UNFI 2026 財年第四季法說會：EBITDA 成長、降低槓桿與 2027 財年財測指引

UNFI 2026 財年獲利能力提升，全年自由現金流創下歷史新高，且槓桿率下降。管理層預估 2027 財年調整後 EBITDA 與調整後每股盈餘（EPS）將再次成長，不過剩餘的網絡優化效應預計將對第一季銷售額造成壓力。

重點總覽

• 2026 財年第四季銷售額超過 76 億美元，年減不到 1%，而全年銷售額約為 312 億美元。
• 單季調整後 EBITDA 為 1.72 億美元。全年調整後 EBITDA 成長 27% 至 7.01 億美元，接近 UNFI 財測目標範圍的高標。
• 第四季調整後 EPS 達 0.69 美元，全年達 2.65 美元。管理層將此結果歸因於營運表現良好、淨利息費用降低以及折舊費用減少。
• 全年自由現金流增加 8,400 萬美元，達到創公司紀錄的 3.23 億美元。淨槓桿率從 3.3 倍降至 2.2 倍，淨負債降至 16 億美元以下。
• 展望 2027 財年，管理層預估銷售額為 312 億至 318 億美元，調整後 EBITDA 為 7.3 億至 7.8 億美元，調整後 EPS 為 3.00 至 3.50 美元。
• UNFI 授權一項新的 2 億美元股票回購計畫，同時維持內部有機投資與進一步降低槓桿的優先事項。

核心財務數據

業務與營運表現

管理層表示，基礎批發銷售額以低個位數速率成長，符合 UNFI 約 900 億美元的目標可服務市場（TAM）。列報銷售額受到網絡優化估計 500 個基點的影響，以及短期專案工作結束約 150 個基點的影響。基期比較亦包含跨越 2025 財年的資安事件影響。

天然產品部門表現繼續優於整體市場。管理層表示，2026 財年天然產品銷售額成長約 7%，部門 EBITDA 增加 19%。第四季基礎傳統產品銷售額以中個位數速率下滑，但隨著 UNFI 執行增益性網絡優化，全年傳統產品 EBITDA 成長超過 50%。

第四季零售銷售額下降 8%，主要是由於計畫中的門市調整措施。在排除前一年資安事件的影響後，Cub 同店銷售額較第三季季增約 150 個基點。管理層將 Cub 策略形容為仍處於初期階段。

UNFI 在 44 個物流中心完成了精益每日管理的初步部署。供貨率、準時交付率和吞吐量連續第四個季度實現同比改善。公司計劃透過精益 2.0 深化該計畫，更加注重問題解決、日常管理流程與持續改善。

公司還將其位於威斯康辛州拉辛的設施整合至位於伊利諾州喬利埃特的擴建物流中心，該中心配備了箱級自動化設備。管理層指出，實施仍處於初期階段，並經歷了一些初期的磨合陣痛。

其他營運舉措包括推出 130 多個新的自有品牌 SKU、為 UNFI Insights 供應商平台導入 AI 功能，以及在全網路部署 AI 驅動的供應鏈與採購計畫系統。

管理層財測指引

隨著 UNFI 繼續經歷網絡優化與臨時專案工作的基期效應，管理層預計第一季銷售額將有所下滑。公司預計下半年將恢復獲利性成長，屆時這些基期影響應已大部分吸收完畢。

2027 財年指引的中點意味著利潤率將年增約 10 個基點。管理層表示，這將使 UNFI 比原計畫提前一年達成 2028 財年的利潤率目標。公司目前也預計 2028 財年調整後 EBITDA 將比 2027 財年指引中點成長約 10%。

2027 財年展望假設食品通膨率為低個位數。管理層表示，其並未依賴異常的採購收益，並已採用其稱為高信賴度的規劃方法將燃料成本納入考量。

風險與關注領域

• 剩餘的網絡優化與臨時專案基期比較預計將對列報銷售額帶來壓力，特別是在 2027 財年第一季。
• 燃料價格上漲最近造成單季淨影響約 500 萬美元。UNFI 正在利用避險、合約價格調整條款與路線優化作為因應對策。
• 管理層指出，SNAP（補充營養援助計畫）福利減少以及與 GLP-1 相關的銷量壓力，是影響食品零售需求的更廣泛因素。
• 由於品項更廣、週轉較慢的 SKU、創新產品以及供應模式較不穩定，天然產品的供貨率仍低於傳統產品。
• 零售業競爭依然激烈，管理層表示 Cub 的營運轉機仍處於初期階段。
• 喬利埃特自動化轉型在初期實施時遇到了挑戰，但管理層預計長期來看將帶來服務與效率上的效益。

分析師問答重點

基礎成長與銷售節奏：管理層表示，UNFI 的基礎成長率仍維持在低個位數區間。預期的第一季銷售額下滑，主要反映了網絡優化時程與臨時客戶專案比較的基期影響，而非基礎預期的改變。

新客戶業務：UNFI 正在從現有客戶獲得額外品項與市占率，同時爭取新的零售品牌加入。管理層表示，大型零售品牌的轉換可能需要六到九個月，且通常安排避開假期等高峰期。

供貨率提升契機：傳統產品與天然產品的供貨率皆以相似的速度改善，但傳統產品依然較高。UNFI 將供貨率的改善視為其最大的營運契機之一，並正運用需求數據、供應商協調及其 RELEX AI 平台來提升庫存可用性。

資本配置：管理層目前的偏好是進行內部有機投資，因為其認為在每年約 40 億美元的營運費用中，仍有大幅提升效能與效率的空間。降低槓桿與逢低回購仍是優先事項，而併購（M&A）機會雖持續評估，但並非當前展望的核心。

資產負債表舉措：UNFI 對其定期貸款進行重新定價，利率從 SOFR 加 475 個基點調降至 SOFR 加 400 個基點，管理層預計這將使每年利息費用再減少 300 萬美元。公司將在 2028 日曆年末債券到期前，繼續評估其債務結構。

完整法說會逐字稿

完整財報電話會議逐字稿

管理層陳述

Operator

Thank you for standing by. At this time, I would like to welcome everyone to the UNFI Fourth Quarter Fiscal 2026 Earnings Call. [Operator Instructions] I would now like to turn the call over to Jeremy Perron, Senior Vice President of Investor Relations and Corporate Development. You may begin.

