynamic operating environment. Our underlying top-line performance reflects the continued strength and resilience of our customers, building on a long track record of consistent growth across our industry.

Speaker #3: Through disciplined execution of our strategy, we generated strong profitability and free cash flow. While continuing to strengthen our balance sheet and increase our financial flexibility, throughout the quarter, we remained focused on helping our customers and suppliers execute their strategies in a dynamic operating environment.

Speaker #3: Our underlying top-line performance reflects the continued strength and resilience of our customers, building on a long track record of consistent growth across our industry.

Speaker #3: As you'll see on slide six, over the past two decades, differentiated regional and independent grocers have steadily gained share, roughly doubling their position in the approximately $1 trillion U.S. grocery retail market, where each incremental share point is equal to $10 billion of retail sales.

Sandy Douglas: As you'll see on slide six, over the past 2 decades, differentiated regional and independent grocers have steadily gained share, roughly doubling their position in the approximately $1 trillion US grocery retail market, where each incremental share point is equal to $10 billion of retail sales. Natural and organic retailers have tripled their share over the same period. Beyond these groups, many multicultural and neighborhood grocers are also well-positioned to deliver enduring growth by offering a unique value proposition to the communities they serve. Retailers pursuing differentiation are the basis for our value creation strategy and define UNFI's growing $90 billion target addressable market. What's notable is the consistency and growth across these food retailers. Differentiated formats have generally outperformed the broader market over time, reflecting a growing segment of consumers that prioritize high quality, healthy assortments, and differentiated experiences.

Speaker #3: Natural and organic retailers have tripled their share over the same period. Beyond these groups, many multicultural and neighborhood grocers are also well-positioned to deliver enduring growth by offering a unique value proposition to the communities they serve.

Speaker #3: Retailers pursuing differentiation are the basis for our value creation strategy and define UNFI's growing $90 billion target addressable market. What's notable is the consistency in growth across these food retailers.

Speaker #3: Differentiated formats have generally outperformed the broader market over time, reflecting a growing segment of consumers that prioritize high-quality, healthy assortments and differentiated experiences. That trend continued in the third quarter, with estimated growth for these segments in aggregate tracking in the low single-digit range, despite a highly dynamic operating environment.

Sandy Douglas: That trend continued in the third quarter, with estimated growth for these segments in aggregate tracking in the low single-digit range despite a highly dynamic operating environment. As we communicated at our Investor Day, our focus is on strengthening the capabilities that are supporting differentiation and growth in our industry. In the quarter, UNFI's underlying net sales performance, excluding the impact of accretive optimization, was in line with the estimated low double single-digit growth of our target addressable market. Since our founding 50 years ago, we have listened closely to our customers and developed solutions to help them respond to emerging trends and business needs, from high-quality natural and organic products to unique private brands and scalable services.

Speaker #3: As we communicated at our investor the capabilities that are supporting differentiation and growth in our industry. In the quarter, UNFI's underlying net sales performance excluding the impact of accretive optimization was in line with the estimated low single-digit growth of our target addressable market.

Speaker #3: Since our founding 50 years ago, we have listened closely to our customers and developed solutions to help them respond to emerging trends in business needs, from high-quality natural and organic products to unique private brands and scalable services.

Speaker #3: The breadth of our product assortment, services offering, and the scale of our distribution network position us to play a meaningful role in supporting the long-term differentiation and growth within the food retail industry.

Sandy Douglas: The breadth of our product assortment, services offering, and the scale of our distribution network position us to play a meaningful role in supporting the long-term differentiation and growth within the food retail industry. Turning to slide seven. We are building on this foundation by strengthening our capabilities in seven key areas: customer stewardship, merchandising and supplier support, professional and digital services, private brands, technology, next-generation supply chain, and productivity. During the third quarter, we continued building and executing our plans for these capabilities, informed by our customer and supplier feedback and through cross-functional collaboration across our teams. We also continued to invest in talent to accelerate our capabilities, including adding a new leader for our digital services business, which includes offerings designed to help our customers and suppliers operate more effectively and to strengthen shopper engagement.

Speaker #3: Turning to slide seven, we're building on this foundation by strengthening our capabilities in seven key areas: customer stewardship, merchandising and supplier support, professional and digital services, private brands, technology, next-generation supply chain, and productivity.

Speaker #3: During the third quarter, we continued building and executing our plans for these capabilities. Informed by our customer and supplier feedback and through cross-functional collaboration across our teams, we also continued to invest in talent to accelerate our capabilities, including adding a new leader for our digital services business, which includes offerings designed to help our customers and suppliers operate more effectively and to strengthen shopper engagement.

Speaker #3: In merchandising and supplier support, we rolled out a new digital marketplace called Endless Aisle. That gives retailers an easier way to access innovative, emerging brands, while also helping suppliers expand their reach with less friction.

Sandy Douglas: In merchandising and supplier support, we rolled out a new digital marketplace called Endless Aisle that gives retailers an easier way to access innovative emerging brands while also helping suppliers expand their reach with less friction. While it is still early, we are hearing positive feedback from partners who value the ability to test new products with greater flexibility, and we expect to continue to develop and test new solutions like this to help further support our stakeholders. We also continue to innovate within our private brands portfolio, introducing more than 30 new SKUs. These innovations aim to help our retailers differentiate their assortments and meet growing shopper demand for nutritious choices, which consumers are increasingly gravitating towards. As we continue taking steps to improve effectiveness and efficiency, we are beginning to see early benefits from the next generation supply chain capabilities that we are building across our network.

Speaker #3: While it's still early, we're hearing positive feedback from partners who value the ability to test new products with greater flexibility, and we expect to continue to develop and test new solutions like this to help further support our stakeholders.

Speaker #3: We also continue to innovate within our private brands portfolio, introducing more than 30 new SKUs. These innovations aim to help our retailers differentiate their assortments and meet growing shopper demand for nutritious choices, which consumers are increasingly gravitating towards.

Speaker #3: As we continue taking steps to improve effectiveness and efficiency, we're beginning to see early benefits from the next-generation supply chain capabilities that we're building across our network.

Speaker #3: For example, we expanded our AI-powered supply chain and procurement planning platform to all DCs in our network, and are focused on completing the supplier-facing portion of this deployment.

Sandy Douglas: For example, we expanded our AI-powered supply chain and procurement planning platform to all DCs in our network and are focused on completing the supplier-facing portion of this deployment. This platform is already helping to steadily improve fill rates and inventory management while also enhancing free cash flow conversion. We also expanded the use of our AI-powered fleet management platform, Samsara. We recently began using the platform's features, including driver coaching, to help strengthen driver safety processes, optimize routes, and improve delivery execution. Year to date through the end of the third quarter, our on-time deliveries increased by over 4% compared to the prior year period, while average miles per delivery have declined by nearly 5%. Additionally, we have expanded our cloud-based warehouse management system to five additional distribution centers, further strengthening reliability and consistency across our network.

Speaker #3: This platform is already helping to steadily improve fill rates, and inventory management, while also enhancing free cash flow conversion. We also expanded the use of our AI-powered fleet management platform, Samsera, we recently began using the platform's features including driver coaching to help strengthen driver safety processes optimize routes, and improve delivery execution.

Speaker #3: Year-to-date, through the end of the third quarter, our on-time deliveries increased by over 4% compared to the prior year period. While average miles per delivery have declined by nearly 5%.

Speaker #3: Additionally, we've expanded our cloud-based warehouse management system to five additional distribution centers. Further strengthening reliability and consistency, across our network. Collectively, these investments aim to enhance service levels for our customers and suppliers over time, while strengthening effectiveness and efficiency across the UNFI network.

Sandy Douglas: Collectively, these investments aim to enhance service levels for our customers and suppliers over time while strengthening effectiveness and efficiency across the UNFI network. We remain confident that our value creation strategy and disciplined execution position us well for long-term sustainable growth and shareholder returns. In addition, we are strengthening our financial flexibility as we look to reinvest in the capabilities to better serve our partners and achieve shared profitable growth with our stakeholders. We see continued opportunities to invest in commercial and supply chain technologies that benefit our customers, our suppliers, and UNFI. As UNFI marks our 50th anniversary, our team is working to build on and accelerate the company's legacy of helping retailers differentiate and grow in a dynamic marketplace. Together, we remain committed to delivering better every day as we work to become our industry's most valued partner.

Speaker #3: We remain confident that our value creation strategy and disciplined execution position us well for long-term sustainable growth and shareholder returns. In addition, we are strengthening our financial flexibility as we look to reinvest in the capabilities to better serve our partners and achieve shared profitable growth with our stakeholders.

Speaker #3: And we see continued opportunities to invest in commercial and supply chain technologies that benefit our customers, our suppliers, and UNFI. As UNFI marks our 50th anniversary, our team is working to build on and accelerate the company's legacy of helping retailers differentiate and grow in a dynamic marketplace.

Speaker #3: Together, we remain committed to delivering better every day as we work to become our industry's most valued partner. With that, let me turn it over to Mateo to share more detail on our third-quarter performance.

Sandy Douglas: With that, let me turn it over to Matteo to share more detail on our Q3 performance.

Speaker #1: Thank you, Sandy, and good morning, everyone. Our third-quarter results reflect disciplined execution of our strategy to create value for customers and suppliers, which enabled us to deliver a strong profitability and free cash flow generation.

Giorgio Matteo Tarditi: Thank you, Sandy, and good morning, everyone. Our Q3 results reflect disciplined execution of our strategy to create value for customers and suppliers, which enabled us to deliver strong profitability and free cash flow generation while further reducing net leverage. Today, I will provide additional insight into our Q3 operating results, our financial position and capital structure, and our fiscal 2026 outlook. With that, let's start with our Q3 results. Starting with Slide nine, our Q3 sales came in at approximately $7.7 billion, a decline of 4.2% to last year, which includes an impact of approximately 450 basis points from our accretive optimization actions. This is similar to the optimization impact we reported in our Q2 results and in line with our expectations.

