ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and the notes thereto, “Risk Factors” included in Part I, Item IA, “Cautionary Note Regarding Forward-Looking Statements” and other risks described elsewhere in this Annual Report. The following includes a comparison of our consolidated results of operations, segment results and financial position for fiscal years 2025 and 2024. In evaluating financial performance in each business segment, management primarily uses Net sales and Adjusted EBITDA of its business segments as discussed and reconciled within Note 16—Business Segments in Part II, Item 8 of this Annual Report. For a comparison of our consolidated results of operations and financial position for fiscal years 2024 and 2023, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, in our Annual Report on Form 10-K for the fiscal year ended August 3, 2024, filed with the Securities and Exchange Commission on October 1, 2024, as supplemented by the additional discussion below, which includes a comparison of our segment results for fiscal years 2024 and 2023 reflecting our updated segments.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act, that involve substantial risks and uncertainties. In some cases you can identify these statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “seek,” “should,” “will” and “would,” or similar words. Statements that contain these words and other statements that are forward-looking in nature should be read carefully because they discuss future expectations, contain projections of future results of operations or of financial positions or state other “forward-looking” information.
Forward-looking statements involve inherent uncertainty and may ultimately prove to be incorrect. These statements are based on our management’s beliefs and assumptions, which are based on currently available information. These assumptions could prove inaccurate. You are cautioned not to place undue reliance on forward-looking statements. Except as otherwise may be required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or actual operating results. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to:
• our dependence on principal customers;
• the relatively low margins of our business, which are sensitive to inflationary and deflationary pressures and intense competition, including as a result of the continuing consolidation of retailers and the growth of consumer choices for grocery and consumable purchases;
• our ability to realize the anticipated benefits of our strategic initiatives;
• changes in relationships with our suppliers;
• our ability to develop, implement, operate and maintain, and rely on third parties to operate and maintain, reliable and secure technology systems, and the effectiveness of our business continuity plans in response to an incident impacting our technology systems, such as the unauthorized incident on our technology systems;
• labor and other workforce shortages and challenges;
• the addition or loss of significant customers or material changes to our relationships with these customers;
• our ability to realize anticipated benefits of strategic transactions;
• our ability to continue to grow sales, including of our higher margin natural and organic foods and non-food products;
• our ability to maintain sufficient volume in our Natural and Conventional businesses to support our operating infrastructure;
• our ability to access additional capital;
• increases in healthcare, pension and other costs under our single employer benefit plan and multiemployer benefit plans;
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• the potential for additional asset impairment charges;
• our sensitivity to general economic conditions including inflation, tariff policy and changes in disposable income levels and consumer purchasing habits;
• our ability to timely and successfully deploy our warehouse management system throughout our distribution centers and our transportation management system across the Company and to achieve efficiencies and cost savings from these efforts;
• the potential for disruptions in our supply chain or our distribution capabilities from circumstances beyond our control, including due to lack of long-term contracts, severe weather, labor shortages or work stoppages or otherwise;
• the effect of adverse decisions in, or settlement of, litigation or other proceedings to which we are subject;
• moderated supplier promotional activity, including decreased forward buying opportunities;
• union-organizing activities that could cause labor relations difficulties and increased costs;
• changes in tax laws and regulations, and actions by federal, state and local taxing authorities related to the interpretation and application of such tax laws and regulations;
• our ability to maintain food quality and safety; and
• volatility in fuel costs.
You should carefully review the risks described under “Risk Factors” included in Part I, Item 1A, as well as any other cautionary language in this Annual Report, as the occurrence of any of these events could have an adverse effect, which may be material, on our business, results of operations, financial condition or cash flows.