Jeremy Perron

Good morning, and welcome to UNFI's Fourth Quarter and Full Year Fiscal 2026 Earnings Conference Call. Our earnings press release and presentation, which management will speak to, are available under the Investors section of the company's website. We've also included a supplemental disclosure file with key financial information. Joining me for today's call are Sandy Douglas, our Chief Executive Officer; and Matteo Tarditi, our President and Chief Operating Officer.

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 the results discussed in these forward-looking statements. Additionally, Sandy and Matteo will refer to certain non-GAAP financial measures. Definitions and reconciliations to the most comparable GAAP financial measures are included in our press release and at the end of the earnings presentation. Now over to Sandy.

James Alexander Douglas

Thank you, Jeremy, and thank you, everyone, for joining us this morning. In the fourth quarter of fiscal 2026, UNFI delivered solid results in line with our most recent outlook and completed a strong second year of our strategy to add value for customers and suppliers while becoming a more effective and efficient company.

Through consistent execution of our value creation strategy, we delivered fourth quarter adjusted EBITDA of $172 million, which contributed to full year adjusted EBITDA growth of 27% and free cash flow of $80 million in the fourth quarter and $323 million for the full year. And we reduced our year-end net leverage ratio to 2.2x, more than a full turn less than last year. At the same time, we strengthened capabilities to help our customers and suppliers grow profitably, continued improving our operating model and build momentum as we enter fiscal 2027.

Now turning to Slide 6. Let me take a few minutes to review UNFI's target addressable market, the basis for our value creation strategy. Over the past 2 decades, many of the most successful food retailers have built growth strategies centered on differentiation. While value remains critically important, many shoppers also continue to seek healthier foods, innovative products and locally relevant experiences. As a result, food retailers with differentiated value propositions have steadily gained share within the grocery industry over time. We continue to see this trend across a wide range of retailers, including natural and organic grocers as well as smaller chains and independents with unique locally relevant offerings.

These retailers are the foundation of UNFI's approximately $90 billion target addressable market, which is expected to grow in the low single digits over time. Our focus is helping these customers execute growth strategies to differentiate their shopping experiences in the marketplace and better compete with mass and discount retailers. Through a combination of our proprietary analysis and third-party research, we estimate retailers within our target addressable market grew in the low single digits and increased their combined share of the grocery industry by approximately 30 basis points compared to last year's fourth quarter.

Within this backdrop, UNFI delivered low single-digit underlying sales growth, in line with our target addressable market. As we've discussed previously, our reported sales included the impact of accretive network optimization actions and the unwind of short-term project work in our Natural Products segment, partially offset by the cycling of last year's cyber event. Excluding those factors, our underlying sales performance remained largely in line with the most consistent and growth-oriented portions of the market. Importantly, we believe our target addressable market will continue to grow because of the quality of our customer base and their alignment with enduring consumer priorities around health, innovation, quality and value.

Turning to Slide 7. Our value creation strategy is purpose-built for this part of the market and anchored on 2 priorities: adding value for customers and suppliers and becoming a more effective and efficient company. First, we're adding value for customers and suppliers by enhancing account management, merchandising and supplier support programs, innovative private brands and professional services that help our partners differentiate, compete and profitably grow.

Second, we're improving effectiveness and efficiency across the business through next-generation supply chain, technology and productivity initiatives that are steadily improving safety, quality and delivery accuracy for our partners while reducing our operating costs. Together, these strategic capabilities represent our road map to building a company that can best serve the most growth-oriented parts of our industry while supporting shared profitable growth for our customers, our suppliers and for UNFI.

Turning to Slide 8. In fiscal 2026, we made solid progress on our road map to strengthen our core capabilities while continuing to improve daily execution. This year, we launched more than 130 new private brand SKUs, including a variety of innovative health forward options. In Q4, we also refreshed one of our core seafood brands that offers a unique combination of quality and value. We've seen private brands continue to grow steadily across the industry, playing an important role in many retailers' differentiation strategies. We also continue to enhance our supplier support programs, which several of our investors saw in real time at our holiday and winter selling shows.

Most recently, we added new AI-enabled features on the UNFI Insights platform to make it easier for our suppliers to assess store-level performance, improve demand planning and achieve their goals. Throughout fiscal 2026, we also made progress towards becoming a more effective and efficient company. We continue to optimize our network to better serve our customers and suppliers over time, while investing in technology to support long-term growth. In the fourth quarter, we consolidated our Racine, Wisconsin facility and expanded our nearby Joliet, Illinois DC with full case automation, which is now in the early stages of implementation.

We also completed the rollout of our AI-powered supply chain and procurement planning platform to all DCs in our network, which is helping to steadily improve fill rates and inventory management while increasing free cash flow. In addition to technology investments, we focused equal attention on strengthening processes across our network. By year-end, we completed the initial deployment phase of lean daily management in 44 distribution centers, which is enabling ongoing improvements in our safety, quality, delivery and cost metrics. While we've made progress this year, we still see significant opportunities to continue improving our capabilities as well as our effectiveness and efficiency across the business.

The leadership updates we recently announced are another step forward in aligning our operating model more closely to our value creation strategy. Matteo's expanded role as President and Chief Operating Officer brings together our sales, supply chain, technology and lean organizations, creating stronger alignment between our customer relationships and our operational execution. We're also sharpening our focus on commercial capability building under Louis Martin's leadership. On that note, I'm pleased to officially welcome Alfredo Luchini as our new Chief Financial Officer, who is joining us on today's call. We're excited to have him on board as we continue executing our strategic priorities with strong financial discipline.