Matteo Tarditi: Thank you, Sandy, and good morning, everyone. Our Q3 results reflect disciplined execution of our strategy to create value for customers and suppliers, which enabled us to deliver strong profitability and free cash flow generation while further reducing net leverage. Today, I will provide additional insight into our Q3 operating results, our financial position and capital structure, and our fiscal 2026 outlook. With that, let's start with our Q3 results. Starting with Slide nine, our Q3 sales came in at approximately $7.7 billion, a decline of 4.2% to last year, which includes an impact of approximately 450 basis points from our accretive optimization actions. This is similar to the optimization impact we reported in our Q2 results and in line with our expectations.

Speaker #1: While further reducing net leverage. Today, I will provide additional insight into our third-quarter operating results, our financial position and capital structure, and our fiscal 2026 outlook.

Speaker #1: With that, let's start with our Q3 results. Starting with slide nine, our third-quarter sales came in at approximately 7.7 billion dollars, a decline of 4.2% to last year, which includes an impact of approximately 450 basis points from our accretive optimization actions.

Speaker #1: This is similar to the optimization impact we reported in our second-quarter results and is in line with our expectations. Our sales results also reflect an impact from the initial unwind of the short-term project work for a single customer that we have referenced before.

Giorgio Matteo Tarditi: Our sales results also reflect an impact from the initial unwind of the short-term project work for a single customer that we have referenced before. Excluding the impacts of optimization and the short-term project work, our underlying business performed in line with our estimate for our target addressable market and outperformed the overall industry. Natural product sales grew by over 4%, which also reflected the impact from the unwind of the project-based work. We expect to fully cycle this project work in Q3 2027. Underlying natural growth again outperformed the market, reflecting strong execution from our customers and continued shopper demand for natural, organic, fresh, and specialty products. Conventional product sales declined nearly 14%, primarily driven by our strategic network optimization actions.

Matteo Tarditi: Our sales results also reflect an impact from the initial unwind of the short-term project work for a single customer that we have referenced before. Excluding the impacts of optimization and the short-term project work, our underlying business performed in line with our estimate for our target addressable market and outperformed the overall industry. Natural product sales grew by over 4%, which also reflected the impact from the unwind of the project-based work. We expect to fully cycle this project work in Q3 2027. Underlying natural growth again outperformed the market, reflecting strong execution from our customers and continued shopper demand for natural, organic, fresh, and specialty products. Conventional product sales declined nearly 14%, primarily driven by our strategic network optimization actions.

Speaker #1: Excluding the impacts of optimization and the short-term project work, our underlying business performed in line with our estimate for our target addressable market, and outperformed the overall industry.

Speaker #1: Natural product sales grew by over 4%, which also reflected the impact from the unwind of the project-based work. We expect to fully cycle this project work in the third quarter of fiscal 2027.

Speaker #1: Underlying natural growth again outperformed the market, reflecting strong execution from our customers and continued shopper demand for natural, organic, fresh, and specialty products. Conventional product sales declined nearly 14%, primarily driven by our strategic network optimization actions.

Giorgio Matteo Tarditi: Importantly, while we report our segments according to product types, approximately 90% of our customers, spanning our smallest and largest customers, buy both conventional and natural products to support their unique go-to-market strategies in the local markets they serve. The unique value and capabilities we're building to support differentiation in key growth segments of the retail industry are helping to support our growing diversified wholesale pipeline. As a result, as we cycle our larger optimization actions in Q1 2027, we expect that our broader wholesale business will return to sales growth next fiscal year. In retail, total sales declined by around 10%, largely due to the planned top-line impact of strategic store closures as we optimize our footprint and strengthen the foundation of the business. Same-store sales declined by around 4%, reflecting a dynamic environment and a change in pharmacy backdrop.

Matteo Tarditi: Importantly, while we report our segments according to product types, approximately 90% of our customers, spanning our smallest and largest customers, buy both conventional and natural products to support their unique go-to-market strategies in the local markets they serve. The unique value and capabilities we're building to support differentiation in key growth segments of the retail industry are helping to support our growing diversified wholesale pipeline. As a result, as we cycle our larger optimization actions in Q1 2027, we expect that our broader wholesale business will return to sales growth next fiscal year. In retail, total sales declined by around 10%, largely due to the planned top-line impact of strategic store closures as we optimize our footprint and strengthen the foundation of the business. Same-store sales declined by around 4%, reflecting a dynamic environment and a change in pharmacy backdrop.

Speaker #1: Importantly, while we report our segments according to product types, approximately 90% of our customer spend—and our smallest and largest customers—buy both conventional and natural products to support their unique go-to-market strategies in the local markets they serve.

Speaker #1: The unique value and capabilities we're building to support differentiation and key growth segments of the retail industry are helping to support our growing, diversified wholesale pipeline.

Speaker #1: As a result, as we cycle our larger optimization actions in Q1, 2027, we expect that our broader wholesale business will return to sales growth next fiscal year.

Speaker #1: In retail, total sales declined by around 10%, largely due to the planned top-line impact of strategic store closures as we optimize our footprint and strengthen the foundation of the business.

Speaker #1: Same-store sales declined by around 4%, reflecting a dynamic environment and a changing pharmacy backdrop. Underlying this performance, we did see some sequential improvement in CAPS food-driven same-store sales, our team remains focused on continuing to enhance CAPS value proposition, product assortment, and shopping experience in the Minnesota market.

Giorgio Matteo Tarditi: Underlying this performance, we did see some sequential improvement in Cub's food-driven same-store sales. Our team remains focused on continuing to enhance Cub's value proposition, product assortment, and shopping experience in the Minnesota market. Moving to slide 10, let's review profitability drivers in the quarter. Our gross margin rate in Q3 was 13.6%, up approximately 20 basis points year over year. This improvement includes the benefits from our network optimization work. We reduced operating expenses by nearly 7% compared to the prior year and operating expense rate by nearly 40 basis points to 12.4% of net sales. Importantly, we increased DC productivity by over 7%. These results reflect the benefits of our effectiveness and efficiency initiatives, including network optimization, investments in our next generation supply chain, and incremental productivity gains from the expansion of lean practices across our network.

Matteo Tarditi: Underlying this performance, we did see some sequential improvement in Cub's food-driven same-store sales. Our team remains focused on continuing to enhance Cub's value proposition, product assortment, and shopping experience in the Minnesota market. Moving to slide 10, let's review profitability drivers in the quarter. Our gross margin rate in Q3 was 13.6%, up approximately 20 basis points year over year. This improvement includes the benefits from our network optimization work. We reduced operating expenses by nearly 7% compared to the prior year and operating expense rate by nearly 40 basis points to 12.4% of net sales. Importantly, we increased DC productivity by over 7%. These results reflect the benefits of our effectiveness and efficiency initiatives, including network optimization, investments in our next generation supply chain, and incremental productivity gains from the expansion of lean practices across our network.

Speaker #1: Moving to slide 10, let's review profitability drivers in the quarter. Our gross margin rate in the third quarter was 13.6%, up approximately 20 basis points year over year.

Speaker #1: This improvement includes the benefits from our network optimization work. We reduced operating expenses by nearly 7% compared to the prior year, and lowered our operating expense rate by nearly 40 basis points to 12.4% of net sales.

Speaker #1: Importantly, we increased DC productivity by over 7%. These results reflect the benefits of our effectiveness and efficiency initiatives including network optimization, investments in our next-generation supply chain, and incremental productivity gains from the expansion of lean practices across our network.

Speaker #1: Our disciplined execution, combined with a higher gross margin rate and reduced operating expenses, resulted in adjusted EBITDA growth of nearly 17% to $183 million.

Giorgio Matteo Tarditi: Our disciplined execution, combined with a higher gross margin rate and reduced operating expenses, resulted in adjusted EBITDA growth of nearly 17% to $183 million. Our adjusted EBITDA margin was approximately 2.4% of net sales, up around 40 basis points year over year. The strong growth in profitability, along with lower net interest from reduced debt levels and lower depreciation expense, resulted in adjusted EPS of $0.77, a meaningful increase compared to last year's $0.44. Flipping to slide 11, during Q3, we continued improving our effectiveness and efficiency through consistent progress, deploying new technology solutions and further embedding lean practices. As Sandy highlighted earlier, we continue to methodically deploy new technology solutions to enhance our network and supply chain.

Matteo Tarditi: Our disciplined execution, combined with a higher gross margin rate and reduced operating expenses, resulted in adjusted EBITDA growth of nearly 17% to $183 million. Our adjusted EBITDA margin was approximately 2.4% of net sales, up around 40 basis points year over year. The strong growth in profitability, along with lower net interest from reduced debt levels and lower depreciation expense, resulted in adjusted EPS of $0.77, a meaningful increase compared to last year's $0.44. Flipping to slide 11, during Q3, we continued improving our effectiveness and efficiency through consistent progress, deploying new technology solutions and further embedding lean practices. As Sandy highlighted earlier, we continue to methodically deploy new technology solutions to enhance our network and supply chain.

Speaker #1: Our adjusted EBITDA margin was approximately 2.4% of net sales, up around 40 basis points year over year. The strong growth in profitability, along with lower net interest from reduced debt levels and lower depreciation expense, resulted in adjusted EPS of $0.77, a meaningful increase compared to last year's $0.44.

Speaker #1: Flipping to slide 11, during the third quarter, we continued improving our effectiveness and efficiency through consistent progress deploying new technology solutions and further embedding lean practices.

Speaker #1: As Sandy highlighted earlier, we continue to methodically deploy new technology solutions to enhance our network and supply chain. Additionally, we have now implemented lean daily management in 40 DCs as of the end of the third quarter—an increase of four facilities from the prior quarter.

Giorgio Matteo Tarditi: Additionally, we have now implemented lean daily management in 40 DCs as of the end of Q3, an increase of 4 facilities from the prior quarter. We believe that by coupling these deployments, we will be able to sustainably improve processes and deliver rising service levels and productivity over time. We continued to make progress on these fronts with fill rates, on-time deliveries, and throughput increasing compared to the prior year quarter. Turning to slide 12, our strategic and operational discipline delivered solid free cash flow of $54 million for the quarter, which brings our year-to-date total to $243 million, an increase of $90 million from the prior year. This free cash flow, coupled with higher adjusted EBITDA, enabled us to lower our net leverage ratio to 2.5 turns, a 0.8 turn improvement year on year with net debt of $1.63 billion, the lowest since fiscal 2018.

