One of the major problems that the United Natural Foods, Inc. faces is its competitiveness. Judging by the overall Net income, among the top players in the industry, the company comes last. While its net income is high above the net incomes of other players in the industry below it, United Natural Foods Inc. needs to be wary of the difference in net income, especially with the Sysco Company. The current rising demand for real foods in the US could create major competition problems for United Natural Foods Inc.
The rising demand will soon attract other investors, and this could be tragic for the current dominant players in the market. New players may come up with different strategies and products that could push the dominant players out of the market. United Natural Foods Inc. has focused its distribution on the US market. This is a volatile strategy that could cause the company to lose future opportunities.
The American natural food market is the biggest in the world, although other markets are coming up. Diversifying its market to explore other markets overseas is an option that the company needs to consider.
Major gaps
Per share gaps
The company’s consensus estimates per share were 67 cents per share (Michaelides par. 5). However, it has recorded 65 cents per share which is a major gap in terms of shares (Michaelides par. 5). This can be attributed to the company’s reduced stocks that went down significantly registering a 6.58% drop.
Debt-to-equity ratio gap
Another gap is seen in the company’s debt-to-equity ratio. The company’s quick ration has been rated below the industry average which is not good for the company’s future. The current quick ration of 0.83 might seem like a strong rate but it is projected to cause future problems (United Natural Food, Inc. par. 10).
Operating income margin gap
Lastly there is the gap seen on the company’s operating income margin. The operating margin for the fiscal year that ended in July 2014 was 210.788 (Michaelides par. 3). Going by the operating income margin in the current fiscal year, this might be attained by the end of the last quarter. The first quarter that ended in January 2015, the operating income margin was 49.503. The projection by analysts suggests that the company may not reach the record set in the last financial year.
The figures representing the operating margins are in millions. The company should consider a number of ways through which the operating margin can be manipulated to influence better results. Such methods include adjusting depreciation, depletion and amortization, DDA (Michaelides par. 5). This method has worked in other cases similar to the stock issue in the United Natural Foods Inc.’s case. For instance, the Nokia’s stocking problem was a known issue globally in 2012 (Michaelides par. 3).
The company has lost its market share by 90% which is the biggest loss it has ever seen since its inception (Michaelides par. 9). The problem is similar to what can happen to the United Natural Foods Inc. if the company continues to focus on its growing earning per share. The earnings per share can still be on an increasing scale but that does not mean the company’s market share is on the rise. The company must therefore be careful to avoided being blinded by the increasing per share rate. Recent cases, especially the Nokia’s case, are perfect examples of the difference meaning of the two variants.
Works Cited
Michaelides, Krysta. Here’s a Reason United Natural Foods (UNFI) Stock is Dropping Today. 2015. Web.
United Natural Food, Inc. Annual financial statements – 2014 form 10K. 2015. Web.