Turning to Slide 9. We've achieved significant improvement as we capped the second year of our value creation strategy with momentum continuing into fiscal '27. Over the past 2 years, we have consistently delivered on our earnings and cash flow commitments. We've grown adjusted EBITDA to over $700 million, generated substantial free cash flow and reduced net leverage from 4x in fiscal '24 to 2.2x in fiscal year '26. These results reflect the impact of our value creation strategy and the actions we've taken to improve execution, increase efficiency and strengthen the company's financial foundation. In fiscal '27, we're positioned for another year of continued progress with adjusted EBITDA up high single digits, sustained free cash flow generation and lower net leverage while returning to profitable growth.

As Matteo will detail shortly, the midpoint of our adjusted EBITDA outlook is $25 million above the targets we communicated during our 2025 Investor Day, reflecting our strong performance in fiscal 2026. Although it's early, we would expect this favorability to flow through to fiscal 2028. Importantly, we're confident in our ability to deliver long-term profitable growth within the most resilient segments of the grocery retail industry. Looking ahead, our teams remain laser-focused on helping our customers execute their differentiation strategies, supporting our suppliers' growth with these retailers and continuing to improve the service that we deliver every day.

With that, I'll turn the call over to Matteo to discuss our fourth quarter results and fiscal 2027 outlook in more detail.

Giorgio Tarditi

Thank you, Sandy, and good morning, everyone. Our fourth quarter results reflect disciplined execution of our value creation strategy. We delivered another quarter of underlying sales growth and improved operating leverage, closing out a strong fiscal 2026 in which we generated meaningful adjusted EBITDA growth and free cash flow while improving our financial flexibility. Today, I will provide additional insight into our fourth quarter and full year results, our year-end financial position and capital structure and our outlook for fiscal 2027.

With that, let's turn to our results. Starting with Slide 11. Fourth quarter sales were over $7.6 billion, bringing full year sales to approximately $31.2 billion, in line with the updated outlook we provided in June. Fourth quarter reported sales declined by less than 1% compared to last year. Excluding our planned optimization actions, short-term project work and the impact of cycling last year's cyber event, our underlying wholesale sales grew in line with our $90 billion target addressable market. We estimate the impact of optimization was approximately 500 basis points. The impact of short-term project work was approximately 150 basis points, and last year's fourth quarter was impacted by the temporary lost sales due to last year's cyber incident.

The majority of our customers buy both natural and conventional products to support the unique go-to-market strategies in the local markets they serve. Underlying sales in our natural products segment again outperformed the broader market, reflecting strong execution and continued shopper demand for natural, organic fresh and specialty products. Meanwhile, underlying sales declined mid-single digits in the Conventional Products segment. In retail, total sales were lower by 8%, largely reflecting planned strategic store actions as we optimize our footprint and strengthen the foundation of the business. In the fourth quarter, Cub same-store sales decline improved by approximately 150 basis points from the third quarter, even after adjusting for last year's cyber impact. We are encouraged by the steady progress, though our Cub strategy is still in its early innings.

Let's move to Slide 12 to review profitability drivers in the quarter. Our gross margin rate in the fourth quarter was 13.7%, approximately 30 basis points higher compared to last year, reflecting the benefits of our optimization work and favorable customer mix. In the fourth quarter, we made some incremental investments in technology, supply chain and commercial capabilities to accelerate the expected benefits from these actions. Operating expenses came in at about 12.9% of net sales, which was in line with our expectations. While we still have significant opportunities to improve, we continue to demonstrate progress on fill rate, on-time deliveries and throughput. These gains reflect the benefits of our effectiveness and efficiency initiatives, including network optimization, investments in our next-generation supply chain and expanding lean practices across our distribution center network.

Our disciplined execution and solid expense management resulted in adjusted EBITDA of $172 million, bringing full year adjusted EBITDA to $701 million, near the top of our guidance range. Our adjusted EBITDA margin rate in the quarter was approximately 2.3% of net sales, reflecting another quarter of solid margin improvement. The strong operating performance, along with lower net interest expense from reduced net debt and refinancing activities as well as lower depreciation expense resulted in fourth quarter adjusted EPS of $0.69 and full year adjusted EPS of $2.65, above the high end of our guidance range.

Looking to Slide 13. During the fourth quarter, we continued to improve our effectiveness and efficiency by deploying new technology solutions and by further embedding lean practices across our network. As Sandy mentioned, one of the key actions we made in the quarter was relocating operations from an older distribution center in Wisconsin to an upgraded facility in Illinois, equipped with automated case pick and each pick technologies. While it is still early and we have more work to do, we expect that this move will help us more effectively serve customers and suppliers in the Midwest over time while generating operating efficiencies for UNFI. This is the latest example of our network optimization planning. We've also completed the initial deployment phase of Lean daily management to 44 distribution centers.

With Lean daily management scaling across our DC network, we delivered our fourth consecutive quarter of year-over-year improvements in fill rates, on-time deliveries and throughput. We have made steady progress, but still believe we have significant runway to continue improving upon these metrics. To do that, we plan to deploy Lean 2.0, which advances systems and processes beyond our initial implementation so we can solve more problems closer to the point of impact. Lean will continue to be an important part of my new role.

Turning to Slide 14. Our strategic and operational discipline, combined with our planned CapEx spend supported free cash flow of $80 million in the quarter, bringing our full year to $323 million, in line with our expectations and $84 million higher than fiscal 2025. This also represents the highest full year free cash flow we have delivered to date. This free cash flow helped lower our net leverage ratio to 2.2x, a 1.1 turn improvement from the end of fiscal 2025. Net debt at the end of fiscal 2026 was less than $1.6 billion for the first time since fiscal 2018. In the fourth quarter, we repurchased about 420,000 shares of our stock for approximately $21 million, bringing our total for the fiscal year to about 1.25 million shares for approximately $50 million, equating to an average price per share of $40.15.