Matteo Tarditi: Additionally, we have now implemented lean daily management in 40 DCs as of the end of Q3, an increase of 4 facilities from the prior quarter. We believe that by coupling these deployments, we will be able to sustainably improve processes and deliver rising service levels and productivity over time. We continued to make progress on these fronts with fill rates, on-time deliveries, and throughput increasing compared to the prior year quarter. Turning to slide 12, our strategic and operational discipline delivered solid free cash flow of $54 million for the quarter, which brings our year-to-date total to $243 million, an increase of $90 million from the prior year. This free cash flow, coupled with higher adjusted EBITDA, enabled us to lower our net leverage ratio to 2.5 turns, a 0.8 turn improvement year on year with net debt of $1.63 billion, the lowest since fiscal 2018.

Speaker #1: We believe that by coupling these deployments, we will be able to sustainably improve processes and deliver rising service levels and productivity over time. We continue to make progress on these fronts with fee rates, on-time deliveries, and throughput increasing compared to the prior year quarter.

Speaker #1: Turning to slide 12, our strategic and operational discipline delivers solid free cash flow of $54 million for the quarter, which brings our year-to-date total to $243 million.

Speaker #1: An increase of 90 million dollars from the prior year. This free cash flow, coupled with higher adjusted EBITDA, enabled us to lower our net leverage ratio to 2.5 turns, a 0.8 turn improvement year on year, with net debt of 1.63 billion dollars, the lowest since fiscal 2018.

Speaker #1: This progress reinforces our confidence in achieving our longer-term deleveraging targets. Year-to-date, through the end of May, we have also repurchased nearly a million shares of stock for approximately $38 million, at an average price of $37.88, reflecting our conviction in the long-term value creation potential of our business and the strategy we are executing.

Giorgio Matteo Tarditi: This progress reinforces our confidence in achieving our longer term deleveraging targets. Year to date, through the end of May, we've also repurchased nearly a million shares of stock for approximately $38 million at an average price of $37.88, reflecting our conviction in the long-term value creation potential of our business and the strategy we are executing. We will continue to evaluate further opportunistic repurchases as we reinvest in our business and reduce leverage as part of our capital allocation process. We also improved our capital structure in Q3. As previously noted, we utilized free cash flow and made a voluntary $150 million prepayment on our senior notes at par, which reduced the outstanding amount of this 2028 maturity to $385 million.

Matteo Tarditi: This progress reinforces our confidence in achieving our longer term deleveraging targets. Year to date, through the end of May, we've also repurchased nearly a million shares of stock for approximately $38 million at an average price of $37.88, reflecting our conviction in the long-term value creation potential of our business and the strategy we are executing. We will continue to evaluate further opportunistic repurchases as we reinvest in our business and reduce leverage as part of our capital allocation process. We also improved our capital structure in Q3. As previously noted, we utilized free cash flow and made a voluntary $150 million prepayment on our senior notes at par, which reduced the outstanding amount of this 2028 maturity to $385 million.

Speaker #1: We will continue to evaluate further opportunistic repurchases as we reinvest in our business and reduce leverage as part of our capital allocation process. We also improved our capital structure in the third quarter.

Speaker #1: As previously noted, we utilized free cash flow and made a voluntary $115 million prepayment on our senior notes at par, which reduced the outstanding amount of these 2028 maturities to $385 million.

Speaker #1: Additionally, we refinanced our 2.53 billion dollar asset-based lending facility which extended its maturity to April 2031 and reduced our overall annual borrowing cost by approximately 2 million dollars.

Giorgio Matteo Tarditi: We refinanced our $2.53 billion asset-based lending facility, which extended its maturity to April 2031 and reduced our overall annual borrowing cost by approximately $2 million. Looking at slide 13, based on our year to date performance and forecast for the balance of the year, we are reiterating outlook midpoints across all outlook metrics and narrowing expected ranges for net sales, net income, EPS, adjusted EBITDA, and adjusted EPS. This reflects our high confidence forecasting methodology, disciplined execution of our value creation strategy, as well as an evolving operating backdrop. It also includes some acceleration of profitability benefits to Q3. We continue to expect investment spend to ramp as we close out fiscal 2026 to support our ongoing investments to enhance our supply chain and deliver better servicing and value for our customers and suppliers.

Matteo Tarditi: We refinanced our $2.53 billion asset-based lending facility, which extended its maturity to April 2031 and reduced our overall annual borrowing cost by approximately $2 million. Looking at slide 13, based on our year to date performance and forecast for the balance of the year, we are reiterating outlook midpoints across all outlook metrics and narrowing expected ranges for net sales, net income, EPS, adjusted EBITDA, and adjusted EPS. This reflects our high confidence forecasting methodology, disciplined execution of our value creation strategy, as well as an evolving operating backdrop. It also includes some acceleration of profitability benefits to Q3. We continue to expect investment spend to ramp as we close out fiscal 2026 to support our ongoing investments to enhance our supply chain and deliver better servicing and value for our customers and suppliers.

Speaker #1: Looking at slide 13, based on our year-to-date performance and forecast for the balance of the year, we are reiterating Outlook midpoints across all Outlook metrics and narrowing expected ranges for net sales, net income, EPS, adjusted EBITDA, and adjusted EPS.

Speaker #1: This reflects our high-confidence forecasting methodology, disciplined execution of our value creation strategy, as well as an evolving operating backdrop. It also includes some acceleration of profitability benefits to the third quarter.

Speaker #1: Additionally, we continue to expect investment spend to ramp as we close out fiscal 2026 to support our ongoing investments to enhance our supply chain and deliver better service and value for our customers and suppliers.

Speaker #1: As highlighted on slide 14, we have delivered another quarter of strong profitability, free cash flow generation, and continued deleveraging. We continue to develop strategic capabilities to support shared long-term profitable growth for our customers, suppliers, and Unifi.

Giorgio Matteo Tarditi: As highlighted on slide 14, we have delivered another quarter of strong profitability, free cash flow generation, and continued deleveraging. We continue to develop strategic capabilities to support shared long-term profitable growth for our customers, suppliers, and UNFI. We continue to advance our technology journey that is designed to simplify processes, provide better near real-time insights into the business, and make us a more effective and efficient organization. As we move into the last quarter of our fiscal year, we are focused on delivering a strong finish to fiscal 2026, continuing to support our customers and suppliers as they execute their unique growth strategies in a dynamic operating backdrop.

Matteo Tarditi: As highlighted on slide 14, we have delivered another quarter of strong profitability, free cash flow generation, and continued deleveraging. We continue to develop strategic capabilities to support shared long-term profitable growth for our customers, suppliers, and UNFI. We continue to advance our technology journey that is designed to simplify processes, provide better near real-time insights into the business, and make us a more effective and efficient organization. As we move into the last quarter of our fiscal year, we are focused on delivering a strong finish to fiscal 2026, continuing to support our customers and suppliers as they execute their unique growth strategies in a dynamic operating backdrop.

Speaker #1: And we continue to advance our technology journey that is designed to simplify processes, provide better near real-time insights into the business, and make us a more effective and efficient organization.

Speaker #1: As we move into the last quarter of our fiscal year, we are focused on delivering a strong finish to fiscal 2026, continuing to support our customers and suppliers as they execute their unique growth strategies in a dynamic operating backdrop.

Speaker #1: We believe that there is a significant opportunity ahead of us, as we expect to return to growth in fiscal 2027 while continuing to strengthen our capabilities and become an even more effective and efficient partner.

Giorgio Matteo Tarditi: We believe that there is a significant opportunity ahead of us as we expect to return to growth in fiscal 2027 while continuing to strengthen our capabilities and become an even more effective and efficient partner. With that, operator, please open the line for questions.

Matteo Tarditi: We believe that there is a significant opportunity ahead of us as we expect to return to growth in fiscal 2027 while continuing to strengthen our capabilities and become an even more effective and efficient partner. With that, operator, please open the line for questions.

Speaker #1: With that, Operator, please open the line for questions.

Speaker #2: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw that question, again, press star one. We also ask that you limit yourself to one question and one follow-up. For any additional questions, please re-queue. Your first question comes from Edward Kelly with Wells Fargo. Please go ahead.

Speaker #2: And if you'd like to withdraw that question, again, press star one. We also ask that you limit yourself to one question in one follow-up.

Speaker #2: For any additional questions, please requeue. And your first question comes from Ed Kelly with Wells Fargo. Please go ahead.

Speaker #3: Hey, good morning. This is John Park on for Ed. Thanks for taking my question. I know you're starting to lapse some of the project work you were doing.

John Park: Hey, good morning. This is John Park on for Ed. Thanks for taking my question. I know you're starting to lap some of the project work you were doing. I guess, can we take a step back and talk about how the underlying natural organic segment is doing, excluding that? Any additional color in terms of customer wins and confidence in that mid-single-digit category growth trajectory?

Speaker #3: I guess, can we take a step back and talk about how the underlying natural/organic segment is doing, excluding that? And any additional color in terms of customer wins and confidence in that mid-single-digit category growth trajectory?

Sandy Douglas: Hi, John, it's Sandy. Good morning. Thanks for the question. The way I'd unpack our sales is starting with -4.2 report. We have about 450 basis points of optimization actions that we took over the past year to align our portfolio of customers with the addressable market and with win-win agreements. That was planned and understood. We also have begun to fully cycle a piece of project work we did with a large customer, that began, as Matteo said in his comments, in Q3, and we'll fully cycle that by the next year Q3. All that adds up to an underlying sales growth that's in line with our addressable market in the low single digits.

Speaker #4: Hi, John. It's Sandy. Good morning. Thanks for the question. the way I'd unpack our sales is starting with negative 4.2 report. we have about 450 basis points of optimization actions that we took over the past year, to align our portfolio of customers with the addressable market and with win-win agreements.

Speaker #4: that was planned and understood. We also have begun to fully cycle a piece of project work we did with a large customer, that began as Matteo said in his comments, in the third quarter and will fully cycle that by the next year, third quarter.

