wholesaler “still shipping” to customers

United Natural Foods continues to ship to customers as the US grocery wholesaler and retailer responds to the cyberattack that has hit the business, its CEO has said.

In a stock-exchange filing on Monday (9 June), UNFI said it had detected “unauthorised activity” on “certain” IT systems on Thursday last week.

The company said it “promptly” responded by implementing containment measures, including “proactively taking certain systems offline”, which temporarily affected its ability to fulfil customer orders.

UNFI published its fiscal third-quarter financial results yesterday and, on a call with Wall Street analysts to discuss the numbers, the company’s management faced a series of questions about the cyberattack and its impact on operations.

Asked by R5 Capital’s Scott Mushkin if UNFI could supply clients, UNFI chief executive Sandy Douglas said the company was able to do so “on a limited basis, and it depends on the technology platform”.

He added: “Some are in further along on the recovery than others but we are partnering with customers across the country and across our formats in various short-term modes to serve their needs as best as we possibly can. It’s getting increasingly positive each day but still work in progress.”

UNFI is among the largest wholesale distributors of food products throughout North America. 

It distributes branded and own-label products to more than 30,000 grocery stores, including Amazon-backed Whole Foods Market, as well as independent retailers.

Douglas declined to estimate how much of UNFI’s deliveries the company was able to make. “The entire process is very fluid and ongoing,” he said. “The way I would describe it is each day is better and we’re working in a very customised way by market and by customer to serve the capability that exists.

“I wouldn’t want to give percentages at this time because it’s changing every day. It’s obviously the top priority of the company to serve our customers as best as we possibly can while we’re working to, as rapidly and safely as possible, bring our systems back online.”

UNFI’s food brands include Wild Harvest, Culinary Circle, and Essential Everyday, covering natural, organic, and specialty food products.

The group runs 76 retail stores under the Cub Foods and Shoppers chains but the wholesale business accounts for more than 95% of its annual revenue.

Douglas was asked later on the call if there are elements of UNFI’s operations that made the business “more susceptible” to a cyberattack and whether the breach would mean the company would reassess its investment plans in areas like IT security.

“We have, like a lot of companies, a significant investment in process around the cyber area,” the UNFI chief said. “It’s highly dynamic and rapidly growing and the threat actors out there are always looking for ways to innovate and find new ways to penetrate systems.

“We rigorously review and invest in this cyber infrastructure and capability in the company. We use multiple different external benchmarks to assess ourselves and, really hold nothing back in this area.

“Having said that, we just got penetrated. We will be continuing to look at every aspect of our defence, every aspect of how our tools are working and what may be necessary to bolster it going forward. It’s clearly an area that requires a tremendous amount of focus from companies today and will continue.

“How that affects capex going forward? Ultimately, it is a choice and we have and will continue to prioritise cyber investment but I don’t think it changes the ultimate big picture for UNFI on capital. But I think a company needs to be both high capability and humble when it relates to cybersecurity and this event is just a demonstrated example of why.”

For the fiscal year ended 2 August, UNFI reported net sales of $30.98bn, a 2.3% increase from fiscal 2023. 

The 2024 fiscal year included 53 weeks, compared to 52 weeks in the prior year. 

Despite the sales growth, operating income fell sharply to $8m, a 93.3% decrease from the previous year.  

Announcing the results in October, UNFI attributed the decline primarily to increased operating expenses, restructuring, acquisition and integration-related costs, as well as losses on asset sales and charges.  

It booked a $112m net loss in fiscal 2024, compared with a $24m profit a year earlier. 

In January, the group set out plans to “realign” its commercial wholesale organisation into two “product-centred” divisions with “focused” sales teams.

In the nine months of UNFI’s current financial year, a period that ran until 3 May, net sales stood at $24.09bn, against $22.83bn in the corresponding nine months in the previous fiscal year.

The company booked a nine-month operating income of $47m, compared to $6m a year earlier.

It posted a net loss of $31m, lower than the $75m booked in the first nine months of 2023/24.

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