Our 8-K this morning also stated that our Board of Directors has authorized a new $200 million share repurchase program that replaces the one that was set to expire this month. This new program and the repurchases we have made to date reflect our conviction in our long-term value creation strategy. We also took action to reduce the cost of our capital structure in the fourth quarter, repricing our term loan from SOFR plus 475 basis points to SOFR plus 400 basis points, which is expected to reduce annual interest expense by another $3 million on top of the savings generated by the refinancing of the ABL earlier in the year.

Looking at Slide 15. We finished fiscal 2026 with operating momentum. And as we look to fiscal year 2027, our guidance reflects our confidence in the continued execution of our value creation strategy. Sales are expected to be in the range of $31.2 billion to $31.8 billion, up 1% at the midpoint. This outlook reflects the remaining impact from the optimization actions we yet have to cycle. As a result, year-over-year sales are expected to decline in the first quarter before returning to profitable growth in the second half. Adjusted EBITDA is expected to be in the range of $730 million to $780 million, representing a high single-digit growth rate at the midpoint, and as Sandy mentioned, $25 million above the target we communicated at Investor Day.

The midpoint of our sales and adjusted EBITDA guidance implies year-over-year margin expansion of 10 basis points, positioning us to achieve the fiscal '28 margin rate target that we set at our Investor Day 1 year earlier than planned. This expected margin expansion is largely driven by the continued execution of initiatives already underway and the timing of their anticipated benefits. Because these benefits are expected to build throughout the year, we expect revenue and earnings growth to be slightly weighted towards the second half, with the first quarter expected to follow historical trends for adjusted EBITDA as the lowest quarter of the year.

And we expect an adjusted EPS range of $3 to $3.50 per share, representing an increase of about $0.60 per share or 23% growth at the midpoint. These ranges represent a high confidence case supported by multiple initiatives across the business to achieve these targets. Also to reiterate what Sandy stated, we presently expect adjusted EBITDA in fiscal 2028 to grow approximately 10% versus our 2027 guidance midpoint, in line with the long-term growth rate we provided at our Investor Day and implying incremental margin expansion above our long-term target.

Turning to CapEx. We expect to deploy approximately $300 million in fiscal 2027, reflecting a higher level of organic investments to advance our capabilities as well as our effectiveness and efficiency agenda. This includes targeted automation, ERP deployment and broader technology initiatives designed to simplify processes and provide better and faster insights to operate the business. We will take a methodical, paced approach to technology investments, focusing on targeted implementations first, then a broader deployment.

Our outlook for fiscal 2027 free cash flow is between $275 million and $325 million, which reflects a year-over-year step-up in capital spending, offsetting the EBITDA growth. The midpoint of $300 million is also in line with our long-term target. We also expect to reduce net debt and improve our leverage ratio to under 2x by end of fiscal 2027. From a capital allocation perspective, we will continue to prioritize organic investments and deleveraging, and we'll also evaluate opportunistic share repurchases. Overall, we remain confident in our long-term value creation strategy.

Closing on Slide 16. As we begin the new fiscal year, we remain focused on continuing to support our customers and suppliers as they execute their unique growth strategies in a dynamic operating backdrop while simultaneously delivering our financial commitments. We continue to see significant opportunities ahead to strengthen our capabilities, improve execution and create long-term value for all our stakeholders.

With that, operator, please open the line for questions.

Operator

[Operator Instructions] And your first question comes from the line of Edward Kelly with Wells Fargo.

分析師問答

Edward Kelly

I wanted to start on the top line. Obviously, still seeing some optimization headwinds. Could you provide a little bit more color on the 150 basis points of short-term project work? And then as we think about the upcoming year, can you help us a little bit in terms of the top line outlook by division and a little bit more on the cadence. And I'm just curious if there's any other optimization stuff that you are maybe contemplating that's not in the guide.

James Alexander Douglas

First, I would say the simplest way to understand the project work is that a large natural retailer asked us to help them make a strategic transition and we did some significant fresh business for them as a bridge from where they were to where they were going. This is a very appropriate use of our resources. It was profitable, and we are in the process of cycling it now having made the transition, and it's approximately 150 basis point drag on our reported sales results.

From an outlook standpoint, as Matteo said in his comments, we see 2027 as a year that will return to growth. We still continue to lap some of the optimization results that we achieved last year. And so we can quantify the headwind there, along with the tailwinds that we estimate from the success of our customer base and our target addressable market as well as our pipeline, which all are part of the mix that lead to a low single-digit guide for the year with an emphasis that growth is restored in the second half as we have pretty much fully lapped the optimization initiatives that are part of the base.

Edward Kelly

And just on where you are in terms of optimization overall, potential for further activity in the future?

James Alexander Douglas

Sure. DC optimization is really an initiative that we undertook to make sure that our DC fleet is designed for the future opportunity that we see in the business. And we've taken a number of actions so far. We continue to look at it to make sure that on an ongoing basis, our DCs are in the right spot with the right technology. It involves both increases in DC space, technology, new DCs as well as transitioning some DCs, sometimes merging them to make them more efficient. So the mainstream of the initiative is something that we're in the process of cycling, but we'll continue to look at it.

Operator

Your next question comes from the line of Alex Slagle with Jefferies.

Alexander Slagle

Congrats on the progress. I just wanted to follow up on Ed's question a little bit more, if there's any other color sort of on the segment level. Just trying to think if like conventional and retail, I mean, can the top line start to flatten out at some point in the back half? And on the bottom line, whether you expect sort of what the contribution could look like for those 2 segments, natural versus conventional?