Speaker #4: All that adds up to an underlying sales growth that's in line with our addressable market in the low single digits. From a pipeline standpoint, while we're not generally specific about that, our pipeline is very strong, and it's part of the sets of puts and takes that Matteo considered when he described next year as a return to growth in fiscal '27.

Sandy Douglas: From a pipeline standpoint, while we're not generally specific about that, our pipeline is very strong, and it's part of the sets of puts and takes that Matteo considered when he described next year as a return to growth, in fiscal 2027.

Speaker #3: And John, on, on natural, the, sequential step down from fix and change percent to, 4% and change again in the mid-single digit, it's really driven by 200 basis points of unwind of the, project-based work.

Giorgio Matteo Tarditi: John, on natural, the sequential step down from 6% and change to 4% and change again in the mid-single digit is really driven by 200 basis points of unwind of the project-based work. More interesting, though, if you look at the two-year stack, you see a consistent growth in the mid-teens over the last 5 quarters. While again, the project-based work could create a bit of ups and downs, over the last 5 quarters, two-year stack, the growth in natural has been really strong.

Matteo Tarditi: John, on natural, the sequential step down from 6% and change to 4% and change again in the mid-single digit is really driven by 200 basis points of unwind of the project-based work. More interesting, though, if you look at the two-year stack, you see a consistent growth in the mid-teens over the last 5 quarters. While again, the project-based work could create a bit of ups and downs, over the last 5 quarters, two-year stack, the growth in natural has been really strong.

Speaker #3: More interesting, though, if you look at the two-year stack, you see consistent growth in the mid-teens over the last five quarters. So, while, again, the project-based work could create a bit of ups and downs, over the last five quarters—two-year stack—the growth in natural has been really strong.

Speaker #5: Got it. That makes sense. And then, I guess, what are you guys seeing from conventional customers trying to lean more into natural and organic products, as well as private label?

John Park: Got it. That makes sense. Then I guess, what are you guys seeing from conventional customers trying to lean more into natural organic products as well as private label? I guess anything you could share on the trajectory of those trends as they lean in more?

Speaker #5: I guess anything you could share on, like, the trajectory of those trends as they lean in more?

Speaker #4: Sure. I think, obviously, the strategies of retailers and the innovation across our customer base are significant, and there are many permutations. But if you were going to pull a general theme, one of the main ways to differentiate is through product and assortment.

Sandy Douglas: Sure. I think obviously the strategies of retailers and the innovation across our customer base is significant. There are many permutations. If you were gonna pull a general theme, one of the main ways to differentiate is through product and assortment. Part of the work that we're doing with customers is to optimize the portfolio that full portfolio customers use to access their strategy and create value for their shoppers. A major lean in point is health and wellness and organic, which is on trend, and we expect will continue to be for a long time. So much of the conversation that we're having with our customers as they pursue differentiation strategies is around assortment and leveraging our extensive natural, organic, and specialty assortment.

Speaker #4: And part of the work that we're doing with customers is to optimize the portfolio that full portfolio customers use to access their strategy and create value for their shoppers.

Speaker #4: A major lean-in point is health and wellness, and organic—which is on trend, and we expect will continue to be for a long time.

Speaker #4: And so much of the conversation that we're having with our customers, as they pursue differentiation strategies, is around assortment and leveraging our extensive natural, organic, and specialty assortment.

Speaker #5: Great. Best of luck, guys.

John Park: Great. Best of luck, guys.

Speaker #2: Your next question comes from the line of John Heimbachl with Guggenheim Partners. Please go ahead.

Operator: Your next question comes from the line of John Heinbockel with Guggenheim Partners. Please go ahead.

John Heinbockel: Hey, Sandy. I want to start with that chart you showed on the industry breakdown, right? Obviously, differentiated regionals are, what, three times, four times the size of natural and organic. How do you look at those two cohorts, right, that are growing your exposure to the two of those, obviously the one is much bigger than the other. Where do you think the greater growth opportunity is between those buckets?

Speaker #6: Hey, Sandy. I want to start with that chart you showed on the industry breakdown, right? And obviously, differentiated regionals are what, three times?

Speaker #6: Four times the size of natural and organic. How do you look at those two cohorts, right, that are growing your exposure to the two of those? And, obviously, the one is much bigger than the other.

Speaker #6: You know, where do you think the greater growth opportunity is between those buckets?

Sandy Douglas: John, thanks for the question. Elevating a little bit, I think part of the reason for the slide is to break apart the industry, noting that three of the four segments are growing. The $90 billion addressable market that we talk about that we have targeted is in the light green, light blue segments, that part of the dark blue that's pursuing a differentiation strategy. We see consistent growth in the light green as the pure play natural. You see that in some of the public names, of course, we serve a significant percentage of that, we see strong growth there. The differentiated regionals continue to perform well at or above the industry. We model this into some internal analysis that allows us to evaluate how the $90 billion addressable market is performing and how it has for many years.

Speaker #4: John, thanks for the question. Elevating a little bit, I think part of the reason for the slide is to break apart the industry, noting that three of the four segments are growing.

Speaker #4: And the $90 billion addressable market that we talk about, that we have targeted, is in the light green and light blue segments. And that part of the dark blue is pursuing a differentiation strategy.

Speaker #4: And we see consistent growth in the light green as the pure-play natural. You see that in some of the public names and, of course, we serve a significant percentage of that.

Speaker #4: And we see strong growth there. The differentiated regionals continue to perform well at or above the industry. And we model this into some internal analysis that allows us to evaluate how the $90 billion addressable market is performing and how it has for many years.

Speaker #4: And it's a very durable growth segment, at or above industry growth rates. It, it was for the past 20 years. It was, quarters and continues to be strong.

Sandy Douglas: It's a very durable growth segment, at or above industry growth rates. It was for the past 20 years. It was last year in the first three quarters and continues to be strong. UNFI's focus is on serving the differentiated strategies. We'll participate heavily in the light green segment, the light blue, then a lot of our work is helping dark blue retailers who have strategies to push towards differentiation. That's what makes up the growing target addressable market of $90 billion.

Speaker #4: And so, you know, if our focus is on serving the differentiated strategies, we'll participate heavily in the light green segment, the light blue, and then a lot of our work is helping dark blue retailers who have strategies to push towards differentiation.

Speaker #4: And that's what makes up the growing target addressable market of $90 billion.

John Heinbockel: Maybe the follow-up would be, you should grow faster than your TAM. I assume you agree with that. I don't know how much faster you think you can grow than the TAM, but your thoughts on that. Calling conventional, is that just going to be— I know 14%'s a big number this year. Is that just always there's a couple of hundred basis points for the duration, whether it's warehouses being consolidated or accounts being eliminated?

Speaker #6: And then, maybe as the follow-up, would be, you know, you should grow faster than your TAM. I assume you agree with that. I don't know how much faster you think you can grow than the TAM, but your thoughts on that.

Speaker #6: And then, culling conventional, is that just gonna be I know 14%'s a big, a big, number this year. Is that just always there's a couple of hundred basis points for the dr the duration, whether it's warehouses, you know, being consolidated or accounts being eliminated?

Sandy Douglas: John, multiple pieces of that. The first component is we expect to perform in line with our targeted addressable market. Now, there are things that could drive above performance and things that could be a slight headwind. The above performance is if we do a great job supporting that strategy, we could potentially earn more market share of customers. On the other side, if we're working, and we are, with customers that have historically not grown with that TAM and they're pursuing a new differentiation strategy, that could pull us slightly backwards. Net-net, we believe we should perform in line with the addressable market as we've discussed it.

Speaker #4: So, John, there are multiple pieces to that. The first component is we expect to perform in line with our target addressable market. Now, there are things that could drive above performance.

Speaker #4: And things that could be a slight headwind. The above performance is if we do a great job supporting that strategy, we could potentially earn more market share of customers.

Speaker #4: On the other side, if we're working and we are with customers that have historically not grown with that TAM and they're pursuing a new differentiation strategy, that could pull us slightly backwards.

Speaker #4: But net-net, we believe we should perform in line with the addressable market as we've discussed it. from a, managing change perspective, ultimately, we sell the products that our customers wanna buy.

John Heinbockel: Okay.

Sandy Douglas: From a managing change perspective, ultimately, we sell the products that our customers want to buy. It happens that we have historically looked at them as natural or organic on one side and conventional on the other, ultimately, our product assortment will evolve with customer and consumer needs. The technology roadmap that we've articulated will allow us to do that more and more efficiently as we look to drive productivity in our $4 billion of spend. Think of it as an asset that will change, one that we can manage given the breadth of our scale and the capabilities that we're building to serve customers in a changing product environment.

Speaker #4: It happens that we have historically looked at them as natural and organic on one side, and conventional on the other. But ultimately, our product assortment will evolve with customer and consumer needs.

Speaker #4: And the technology roadmap that we've articulated will allow us to do that more and more efficiently as we look to drive productivity in our $4 billion of spend.

Speaker #4: So think of it as an asset that will change, but one that we can manage given the breadth of our scale and the capabilities we're building to serve customers in a changing product environment.

Speaker #6: Thank you.

John Heinbockel: Thank you.

Speaker #2: Your next question comes from the line of Mark Carden with UBS. Please go ahead.

Operator: Your next question comes from the line of Mark Carden with UBS. Please go ahead.

Speaker #7: Good morning. Thanks so much for taking the question. So, to start, I just wanted to touch on the health of the consumer. Have you guys seen any changes since the start of Q3, just given higher energy costs? Has demand for trade-down in general picked up much?

Mark Carden [Director: Morning. Thanks so much for taking the question. To start, just wanted to touch on the health of the consumer. Have you guys seen many changes since the start of Q3, just given higher energy costs? Has demand for trade down in general picked up much? Have you seen differences in behavior there between both natural, organic, and conventional customers?

Mark Carden: Morning. Thanks so much for taking the question. To start, just wanted to touch on the health of the consumer. Have you guys seen many changes since the start of Q3, just given higher energy costs? Has demand for trade down in general picked up much? Have you seen differences in behavior there between both natural, organic, and conventional customers?