Giorgio Tarditi

So first of all, we are pleased with the performance that the 2 segments delivered in 2026. So think about natural growing top line about 7% and growing EBITDA 19%, so showing strong operating leverage. And then conventional while going through an important year of accretive network optimization, growing EBITDA by more than 50%. So solid foundation to start with. When you think about 2027, we don't necessarily guide by segment, but let me give you a little bit of color. So the low single-digit growth for the top line is rooted into the customer strength, as Sandy said, the $90 billion market that continues to grow at low single digit and the commercial capabilities we're building.

And inside the low single-digit guidance, we continue to see natural organic specialty products to grow faster than the average market and the portfolio. So we expect to continue to see strength from the natural products. We continue to have our initiatives on productivity largely underway and then the return to profitable growth to compound on getting the EBITDA up 8% at the midpoint.

James Alexander Douglas

One final point I'd make is that ultimately, our product set is designed to serve the assortments of our customers. And so the natural evolution would be that customers are beginning to focus more on healthier, more differentiated product sets, which drives growth in natural. But our conventional products are particularly important products in many assortments. And while their year-over-year growth may be negative, the total combination adds value to customers and drives our growth proposition.

Alexander Slagle

Got it. And then just on the '27, '28 targets, I mean, how do the higher fuel costs impact this outlook and just the magnitude of the incremental headwind? I know it's something we initially weren't looking at a couple of years ago when we set the plan.

Giorgio Tarditi

Yes, Alex, we talked in kind of the 3Q, 4Q calls about a $5 million kind of net fuel impact in each quarter. And that's kind of in the high confidence mode that we always apply for our outlook, what we model for 2027. And equally importantly, if not more, is the countermeasures that we continue to deploy against fuel prices. So the first one is we have some fuel hedges in place to mitigate some of the inbound cost. Second, we have customer and supplier contractual escalations that again go through a lagging and a phasing, but they are in place to protect. And then the third one, which is the most important is the continuous focus on route optimization. So how do we continue to reduce miles per delivery and optimize routes. So the whole system benefits from lower fuel consumption besides contractual escalations and hedges.

Operator

Your next question comes from the line of Kelly Bania with BMO Capital.

Kelly Bania

Congrats on the leadership announcements. I wanted to go back again to the top line, I guess, that kind of underlying low single-digit sales growth that you noted for the quarter. Should we assume that you kind of got back 100% of the cyber incident impact in the quarter? Just trying to tighten that math up a little bit. And then as well, you mentioned in the press release onboarding of additional business from both new and existing customers. Can you share any color on the timing and magnitude and drivers for that new business?

James Alexander Douglas

Kelly, so the way I would describe the flow of the business is that I'll start with the pipeline. We've continued to earn bigger shares of our customers' business. It's the best kind of growth because it signals a healthy relationship and it often includes economies of scale. And so it's a real focus for us to continue to earn our customers' business, and that's a component of the outlook in terms of sales. We also have new banners, which are new relationships. And obviously, we've netted out any other changes in our customer base to be able to come to the guide.

What we've communicated today, and I think it's the best way to think about it is that the first quarter will continue to have a heavy amount of cycling from the optimization. And the second half of the year, we think we'll be fully back to growth. That gives you an idea of the staging, both of the pipeline and of the cycling of optimization. Finally, relative to the cyber event of last year, in general, we believe we've completely cycled it as we enter the first quarter. I mean there's little impacts here or there, but we worked very hard last year to manage through that in a way that was focused 100% on our customers' impact. And we did so in a way that was expedited, although it was, as everyone remembers, very challenging. And as we sit here today, we're a stronger company from a technology and security standpoint, and our customers have the benefit of that capability build. And this is solidly in the rearview mirror for them and for us.

Operator

Your next question comes from the line of Leah Jordan with Goldman Sachs.

Leah Jordan

I wanted to ask about food inflation. What are you seeing today? What is embedded within your outlook for FY '27? And then how are you thinking about forward buying opportunities in the year ahead? Because I think you have a small tailwind that you have to lap in the front half of this coming year that you gained last year.

Giorgio Tarditi

First of all, our strategy with suppliers and throughout our supply chain is always to keep our prices low, stable and predictable. That is the best answer and the best response to the industry and for our customers. When you think about our fiscal 2027 outlook, we've embedded low single-digit assumption for inflation, recognizing though that the environment is dynamic, and it includes areas like energy, logistics, we talked about fuel. So it is consistent with the signals that we receive. And again, our focus is to continue to work with our suppliers and our operational capabilities to keep prices low.

Relative to procurement gains, what -- again, very similarly, our strategy is always to work with our suppliers to avoid inflation and to avoid price increases. And we always view procurement gains as temporary and secondary. If you think about the $150 million of EBITDA growth in 2026, very largely driven by the productivity efforts, the accretive network optimization, a very residual part was driven by procurement gains. So we may be lapping some in the first and second quarter when we had them a little bit higher. But what we embedded in our '27 outlook is low single-digit inflation and basically no reliance on procurement gains on out of pattern, let's say, procurement gains.

Leah Jordan

Okay. That's helpful. And then maybe could you provide more detail on the trends in your retail business? What are you seeing across the competitive environment in your regions? What are you seeing from the consumer? Just continues to be kind of a top line and margin headwind for you. So how are you thinking about that?

James Alexander Douglas

Yes, Leah, it's Sandy. The way I describe our retail initiatives is early days. David Best, our retail CEO, has his management team in place. They've developed a strategy, and they're in the early stages of implementing it. And as Matteo said in his remarks, we're seeing sequential improvement in the top line and bottom line performance. We'll have more to say about that as we get more experience. But as you know, in particular, Cub is a great learning lab for us. And the management team that's been put in place is very high quality. We work closely with our franchise partners in the Twin Cities area, and we're excited about the potential, but early days as of now.