Speaker #7: And have you seen differences in behavior there between both natural, organic, and conventional customers?

Sandy Douglas: I think what I would say is that we generally are finding incremental pressure across the consumer base. I would say heavily impacting the lower end of the socioeconomic level. The reduction in SNAP funding is beginning to make an impact or continuing to make an impact. Consumers continue to seek value, whether it's value from a cost and price standpoint or value in terms of quality and experience. The result of that, if you go back to the slide that John and I were just talking about, is you see growth above the industry in the discounters and you see growth above the industry in the value-added players. Generally, the consumer continues to look for value, and there's certainly a lot of headwinds on them as they manage the different things that they have to deal with, from higher energy prices to lower SNAP.

Speaker #4: I think what I would say is that we are generally finding incremental pressure across the consumer base. I would say it's heavily impacting the lower end of the socioeconomic level. The reduction in SNAP funding is beginning to make an impact, or continuing to make an impact.

Speaker #4: consumers continue to seek value, whether it's value from a cost and price standpoint or value in terms of quality and experience. And that's the result and the result of that, if you go back to the slide that John and I were just talking about, is you see growth above the industry in the discounters and you see growth above the industry in the value-added players.

Speaker #4: But generally, the consumer continues to look for value. And there's certainly a lot of headwinds on them as they manage the different things that they have to deal with, from higher energy prices to lower SNAP.

Speaker #4: I would also say that from a macro standpoint, challenging times often help food away from home because there's better value. And the price splits between—or I should say, food at home and food away from home—prices are still higher than food at home.

Sandy Douglas: I would also say that from a macro standpoint, challenging times often help food away from home because there's better value, or I should say food at home. Food away from home prices are still higher than food at home, our customers are continuing to seize opportunities there to create unique value for consumers.

Speaker #4: And so, our customers are continuing to seize opportunities there to create unique value for consumers.

Speaker #6: Yeah. Mark is Matteo. Maybe a, a couple of additional thoughts. So the first one, just to reinforce, the on the health of the customers, when you look at the natural customers, so deeply into the Brazilian $90 billion market, the two-year stack points to a mid-teens growth, for five consecutive quarters.

Giorgio Matteo Tarditi: Mark, it's Matteo. Maybe a couple of additional thoughts. The first one just to reinforce on the health of the customers. When you look at the natural customers, so deeply into the resilient $90 billion market, the two-year stack points to mid-teens growth for five consecutive quarters. When you combine that trend, the resilience of the $90 billion market, that's where we have the confidence in the return to low single-digit sales growth in 2027.

Matteo Tarditi: Mark, it's Matteo. Maybe a couple of additional thoughts. The first one just to reinforce on the health of the customers. When you look at the natural customers, so deeply into the resilient $90 billion market, the two-year stack points to mid-teens growth for five consecutive quarters. When you combine that trend, the resilience of the $90 billion market, that's where we have the confidence in the return to low single-digit sales growth in 2027.

Speaker #6: So when you combine that trend, the resilience of the $90 billion market, that's where we have the confidence in the return to low single-digit sales growth in 2027.

Speaker #8: Got it. Appreciate all the color there, guys. And then, as a quick follow-up, you've got some moving pieces in play, obviously. But as you think about Q4 and your guidance, are you assuming any underlying shifts in fuel prices, or any benefit from tariff refunds?

Mark Carden [Director: Got it. Appreciate all the color there, guys. As a quick follow-up, you got some moving pieces in play, obviously, but as you think about Q4 and your guidance, are you assuming any underlying shifts in fuel prices or any benefit from carefree funds? Thanks.

Mark Carden: Got it. Appreciate all the color there, guys. As a quick follow-up, you got some moving pieces in play, obviously, but as you think about Q4 and your guidance, are you assuming any underlying shifts in fuel prices or any benefit from carefree funds? Thanks.

Speaker #8: Thanks.

Speaker #6: Hey, Mark. So the, discipline, execution of our strategy to date, helped us grow EBITDA 20%, more than $90 million year over year. And, 40 basis points on average of, of expansion.

Giorgio Matteo Tarditi: Hey, Mark. The disciplined execution of our strategy to date help us grow EBITDA 20%, more than $90 million year over year, and 40 basis points on average of expansion. Pleased with the performance. They are rooted into the natural growth, the network optimization benefits, and the productivity journey. When we thought about Q4 in high confidence mode, we embedded the tailwinds from the natural growth, the benefits of the optimization, and the continuous journey on productivity. We also embedded a couple of elements. First is the expected pressure from fuel and transportation in this dynamic operating backdrop. It's also some incremental investments in technology, supply chain, and commercial capabilities in light of the accelerated benefits that we generated in Q3 versus H2 as initially expected.

Matteo Tarditi: Hey, Mark. The disciplined execution of our strategy to date help us grow EBITDA 20%, more than $90 million year over year, and 40 basis points on average of expansion. Pleased with the performance. They are rooted into the natural growth, the network optimization benefits, and the productivity journey. When we thought about Q4 in high confidence mode, we embedded the tailwinds from the natural growth, the benefits of the optimization, and the continuous journey on productivity. We also embedded a couple of elements. First is the expected pressure from fuel and transportation in this dynamic operating backdrop. It's also some incremental investments in technology, supply chain, and commercial capabilities in light of the accelerated benefits that we generated in Q3 versus H2 as initially expected.

Speaker #6: So, please, with the performance they are rooted into—the natural growth, the network optimization benefits, and then the productivity journey. When we thought about the fourth quarter, in high-confidence mode, we embedded the tailwinds from the natural growth, the benefits of the optimization, and the continuous journey on productivity, but we also embedded a couple of elements.

Speaker #6: First is the, expected pressure from fuel and transportation in this dynamic operating backdrop. And then also some incremental investments in technology, supply chain, and commercial capabilities in light of the accelerated benefits that we generated in Q3 versus the, second half as initially expected.

Speaker #6: So we are in high confidence mode, multiple ways to get to the outcome, balancing the strength that we've seen year to date, and also fuel pressure and incremental investments that we want to make to get into 2027 on stronger footing.

Giorgio Matteo Tarditi: We are in high confidence mode, multiple ways to get to the outcome, balancing the strengths that we have seen year to date, and also fuel pressure and incremental investment that we want to make to get into 2027 on stronger footing.

Matteo Tarditi: We are in high confidence mode, multiple ways to get to the outcome, balancing the strengths that we have seen year to date, and also fuel pressure and incremental investment that we want to make to get into 2027 on stronger footing.

Speaker #8: Thanks so much. Good luck, guys.

Mark Carden [Director: Thanks so much. Good luck, guys.

Mark Carden: Thanks so much. Good luck, guys.

Speaker #6: Thank you.

Giorgio Matteo Tarditi: Thank you.

Matteo Tarditi: Thank you.

Speaker #2: Your next question comes from the line of Scott Mushkin with R5 Capital. Please go ahead.

Operator: Your next question comes from the line of Scott Mushkin with R5 Capital. Please go ahead.

Speaker #9: Great, guys. And, thanks for taking my questions. short-term question. You guys you were touching on it, Matteo. obviously, diesel prices have gone way up.

Scott Mushkin: Great, guys, thanks for taking my questions. Short-term question, you were touching on it, Matteo. Obviously, diesel prices have gone way up. Are you already putting surcharges in to your customers? The impact seems to me could be pretty large on your margins. I'm thinking about 20 basis points this quarter and next. I guess that's my first question.

Speaker #9: you know, are you already putting surcharges in on, to your customers? And then, are the impact seems to me could be pretty large, on your on your margins.

Speaker #9: and, you know, I'm thinking about 20 basis points this quarter and next. so I, I guess that's my first question.

Giorgio Matteo Tarditi: Morning, Scott.

Matteo Tarditi: Morning, Scott.

Speaker #8: Morning, Scott. So we're,

Speaker #9: Hi.

Scott Mushkin: Hi

Speaker #8: M-monitoring this very dynamic situation as you can imagine. but continue to manage fuel prices through, three important tools. The first one is that we hedge part of the fuel.

Giorgio Matteo Tarditi: Monitoring this very dynamic situation, as you can imagine, continue to manage fuel prices through three important tools. The first one is that we hedge part of the fuel. The second one is that we have contractual protection to share some of the fuel pressures with our customers. Equally, if not even more importantly, we continue to optimize our transportation routes to reduce mileage so that we create a full wing-to-wing benefits in the industry. What we model in the Q4, given the dynamic situation, is incremental fuel cost and kind of broader kind of transportation impacts. Also, as I mentioned, some incremental investments that keep us into the control what we can control. We're balancing the tailwind from the year to date, the incremental fuel cost, the desire to make some incremental investments, but that, of course, we control.

Matteo Tarditi: Monitoring this very dynamic situation, as you can imagine, continue to manage fuel prices through three important tools. The first one is that we hedge part of the fuel. The second one is that we have contractual protection to share some of the fuel pressures with our customers. Equally, if not even more importantly, we continue to optimize our transportation routes to reduce mileage so that we create a full wing-to-wing benefits in the industry. What we model in the Q4, given the dynamic situation, is incremental fuel cost and kind of broader kind of transportation impacts. Also, as I mentioned, some incremental investments that keep us into the control what we can control. We're balancing the tailwind from the year to date, the incremental fuel cost, the desire to make some incremental investments, but that, of course, we control.

Speaker #8: The second one is that we have contractual protection to, share some of the fuel pressures with our customers. equally, if not even more importantly, we continue to optimize our transportation routes to, reduce mileage so that we create a full wing-to-wing benefits in the, in the industry.

Speaker #8: What we model in the, fourth quarter, given the dynamic situation, is some incremental, fuel cost and kind of broader kind of transportation impacts. but also, as I mentioned, some incremental investments that keep us into the control where we can control.

Speaker #8: So we're, we're balancing the tailwinds from the year to date, the incremental fuel cost, the desire to make some incremental investments, but the, of course, we, we control.

Speaker #8: And so that's really our focus while working the three levers that I mentioned at the opening.

Giorgio Matteo Tarditi: That's really our focus while working the three levers that I mentioned at the opening.

Matteo Tarditi: That's really our focus while working the three levers that I mentioned at the opening.