Let me answer your second question I forgot to about competitive environment. Broadly speaking, retail is and has always been in my entire professional life, a very competitive business, and it still is. Ultimately, if you look at the way we've segmented the business, and there's one slide that's in our provided materials, we continue to see natural organic and specialty players grow and gain share. We continue to see differentiated grocery companies grow and gain share. And we continue to see discounters grow and gain share, and they each do it in their own unique way. And at UNFI, our focus is trying to help retailers wherever they're segmented, particularly those that may not have been as differentiated in the past, like Cub, for example, to really take the actions necessary to create a winning strategy for their business on value, on assortment and on unique experiences. And I think we can follow Cub as an example, and that effort goes for all our customers, and we're seeing some early results from providing that support on top of a bed of continuously improving execution.

Operator

Your next question comes from the line of John Heinbockel with Guggenheim Securities.

John Heinbockel

Sandy, I wanted to start with fill rate, up 2%. How is natural fill rate progressing? Because I know that's obviously lower than conventional. Is that growing faster? Where do you see the opportunity there? And I guess it's very hard to tell how much sales you're leaving on the table because the fill rate is not higher. But maybe you can talk to that.

James Alexander Douglas

Sure, John. Good insightful question. Broadly, we're seeing fill rates improve in conventional and natural at about the same rate. However, you're right, conventional fill rates are higher, and it makes sense that they are. They're fast-moving consumer goods, a lot fewer SKUs and generally, volume is more stable, and there's plenty of supply. On the natural side, with all the innovation and the slow-moving SKUs, it's a whole different ball game. But we have created an enterprise-level project on fill rate. We consider improving it to be at the top of the most important things we can do for our customers, and that includes owning them.

The ultimate position that we want to put our customers in is being in stock at really very, very high levels. And then underneath that, understanding demand, understanding ordering patterns, understanding promotions and working with suppliers to get a differentiated amount of inventory and then using technology, which we've implemented, as you know, RELEX across our system to leverage AI to make sure that we're continuing to order and fulfill in the most technology supported way. And we're making some progress, but we continue to see it as the biggest improvement opportunity we're working on, and we expect to continue to improve.

John Heinbockel

Maybe a second question. As you think about -- you break out natural and conventional, but then you have, right, the customer types that are differentiated. So when I think about conventional product sales through less or undifferentiated channels, how do you think about that? And I would guess over time, right, as conventional gets smaller and as these customer types get smaller, right, you would think that your enterprise top line would gradually strengthen. Is that fair?

James Alexander Douglas

Yes, I think so. The way I look at it is that customers have their own assortment strategies and what our job is, is to support that. Now the advice we're offering is a couple fold as it relates to assortment. First, on items that are comparable with discounters, we need to work together to get costs down so our customers can be competitive. Beyond that, though, there's tremendous opportunities to decomparablize and move assortments towards private labels, which is a major focus of ours as well as natural, organic and specialty, a, because they're not comparable; and b, because they're on trend. And so to some degree, we're going to force that transition in mix simply by strategy and by consumer demand. But what I'll also tell you is that approximately 90% of our customers buy at least some of both. And so I return back to how I started, which is we're in the business of selling the products our customers want to sell. But at the end of the day, the math of it is going to be what you suggested, I expect. And I believe the health and wellness trends in food are enduring and will go for a long time.

Operator

Your next question comes from the line of Mark Carden with UBS.

Mark Carden

So to start, you walked through the competitive backdrop on the retail side of the business a bit earlier. Are you guys seeing any shift in competitive intensity on the distribution side of the business, just given the duration of some of the recent pressures that we've seen in grocery? You guys obviously have a bit more favorable exposure to your target market, but has there been any shift on either upfront money or on price in general?

James Alexander Douglas

Mark, I would say broadly that the wholesale industry continues to be very competitive. I think what maybe taking place is some incremental segmentation about where different players are focused, but you have to talk to the other companies to understand their strategy. I wouldn't be the right spokesperson for it. But ultimately, we operate a very efficient business with low margins and our productivity and operational improvement drives our margin expansion, not our price increases. We remain competitive, but we're focused, as we've said many times, on a subsegment of the market and particular needs and capabilities that support the strategy of customers in those segments. And that puts us, to a degree, in our own spot in the industry, although it's a very competitive industry, and we continue to sharpen our execution to make sure that our customers believe they're getting the best value for what they're trying to accomplish.

Mark Carden

Great. That's helpful color. And then as a follow-up, you guys called out the focus on Lean 2.0. Can you walk through just how this differs from your initial deployment, where you see the most opportunity for incremental improvement and how you're planning on phasing in these changes to your DC base? Is it voluntary like the first phase? Could this be implemented more quickly? Just color there.

Giorgio Tarditi

So pleased with the progress with the first phase. We deploy the basics of Lean daily management at 44 DCs. And really, what we saw in the last 4 quarters is green shoots of improvements in fill rates, on-time delivery, throughput, but still a very large opportunity in front of us. So we call them green shoots at the start, but there is a lot to do. When you think about 2.0, the plan here is to start going much deeper into 2 specific areas. The first one is management routines and specifically, how do we strengthen the problem-solving and daily management programs. So we spoke about the teams huddling at 7:00 a.m. at 44 DCs to look at the key performance indicators. We're going to start going much deeper into the countermeasures and how do we deploy technology, how do we deploy stronger quality, et cetera, et cetera, to problem solve.

The second area then is going to be continuous improvement, right? The Japanese word would be Kaizen, but it's how do you then take your foundation and you keep thinking about eliminating waste, improving effectiveness, improving efficiency. So the plan here is to go a little bit on the volunteering basis as we did with the 44 DCs, but we also start having a better understanding of where are the larger opportunities based on customer feedback, customer impact, suppliers, out of stock, et cetera. And so that's how we're going to prioritize. So it's going to be a little bit less of just raising your hand is a smarter way to cross check where is the biggest impact, where is the opportunity.