Speaker #9: Is it safe to say that you're adjusted EBITDA would have been at the high end of the range without fall, without fuel? Or even over?

Scott Mushkin: Is it safe to say that your adjusted EBITDA would have been at the high end of the range without fuel, or even over?

Giorgio Matteo Tarditi: I think that the learnings the last 3 months continues to keep us in high confidence mode. It was the right thing to do to invest some higher fuel and transportation costs in light of the environment.

Matteo Tarditi: I think that the learnings the last 3 months continues to keep us in high confidence mode. It was the right thing to do to invest some higher fuel and transportation costs in light of the environment.

Speaker #6: I, I, I think that, the, the learning in the last three months, continues to keep us in high confidence mode. And it was, the right thing to do to embed some higher fuel and, and transportation cost in light of the environment.

Speaker #9: Okay. And then, my second question is, is more longer term. I mean, obviously, you, you guys are growing your EBITDA very quickly. So is and I know you have your long-term outlook out there.

Scott Mushkin: Okay. My second question is more longer term. I mean, obviously you guys are growing the EBITDA very quickly. I know you have your long-term outlook out there, but as you think about some of these levers, are you able to kind of think that your EBITDA margin and growth rate on EBITDA, adjusted EBITDA, can continue to kind of exceed your thought process? From a CapEx spending, I know this comes up a lot, how should we be thinking about CapEx as we go forward as maybe a percentage of sales or something like that? Thanks.

Speaker #9: But as you think about some of these these levers, you know, are you able to, to kind of think that you're EBITDA margin, and growth rate, on EBITDA adjusted EBITDA can continue to kind of exceed, your thought process?

Speaker #9: And then from a CapEx spending, I know this comes up a lot. You know, how should we how should we think be thinking about CapEx, as we go forward, as maybe a percentage of sales or something like that?

Speaker #9: thanks.

Speaker #6: Hey, Scott. thanks for the question. I think.

Sandy Douglas: Hey, Scott. Thanks for the question.

Scott Mushkin: Hey, Sandy.

Sandy Douglas: I think broadly speaking, I will let Matteo provide the detail here, but I think broadly speaking, we see the business as a growth business in line with the addressable market, focusing on helping customers differentiate. As the slide we talked about on slide six describes earlier, there are multiple growth segments of the market, and the company is focused on serving the successful high growth areas, as well as those who are trying to get there. We believe that market will grow in the low single digits consistently over time, as it has all year this year and for the years prior.

Speaker #9: Thanks, Danny.

Speaker #6: Bro-broadly speaking, and I'll, I'll let Matteo, provide the, the detail here. But I think broadly speaking, we see the business as a growth business, in line with the addressable market, focusing on helping customers differentiate.

Speaker #6: As, the slide we talked about on slide six describes earlier, there are multiple growth segments of the market. And the company is focused on serving the successful high-growth areas as well as those who are trying to get there.

Speaker #6: and we believe that market will grow in the low single digits, consistently over time as it has all year this year and for the years prior.

Speaker #6: That's embedded on top of a $4 billion cost base, that we believe can be optimized through lean, through technology, and very disciplined investments, to drive a virtuous cycle between driving customer value and customer service metrics, and at the same time, driving efficiency through process and technology.

Sandy Douglas: That is embedded on top of a $4 billion cost base that we believe can be optimized through lean, through technology, and very disciplined investments to drive a virtuous cycle between driving customer value and customer service metrics, and at the same time, driving efficiency through process and technology. That algorithm ultimately creates the low single-digit sales growth and high single-digit EBITDA growth with reliable free cash flow generation and improved returns over time. We are driving that and have lots of confidence in our ability to do that. Matteo, do you want to give some more detail?

Speaker #6: That algorithm ultimately creates the low single digit sales growth and high single digit EBITDA growth with reliable free cash flow generation and improved returns over time.

Speaker #6: and we are driving that and have lots of confidence in our ability to do that. Matteo, do you wanna give some more detail? Yeah.

Giorgio Matteo Tarditi: Yeah, I will add on CapEx. Scott, if you look at the last four years, including the 2026 guidance, we would have spent about a billion and a quarter, which is roughly 1% of sales. The number goes up and down depending on the timing on the automation investments. We also embedded in our operating mechanisms, usage-based maintenance versus calendar-based maintenance that obviously created a benefit as we look at the CapEx spending in 2025, 2026 versus 2023 and 2024. Broadly, when we think about the capital allocation and how we think about organic investments, we want to continue to invest in safety maintenance, technology, and then growth and supply chain modernization, which in a given year or quarter may imply some automation investments. In other quarters could be more focused on technology or general modernization.

Matteo Tarditi: Yeah, I will add on CapEx. Scott, if you look at the last four years, including the 2026 guidance, we would have spent about a billion and a quarter, which is roughly 1% of sales. The number goes up and down depending on the timing on the automation investments. We also embedded in our operating mechanisms, usage-based maintenance versus calendar-based maintenance that obviously created a benefit as we look at the CapEx spending in 2025, 2026 versus 2023 and 2024. Broadly, when we think about the capital allocation and how we think about organic investments, we want to continue to invest in safety maintenance, technology, and then growth and supply chain modernization, which in a given year or quarter may imply some automation investments. In other quarters could be more focused on technology or general modernization.

Speaker #6: I'll add on, on, on CapEx. So if you, Scott, if you look at the last four years including the, the 26 guidance, we would have spent about a billion and a quarter, which is roughly 1% of sales.

Speaker #6: And that number, goes up and down, depending on the timing on the automation investments. And we also embedded in our operating mechanisms, usage-based maintenance versus calendar-based maintenance that obviously created a benefit as we look at the CapEx spending in 25, 26 versus 23 and 24.

Speaker #6: But broadly, when we think about the capital allocation and how we think about organic investments, we wanna continue to invest in safety maintenance, technology, and then growth and supply chain modernization, which in a given year or quarter may imply some automation investments, in other quarters could be more focused on technology, or general modernization.

Speaker #6: If, if you think about the CapEx in the first nine months of 26 versus 25, basically, when you normalize for automation payments that we were making in 25 towards implementation in 25 and 26, we're actually spending more.

Giorgio Matteo Tarditi: If you think about the CapEx in the first nine months of 2026 versus 2025, basically when you normalize for automation payments that we were making in 2025 towards implementation in 2025 and 2026, we are actually spending more. We are behind that kind of 1% of sales kind of plan for the future.

Matteo Tarditi: If you think about the CapEx in the first nine months of 2026 versus 2025, basically when you normalize for automation payments that we were making in 2025 towards implementation in 2025 and 2026, we are actually spending more. We are behind that kind of 1% of sales kind of plan for the future.

Speaker #6: So we are we're behind that kind of 1% of sales, kind of plan, for the future. Perfect. Thanks, guys, for the insights.

Scott Mushkin: Perfect. Thanks, guys, for the insights.

Speaker #1: Your next question comes from a line of Kelly Bania with BMO Capital Markets. Please go ahead.

Operator: Your next question comes from the line of Kelly Bania with BMO Capital Markets. Please go ahead.

Kelly Bania: Hi, thanks for taking our questions. I just wanted to clarify a little bit the expectations around Q3 and Q4 EBITDA. I think you had expected a roughly equal contribution in each quarter for EBITDA. Matteo mentioned an acceleration of profitability drivers or benefits in Q3. I just wanted to understand what those were, and it sounds like some more investments in Q4. Can you just help quantify exactly what those are and what the benefits will be?

Speaker #10: Hi. Thanks for taking our questions. I just wanted to, to clarify a little bit. the expectations around Q3 and Q4 EBITDA, I think you had expected a roughly equal contribution in each quarter for EBITDA.

Speaker #10: And, I think Matteo mentioned an acceler-acceleration of profitability drivers or benefits in the third quarter. And so I've just understand wanted to understand what those were and it sounds like some more investments in Q4.

Speaker #10: Can you just help quantify exactly what those are, and, and what the benefits will be?

Speaker #6: Morning, Kelly. So three, three months ago, we, shared that we were expecting about $350 million for the remainder of the year, with equal contributions to your point, in Q3 and Q4.

Giorgio Matteo Tarditi: Morning, Kelly. Three months ago, we shared that we were expecting about $350 million for the remainder of the year with equal contributions, to your point, in Q3 and Q4. What we saw is that through the productivity actions, the value delivery office, Lean, we were able to accelerate some of the productivity benefits into Q3. In a way, we deliver a little bit over our equal contributions as initially expected. With that in mind, as we thought about Q4, we wanted to embed two kind of balancing elements. The first one is this continuous strength coming from natural product growth, network optimization, and the productivity journey.

Matteo Tarditi: Morning, Kelly. Three months ago, we shared that we were expecting about $350 million for the remainder of the year with equal contributions, to your point, in Q3 and Q4. What we saw is that through the productivity actions, the value delivery office, Lean, we were able to accelerate some of the productivity benefits into Q3. In a way, we deliver a little bit over our equal contributions as initially expected. With that in mind, as we thought about Q4, we wanted to embed two kind of balancing elements. The first one is this continuous strength coming from natural product growth, network optimization, and the productivity journey.

Speaker #6: What we saw is that through the, productivity, actions, the value delivery office, lean, we were able to accelerate some of the, productivity benefits, into the third quarter.

Speaker #6: So in a way, we deliver a little bit over, our equal contributions as initially expected. With, with that in mind, as we thought about the fourth quarter, we wanted to embed two kind of balancing elements.

Speaker #6: The first one is this continuous strength coming from natural product growth, network optimization, and then the productivity journey. But then on the other side, the fuel dynamics, as well as an opportunity to accelerate certain investments in technology, supply chain, and commercial capabilities to continue to support our strategy.

Giorgio Matteo Tarditi: On the other side, the fuel dynamics, as well as an opportunity to accelerate certain investments in technology, supply chain, and commercial capabilities to continue to support our strategy while still remaining at the midpoint of our guidance at $695 million EBITDA.

Matteo Tarditi: On the other side, the fuel dynamics, as well as an opportunity to accelerate certain investments in technology, supply chain, and commercial capabilities to continue to support our strategy while still remaining at the midpoint of our guidance at $695 million EBITDA.