James Alexander Douglas

Mark, the one build I'd put on that is Matteo's answer to that question gives you a pretty good example of why we're optimistic about the impact he's going to make as Chief Operating Officer with sales, customer and supply chain and Lean and IT reporting to him, we're able to push that mix together and begin to take things to the next level.

Operator

Your next question comes from the line of Scott Mushkin with R5 Capital.

Scott Mushkin

I have 2 questions. But before that, I just wanted to say what an incredible job you guys have done with this company over the last 2 years, and it's much appreciated. So first question is more short term. It's industry related. I mean, obviously, you guys outlined the way you can grow. But in the broad industry, it looks like we're going to have some volume pressures as GLP-1s continue to erode demand and then also building price pressures throughout the whole industry. So I was just wondering if you could kind of put UNFI in that, if that's correct and how your business performs in that environment, if that's the short-term environment?

James Alexander Douglas

Scott, so clearly, there are some macros that are impacting everyone. I think the largest right now is fuel prices and the reduction of food assistance or SNAP programs, and that's impacting retail. GLP-1s are also impacting volume, but there's a positive and a negative. The negative is volume goes down, the positive is that healthier food goes up. So those are the 3 macros. Ultimately, retailers respond to it differently. And our exposure is attached to how our $90 billion target addressable market retailers action against the environment they're in.

And as I mentioned earlier, broadly speaking, they're making sure that their value is right. They're making sure that their assortment is right, and then they're continuing to work on their in-store experience depending on what their strategy is. Ultimately, the environment is dynamic. And if you look at the chart we have that goes back 20, 25 years, and that certainly includes all the time that I've been in the industry, I've never seen the industry not be dynamic. There have been periods of time when the macros were particularly challenging.

But if you look at it over time, the winners win regardless of the environment. And to some degree, there's a fair amount of opportunities that companies see when things are challenging to double down on their proposition. Now I don't want to be Pollyanna. We have to work on it. We have to be efficient. We have to improve our execution. We, at UNFI, think the opportunities to improve our service to our customers are significant and enduring, and we're relentlessly focused on them, and that's particularly important in this environment.

Scott Mushkin

That's great. So my second question is more of a long-term question. And obviously, you've gotten back -- you're going to be at 2x. So if you had to prioritize capital, organic growth versus M&A, buyback versus dividend over like a 3- to 5-year period, not like this year, because you're going to have free cash flow, it looks like at least a $300 million going forward. How would you structure that and think about that?

James Alexander Douglas

Yes. Great question, Scott. And I'm going to let Matteo carry most of this. But what I -- the first comment I'd make is we really haven't said anything about the long-term capital allocation strategy other than we're going to continue focusing on deleveraging, investing in the business to drive organic performance in a highly disciplined way and then opportunistically buying back our shares. I think the broad opportunity over time is to continue to invest capital to drive the highest possible level of customer benefit and shareholder returns. And we continue to work as a matter of strategy in a very diligent way to look at that short, medium and long term.

If we had a bias right now, I would say that it's around organic improvement simply because we see so much opportunity to do that. But that -- I wouldn't want to foreshadow the ultimate strategy other than to say that's where we are currently focused. Matteo, how would you build on that?

Giorgio Tarditi

No, you said it perfectly, Sandy. I mean the only add I would say is that we are taking the CapEx spending for '27 to about $300 million, which, as you average the last 3 years, is kind of in line with that 1% of top line that we discussed at the Investor Day. And we keep the same high hurdle rates for returns, strong focus on safety, strong focus on technology and then to Sandy's point, developing those supply chain capabilities that are critical to become more effective and efficient. And inside that, our commitment to continue to reduce leverage and return money to shareholders.

Operator

Your next question comes from the line of Chuck Cerankosky with Northcoast Research.

Charles Cerankosky

Great quarter, great year. When you're talking about acquiring new business and expanding business with existing customers, what's sort of the lead time? How much spade work goes on that we don't see? And is the company's improving balance sheet helping United Natural achieve that goal?

James Alexander Douglas

Chuck, let me answer the second half of your question first. Our balance sheet strength and financial foundation improvement is significantly freeing up our ability to invest in a high-quality way around capability. Having said that, there's a bigger enabler beyond the dollars, which is the talent of the management team and the discipline and the focus around project management. And I actually view the second one as more important than the first, but it's nice to have them go together. That differentiation around execution and then the focus on providing the value that our customers are seeking to drive with their strategy is ultimately why we're winning business when we do. The sales cycle is as long as it takes.

Now that's -- I'm not trying to cop out. It's a long sales cycle. But I have seen customers make decisions to give us a category to work on for whatever reason, sometimes because their existing supply caved in and they need us to pick it up right away. Other times where they're continuing to evaluate categories, and it takes months of dialogue, and in a banner conversion, it could take as much as 6 to 9 months, and then you have to avoid high-volume times. It's not the best time to make a distribution change in the holidays, for example. So it's a deliberate process. It's at the speed of the customer and the basis of competition is our fit to their strategy and our execution capability.

Operator

Your next question comes from the line of Peter Saleh with BTIG.

Peter Saleh

Great. I wanted to ask on the automation that you discussed earlier in the Illinois facility. I think you shifted from Wisconsin to Illinois. Can you just talk about what prompted this change and kind of what benefits you're starting to see with some of this automation?

Giorgio Tarditi

Peter, let me start it out to you because you may recall that automation is inside a suite of kind of capabilities and optionalities that we have to become more effective and efficient alongside with Lean, the technology investments we're making, the engineering standard and the work that we're doing there, and then there is automation. So it's part of a strategy that is all again creating multiple ways to become more effective and efficient. Specifically on the Racine to Joliet move, this is similar to what we did a couple of years ago with the York to Manchester transfer, where we basically look for ways to modernize, get into larger facilities, study the market potential and then at the point, deploy dollars to support our customer growth.