Speaker #6: While still remaining at the midpoint of our guidance at $695 million of EBITDA.

Speaker #10: Okay. So does that pull forward, impact at all the way that you think about fiscal 27 EBITDA?

Kelly Bania: Okay. Does that pull forward impact at all the way that you think about fiscal 2027 EBITDA?

Speaker #6: No. 'Cause when we think about, we're, we're first of all, we're in the middle of building our high confidence operating, case that we're, we're gonna discuss in September.

Giorgio Matteo Tarditi: No, because first of all, we're in the middle of building our high confidence operating case that we're going to discuss in September. In general, what we would expect to see into 2027 is the resilience of the $90 billion market growing at low single-digit to get us back into low single-digit sales growth in fiscal 2027. The expansion of the seven capabilities that we discussed at the Investor Day to continue to help and the continuous value delivery office/Lean productivity journey to contribute to the growth in 2027. The framework is consistent with return to growth capabilities and productivity journey.

Matteo Tarditi: No, because first of all, we're in the middle of building our high confidence operating case that we're going to discuss in September. In general, what we would expect to see into 2027 is the resilience of the $90 billion market growing at low single-digit to get us back into low single-digit sales growth in fiscal 2027. The expansion of the seven capabilities that we discussed at the Investor Day to continue to help and the continuous value delivery office/Lean productivity journey to contribute to the growth in 2027. The framework is consistent with return to growth capabilities and productivity journey.

Speaker #6: But in general, what we would expect to see into, 2027 is the resilience of the $90 billion market growing at low single digit, to get us back into low single digit sales growth in fiscal 2027.

Speaker #6: And then the expansion of the, seven capabilities that we discussed at the, investor day to continue to help, and the continuous value delivery office/lean productivity journey, to, contribute, you know, to the growth in 2027.

Speaker #6: So the, the, the framework is consistent with return to growth, capabilities, and productivity journey.

Speaker #10: Okay. Thanks. And Matteo, can you help, help me understand, I think you're, you're characterizing it as that top line was kind of in line with that low single digit, growth rate that you're looking at for your core customers.

Kelly Bania: Okay, thanks. Matteo, can you help me understand, I think you're characterizing it as the top line was kind of in line with that low single-digit growth rate that you're looking at for your core customers, ex the optimization. I guess, looking at it, and it seems closer to flat, I was just wondering if you could help walk us through that math. Maybe we're missing a piece. Just also on top of that, how the network optimization impact, how that played out relative to your expectations.

Speaker #10: ex the, the optimization. But I guess, looking at it, and it seems closer to flat, I was just wondering if you could, you know, help walk us through that math, maybe we're missing a piece, and, and just also on top of that, how the network, optimization impact, ho-how that played out relative to your expectations.

Speaker #6: Y-yeah. So, Kelly, if you start with the negative 4% and you add back first the 450 basis points of network optimization, you get to slightly positive.

Giorgio Matteo Tarditi: Yeah. Kelly, if you start with the -4% and you add back first the 450 basis points of network optimization, you get to slightly positive, and then there is an incremental headwind coming from the unwind of the project-based work in natural that we sort of quantify as a 200 basis points sequential headwind for natural. You basically get another tens of points getting to a low single-digit normalized growth, which is in line with the market and actually with the addressable market and actually faster than the overall grocery market. I think the piece that you may be missing was the unwind of the project-based work.

Matteo Tarditi: Yeah. Kelly, if you start with the -4% and you add back first the 450 basis points of network optimization, you get to slightly positive, and then there is an incremental headwind coming from the unwind of the project-based work in natural that we sort of quantify as a 200 basis points sequential headwind for natural. You basically get another tens of points getting to a low single-digit normalized growth, which is in line with the market and actually with the addressable market and actually faster than the overall grocery market. I think the piece that you may be missing was the unwind of the project-based work.

Speaker #6: And then there is an incremental headwind coming from the unwind of the, project-based work in natural, that we sort of quantify as a 200 basis points, sequential headwind for natural.

Speaker #6: So you basically get another, tens of points, get into a low single digit normalized growth, which is in line with the market. And actually, with the addressable market and actually faster than the, overall grocery market.

Speaker #6: So I, I think the me the, the piece that you may be missing was the unwind of the project-based work.

Speaker #10: Okay. That's helpful. Thank you.

Kelly Bania: Okay. That's helpful. Thank you.

Speaker #6: Thank you.

Giorgio Matteo Tarditi: Thank you.

Matteo Tarditi: Thank you.

Speaker #1: Your next question comes from the line of Leah Jordan with Goldman Sachs. Please go ahead.

Operator: Your next question comes from the line of Leah Jordan with Goldman Sachs. Please go ahead.

Leah Jordan: Hi. Thank you. Good morning. I wanted to build off of one of Kelly Bania's questions around FY27. I know it's a little early for formal guidance, but you've talked about the return of wholesale to low single-digit growth. Maybe some more detail around the high level puts and takes we should keep in mind around gross margin and SG&A heading into next year as we lap a lot of the optimization work and cost savings you've already done.

Speaker #11: Hi. Thank you. Good morning. I wanted to build off of one of Kelly's questions around FY27. I know it's a little early for formal guidance, but you've talked about the return of wholesale to low single digit.

Speaker #11: But maybe some more detail around the high-level puts and takes we should keep in mind around gross margin and SG&A heading into next year, as we lap a lot of the optimization work and cost savings you've already done.

Speaker #6: Hey. Morning, Leah. It's, probably a bit too early relative to the, the specific elements. But let me offer you a framework that I think will, will help.

Giorgio Matteo Tarditi: Hey. Morning, Leah Jordan. It's probably a bit too early relative to the specific elements, let me offer you a framework that I think will help. First of all, with the $695 million as a jumping off point, we got a good solid foundation into 2027, and we really look at three elements of the EBITDA growth into 2027. First is the resilient $90 billion market will help us drive overall wholesale growth of low single-digit growth, wholesale portfolio growth of low single-digit growth, restarting in 2027. The second area is that the four commercial capabilities of customer stewardship, merchandising, supplier management, professional services, and brands are all growing inside our portfolio. The third element is the process to become more effective and efficient.

Matteo Tarditi: Hey. Morning, Leah Jordan. It's probably a bit too early relative to the specific elements, let me offer you a framework that I think will help. First of all, with the $695 million as a jumping off point, we got a good solid foundation into 2027, and we really look at three elements of the EBITDA growth into 2027. First is the resilient $90 billion market will help us drive overall wholesale growth of low single-digit growth, wholesale portfolio growth of low single-digit growth, restarting in 2027. The second area is that the four commercial capabilities of customer stewardship, merchandising, supplier management, professional services, and brands are all growing inside our portfolio. The third element is the process to become more effective and efficient.

Speaker #6: So first of all, with the $695 million as a jumping-off point, we got a good solid foundation, into 2027. And we really look at three elements of the growth into the EBITDA growth, into 2027.

Speaker #6: So first is the resilient $90 billion market will help us drive overall wholesale growth of low single digit wholesale portfolio growth of low single digit, restarting in 2027.

Speaker #6: The second area is that the four commercial capabilities of customer management, professional services, and brands, are all growing inside our portfolio. And then the third element is the process to become more effective and efficient.

Speaker #6: So think about technology, supply chain of the future, and productivity, which as Sandy said, is rooted into the, projects around the $2 billion indirect cost, but overall into the $4 billion of total cost, where we continue to see large opportunities with throughputs, better cost optimization, etc.

Giorgio Matteo Tarditi: Think about technology, supply chain of the future, and productivity, which as Sandy Douglas said, is rooted into the projects around the $2 billion indirect cost, overall into the $4 billion of total cost, where we continue to see large opportunities with throughput, better cost optimization, et cetera. These are kind of the three big pieces into 2027.

Matteo Tarditi: Think about technology, supply chain of the future, and productivity, which as Sandy Douglas said, is rooted into the projects around the $2 billion indirect cost, overall into the $4 billion of total cost, where we continue to see large opportunities with throughput, better cost optimization, et cetera. These are kind of the three big pieces into 2027.

Speaker #6: So these are kind of the three big pieces into 2027.

Speaker #10: Okay, that's helpful, thank you. And then maybe just switching gears over to inflation—could you talk about what you're seeing in terms of food inflation today, and how you think that evolves in Q4 and into FY27?

Leah Jordan: Okay. That's helpful. Thank you. Maybe just switching gears over to inflation, could you talk about what you're seeing in terms of food inflation today and how you think that evolves in Q4 and into FY27?

Speaker #6: Yeah. So, we have seen a low single digit inflation, year to date. And our, forecast through the end of our fiscal year ending in early August, is, as well low single digit.

Giorgio Matteo Tarditi: Yes. We have seen a low single-digit inflation year to date, and our forecast through the end of our fiscal year ending in early August is, as well, low single digit. The backdrop, as you can imagine, Leah, is very dynamic. Our response is really to continue to work with our suppliers and our supply chain at large to keep prices low, stable, and predictable to continue to help our customers succeed in the food marketplace. I would say that going back to the 2027 question, we continue to see the combination of return to growth, the capabilities, and then the control of what we can control, so productivity and lean, as our kind of response to what is happening in the industry, and continue to remain very committed to help our customers stay competitive in the industry.

Matteo Tarditi: Yes. We have seen a low single-digit inflation year to date, and our forecast through the end of our fiscal year ending in early August is, as well, low single digit. The backdrop, as you can imagine, Leah, is very dynamic. Our response is really to continue to work with our suppliers and our supply chain at large to keep prices low, stable, and predictable to continue to help our customers succeed in the food marketplace. I would say that going back to the 2027 question, we continue to see the combination of return to growth, the capabilities, and then the control of what we can control, so productivity and lean, as our kind of response to what is happening in the industry, and continue to remain very committed to help our customers stay competitive in the industry.

Speaker #6: The backdrop, as you can imagine, Leah, is very, very dynamic. and our response, is really to continue to work with our suppliers and our supply chain at large to keep prices, low, stable, and predictable, to continue to help our customers succeed in the, in the food marketplace.