And you remember the example, York to Manchester was 50% larger, highly automated, very low if any defect rate. And that's the same playbook that we are playing with the Racine to Joliet transfer. So automated, reskilling, larger support in the market. Of course, we are into the very early innings. As with every transfer, there are a little bit of growing pains. We're very aware of that, and we're working very hard to fix them, but excited that we had another opportunity to execute network optimization in a way, expanding into modernized facility.

Peter Saleh

Understood. Okay. Just as a follow-up, are there more of these types of facilities planned in '27 or '28? Anything else on that front?

James Alexander Douglas

Peter, it's Sandy. What I would say is we have an exciting technology and improvement road map that goes out multiple years. For obvious reasons, we're not going public with it at this stage. But with each passing implementation, whether it's technology like RELEX or Samsara going system-wide last year, we're growing in our confidence relative to the ability to put technology and Lean and process improvement together to drive capability. And the discipline that Matteo and finance team put into evaluating each investment and to track its return gives us even more confidence to continue to press the agenda to build capability for our customers, and we have a plan to do that over the next years.

Operator

Your next question comes from the line of William Reuter with Bank of America.

William Reuter

So in a previous question around your capital priorities, M&A buybacks, you said we haven't really said anything at this point. We're focusing on deleveraging. I believe your target for leverage has been 2.0x what you're going to achieve by the end of this year. At that point, you'll still be doing pretty solid free cash flow. Would you consider revising your leverage target? Or should I assume that everything will just accrue towards either CapEx or alternatively share repurchases?

Giorgio Tarditi

So we continue to generate strong cash flow. You saw the $560 million in the last couple of years, outlook for 2027 at the midpoint, $300 million. But again, reinvesting the same amount into CapEx. And for now, our focus is really to delever, go below 2x as we mentioned, and then continuing to find opportunities for organic investments with high returns and discipline. And this morning, we announced a new $200 million share buyback program. The Board approved that. So it's a combination of strong operations, strong free cash flow, continue to deleverage, reinvest into strong organic investments and then look for opportunistic ways to return money to the shareholders. And while doing that, we will continue to optimize our capital structure. We took the unsecured bonds down $150 million that generates interest savings. We refinanced the ABL with some savings. We repriced the term loan and generated savings. So it's a very comprehensive set of mechanisms to deleverage and continue to optimize the structure.

William Reuter

Got it. And then just my follow-up. You mentioned the headwinds in terms of optimization in the first quarter. And then, I guess, a little bit maybe still of this onetime program that resulted in some revenue. Is the underlying growth rate of the first quarter any different than your expectations for the rest of the year? Or is the difference in commentary about revenue growth 100% based upon just those items?

James Alexander Douglas

I think you've got it exactly. We see the underlying growth rate based on the performance of our target addressable market to be in the low single-digit area. And what makes it a little noisy is the cycling of the optimization and the project work with an individual customer.

Operator

Your last question comes from the line of Carla Casella with JPMorgan.

Carla Casella

I'm just following up on Bill's leverage question, just digging in. With the bonds currently callable at par and you paid down $150 million, as you noted, are there any thoughts -- do you need to keep a foothold in the bond market? Or could you go more towards loans? Or on the flip side, would you go more towards bonds, which currently you're paying less cost -- your bonds are less costly than your term loans?

Giorgio Tarditi

Carla, we continue to look at those opportunities. So the bonds will come up for full maturity at the end of calendar 2028. So it gives us a couple of years to continue to study the market. We got now the ABL and the term loan maturing in 2031. So again, that gives us a 5-year tranquility, in a way, to continue to study the market. So we'll -- under Alfredo's leadership and Sandy and all the kind of the governance that we have, we'll continue to look for opportunities to optimize our cost of interest and our capital structure. But fairly, again, early thoughts and again, pleased with what we've been able to do in the last 6 months with the bonds, term loan and ABL.

Carla Casella

Okay. Great. And then just on the subject of M&A, what is the -- are there a lot -- are you seeing more or -- fewer or more M&A opportunities? And then on the grocery side, specifically, you talked about Cub. Would you look towards more conventional grocery just to have more, I guess, test use cases to work with in your own portfolio? Or is that something where you could move away from retail over time? Any thoughts there?

James Alexander Douglas

Yes, Carla, this is Sandy. I would say, broadly speaking, that our outlook contemplates a significant priority around internal capability development. We see so much opportunity to improve the effectiveness and efficiency of the $4 billion a year that we have in operating expenses that we will continue on that path and maximize the value of our capital in terms of delivering customer benefit and shareholder returns.

As it relates to M&A, obviously, we're open to it. We continue to scan and evaluate the market. But at this stage, while we have not updated our capital allocation strategy beyond the focus on deleveraging and investing in the business and opportunistic return of dollars to shareholders through buybacks, we will continue to refresh that with the Street when we're ready. But I think if there's a bias, the bias is on improving execution for our customers and delivering value to our shareholders through internal investment rather than M&A.

Operator

I will now turn the call back over to Sandy Douglas for closing remarks.

James Alexander Douglas

Thank you. And in closing, thank you to all of our UNFI associates for delivering a strong fiscal year '26. And many thanks to our customers and suppliers for their continued trust and partnership. We are heading into fiscal '27 with solid momentum, a stronger financial foundation and a continued focus on executing our value creation strategy. While there is still much more work to do and much improvement to capture, we remain committed, and we believe we are best positioned to help our customers and suppliers differentiate and grow profitably while continuing to improve the effectiveness and efficiency of our business. I'm confident we have the right team to advance our long-term strategy and create long-term value for our stakeholders. We look forward to updating you on our progress next quarter.

Operator

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.