Speaker #6: I would say that going back to the, the 27 question, we continue to see the combination of return to growth, the capabilities, and then the, control of what we can control.

Speaker #6: So productivity and lean, as our kind of response to what is happening in the industry, and continue to remain very committed to help our customers stay competitive in the industry.

Speaker #10: Okay. Great. Thank you.

Leah Jordan: Okay, great. Thank you.

Speaker #1: If you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Chuck Sarankowsky with North Coast Research.

Operator: If you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Chuck Cerankosky with North Coast Research. Please go ahead.

Speaker #1: Please go ahead.

Speaker #6: Good morning, everyone. when you're looking at working capital, the, the last or actually last three fiscal years, it was a source of cash and, and a significant source and, and two of the last three.

Chuck Cerankosky: Good morning, everyone. When you're looking at working capital, the last or actually last 3 fiscal years, it was a source of cash and a significant source in 2 of the last 3. What are sort of the dynamics in fiscal 2026 as you're lapping these big numbers? What should we expect from working capital as either a source of cash or a use of cash going forward, especially with stabilization of sales and steady increases in efficiency?

Speaker #6: What are, sort of, the dynamics in fiscal '26 as you're lapping these big numbers? And what should we expect from working capital as either a source of cash or a use of cash going forward, especially with stabilization of sales and steady increases in efficiency?

Giorgio Matteo Tarditi: Morning, Chuck. As you can see in one of the appendix pages in the earnings materials, working capital has been a positive source of free cash flow year to date and is really centered on a sequence of activities. First of all, our focus has been on reducing days on hand of inventory, and it started in 2025 with the decentralization of the procurement organization and it expanded with the rollout of the RELEX planning tool, which is AI- and cloud-based, and again, created a decentralized AI-based kind of process to plan around our customers and suppliers. The second area of focus has been to optimize our payment terms, and this is still very much ongoing and an opportunity for '27 and beyond, together with improving our billing processes, continuing to try and reduce the days of collection.

Matteo Tarditi: Morning, Chuck. As you can see in one of the appendix pages in the earnings materials, working capital has been a positive source of free cash flow year to date and is really centered on a sequence of activities. First of all, our focus has been on reducing days on hand of inventory, and it started in 2025 with the decentralization of the procurement organization and it expanded with the rollout of the RELEX planning tool, which is AI- and cloud-based, and again, created a decentralized AI-based kind of process to plan around our customers and suppliers. The second area of focus has been to optimize our payment terms, and this is still very much ongoing and an opportunity for '27 and beyond, together with improving our billing processes, continuing to try and reduce the days of collection.

Speaker #11: Morning, Chuck. as you can see in one of the, appendix pages in the, in the earnings materials, working capital has been a positive source of free cash flow, year to date.

Speaker #11: And it's really centered on a sequence of activities. First of all, our focus has been on reducing this unhandled inventory, and it started in 2025 with the decentralization of the procurement organization.

Speaker #11: And then in expanded with the rollout of the, relaxed planning tool, which is AI and cloud-based. And again, created a decentralized AI-based kind of process to, plan around our customers and, and suppliers.

Speaker #11: The second area of focus has been to optimize our payment terms, and this is still very much ongoing, and an opportunity for '27 and beyond. Together with improving our billing processes, we are continuing to try and reduce the days of collection.

Speaker #11: So a lot of a lot of, levers and a lot of different ways to continue to, support working capital benefits. again, we wouldn't expect the same magnitude of benefits year over year as we harvested, you know, quite, quite some good dollars in '25 and 2026.

Giorgio Matteo Tarditi: A lot of levers and a lot of different ways to continue to support working capital benefits. Again, we wouldn't expect the same magnitude of benefits year over year as we harvested quite some good dollars in 2025 and 2026. The focus is always there to reduce the levels and continue to be very disciplined in the way we manage it.

Matteo Tarditi: A lot of levers and a lot of different ways to continue to support working capital benefits. Again, we wouldn't expect the same magnitude of benefits year over year as we harvested quite some good dollars in 2025 and 2026. The focus is always there to reduce the levels and continue to be very disciplined in the way we manage it.

Speaker #11: But the focus is always there to reduce the levels and continue to be very, very disciplined in the way we manage it. Matteo, how do you feel, given economic conditions, about receivables?

Chuck Cerankosky: Matteo, how do you feel, given economic conditions, about receivables? Any problem accounts out there?

Speaker #11: Any problem accounts out there?

Giorgio Matteo Tarditi: We monitor them very closely, and we haven't seen any kind of out-of-pattern behavior.

Matteo Tarditi: We monitor them very closely, and we haven't seen any kind of out-of-pattern behavior.

Speaker #6: We monitor them very, very closely, and we haven't seen any kind of out-of-pattern behavior. But I think we need to continue to monitor.

Chuck Cerankosky: All right. Thank you.

Giorgio Matteo Tarditi: We continue to monitor it. Thanks a lot, Chuck.

Matteo Tarditi: We continue to monitor it. Thanks a lot, Chuck.

Speaker #11: Thanks a lot, Chuck.

Speaker #1: We have time for one more question, and that question comes from Bill Ruder with Bank of America. Please go ahead.

Operator: We have time for one more question, and that question comes from Bill Kirk with Bank of America. Please go ahead.

Speaker #12: Good morning. I just have one question. On the topic of inflation, Matteo, you mentioned still expecting low single-digit inflation for the remainder of the year.

Bill Kirk: Good morning. I just have one. On the topic of inflation, Matteo, you mentioned still expecting low single digit for the remainder of the year. I can't imagine that's not going to accelerate next year given what we've heard from food companies. If it does, do you expect that there will be benefits from forward buys? I guess, are you beginning to participate in some of those activities which could, I guess, increase working capital in the short term?

Bill Luther: Good morning. I just have one. On the topic of inflation, Matteo, you mentioned still expecting low single digit for the remainder of the year. I can't imagine that's not going to accelerate next year given what we've heard from food companies. If it does, do you expect that there will be benefits from forward buys? I guess, are you beginning to participate in some of those activities which could, I guess, increase working capital in the short term?

Speaker #12: I can't imagine that's not going to accelerate next year, given what we've heard from food companies. If it does, do you expect that there will be benefits from Ford Buys?

Speaker #12: And I guess, are you beginning to participate in some of those activities which could, I guess, increase working capital in the short term?

Speaker #6: Yeah. Should inflation sustain at or above low single digits, first of all, we have a 60- to 90-day advance price notice. So we have time to work with our suppliers and customers on alternatives.

Giorgio Matteo Tarditi: Yeah. Should inflation sustain at or above low single-digit, first of all, we have a 60 to 90-day advance price notice, we have time to work with our suppliers and customers on alternatives. As we said before, we may be seeing some secondary and temporary gains in the short term, our focus is really going to be to work with suppliers and our broad supply chain to keep prices low, stable, and predictable to continue to help the industry. We're going to closely monitor it with our learning how to model it, and we'll see what happens in a couple of months.

Matteo Tarditi: Yeah. Should inflation sustain at or above low single-digit, first of all, we have a 60 to 90-day advance price notice, we have time to work with our suppliers and customers on alternatives. As we said before, we may be seeing some secondary and temporary gains in the short term, our focus is really going to be to work with suppliers and our broad supply chain to keep prices low, stable, and predictable to continue to help the industry. We're going to closely monitor it with our learning how to model it, and we'll see what happens in a couple of months.

Speaker #6: As we said before, we may be seeing some secondary and temporary gains in the short term, but our focus is really going to be to work with suppliers and our broad supply chain to get prices low, stable, and predictable to continue to help the industry.

Speaker #6: So we're going to closely monitor it. We are learning how to model it, and we'll see— we'll see what happens in a couple of months.

Speaker #12: Got it. Thank you.

Bill Kirk: Got it. Thank you.

Bill Luther: Got it. Thank you.

Speaker #6: Thank you.

Giorgio Matteo Tarditi: Thank you.

Matteo Tarditi: Thank you.

Speaker #1: I would now like to turn the conference over to Sandy Douglas, CEO, for closing comments.

Operator: I would now like to turn the conference over to Sandy Douglas, CEO, for closing comments.

Speaker #13: Thank you, operator. As we close out fiscal 2026, we're continuing to focus on the disciplined execution of our value creation strategy—focused on adding value for our customers and suppliers, and becoming a more effective and efficient company.

Sandy Douglas: Thank you, operator. As we close out fiscal 2026, we're continuing to focus on the disciplined execution of our value creation strategy, focused on adding value for our customers and suppliers and becoming a more effective and efficient company. As we shared today, UNFI is uniquely positioned to support a growing $90 billion target addressable market that continues to demonstrate enduring growth in the food retail industry. Our team remains focused on strengthening capabilities to help food retailers differentiate, compete, and profitably grow while helping suppliers build their brands within a diverse retail network. Importantly, it's early in the strategy, and we believe there's a long runway for continued improvement and value creation ahead of us. To our customers and suppliers, we thank you for your continued partnership and collaboration.

Speaker #13: As we shared today, UNFI is uniquely positioned to support a growing $90 billion target addressable market that continues to demonstrate enduring growth in the food retail industry.

Speaker #13: Our team remains focused on strengthening capabilities to help food retailers differentiate, compete, and profitably grow. While helping suppliers build their brands, within a diverse retail network.

Speaker #13: Importantly, it's early in the strategy, and we believe there's a long runway for continued improvement and value creation ahead of us. To our customers and suppliers, we thank you for your continued partnership and collaboration.

Speaker #13: To the UNFI associates listening today, our thanks for continuing to deliver better for our partners, our communities, and each other. And to our shareholders, we thank you for the trust you continue to place in us.

Sandy Douglas: To the UNFI associates listening today, our thanks for continuing to deliver better for our partners, our communities, and each other. To our shareholders, we thank you for the trust you continue to place in us. Thanks again to all of you for joining us this morning. We look forward to updating everyone on our progress and our full year results in September.

Speaker #13: Thanks again to all of you for joining us this morning. We look forward to updating everyone on our progress and our full-year results in September.

Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Q3 2026 United Natural Foods Inc Earnings Call

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