EXECUTIVE OVERVIEW
Business Overview
UNFI is a leading distributor of grocery and non-food products, and support services provider to retailers in the United States and Canada. We believe we are uniquely positioned to provide the broadest array of products, programs and services to customers throughout North America. Our diversified customer base includes over 30,000 customer locations ranging from some of the largest grocers in the country to smaller retailers. We offer approximately 230,000 products consisting of national, regional and private label brands grouped into the following main product categories: grocery and general merchandise; perishables; frozen foods; wellness and personal care items; and bulk and foodservice products. We believe we are North America’s premier grocery wholesaler with 52 distribution centers and warehouses representing approximately 30 million square feet of warehouse space. We are a coast-to-coast distributor with customers in all 50 states as well as all ten provinces in Canada, making us a desirable partner for retailers and consumer product manufacturers. We believe our total product assortment and service offerings are unmatched by our wholesale competitors. We plan to continue to pursue new business opportunities with independent retailers that operate diverse formats, regional and national chains, as well as international customers with wide-ranging needs. Our business is classified into three reportable segments: Natural, Conventional and Retail.
We are executing against the strategy we introduced in October 2024 and three-year financial objectives that seek to add value to our customers and suppliers through our portfolio of products, programs, insights and services while improving our effectiveness, efficiency and cash flow. To accomplish the latter, we are focused on controllable variables in four key areas: intensifying and expanding our network optimization; reducing annual capital spending; optimizing our cost structure; and reducing our net working capital position. Our strategy includes the areas of focus detailed under “Business” included in Part 1, Item 1 of this Annual Report.
In the second quarter of fiscal 2025, we began realigning our commercial wholesale organization into two product-centered business divisions, Conventional Grocery Products (“Conventional”) and Natural, Organic, Specialty & Fresh Products (“Natural”), to enhance service to customers and suppliers through more customized, product- and service-focused commercial teams. In addition, capability centers of excellence in areas such as supply chain, professional and digital services, and private brands work across the divisions to help create customized programs to help customers and suppliers accelerate their growth strategies. In the fourth quarter of fiscal 2025, we restructured our internal financial reporting and management processes to align with the new divisional structure. Our new external reporting structure provides insight into each division’s performance in line with how the business is now managed.
We expect to continue to use available capital to re-invest in our business and are committed to improving our free cash flow and financial leverage while reducing outstanding debt.
We believe we can optimize our performance and profitability through our improvement efforts, which we expect will improve our cost structure, increase sales of products and services, and position us to provide tailored, data-driven solutions to help our customers run their businesses more efficiently and expand our customer base.
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Trends and Other Factors Affecting Our Business
Our results are impacted by macroeconomic and demographic trends, changes in the food distribution market structure and changes in consumer behavior, which may result from factors beyond our control, including geopolitical events and other events that may trigger economic volatility and negatively impact discretionary income levels and consumer confidence, social trends, changes in the levels of disposable income and the health of the economy in which our customers and stores operate.
The U.S. economy continues to experience economic volatility, which has had, and we expect may continue to have, an impact on consumer confidence and behavior. Consumer spending may continue to be impacted by levels of discretionary income with consumers trading down to a less expensive mix of products for grocery items or buying fewer items. In addition, inflation continues to affect our business, and fluctuating commodity and labor input costs may continue to impact the prices of products we procure from manufacturers. We believe our product mix, which ranges from high-quality natural and organic products to national and local conventional brands, including cost conscious private label brands, positions us to serve a broad cross section of North American retailers and end customers, and may lessen the impact of any further shifts in consumer and industry trends in grocery product mix. We are actively monitoring the impacts of the evolving macroeconomic and geopolitical landscape, including rapidly evolving tariff and global trade policies, on all aspects of our business.
We are also impacted by changes in food distribution trends affecting our wholesale customers, such as direct store deliveries and other methods of distribution. Our wholesale customers manage their businesses independently and operate in a competitive environment.
Additionally, in the fourth quarter of fiscal 2025, we became aware of unauthorized activity on certain of our information technology systems. We promptly activated our incident response plan and implemented containment measures, including proactively taking certain systems offline (the “Cybersecurity Incident”, as discussed in Part I, Item 1C of this Annual Report). As a result, our ability to fulfill and distribute customer orders was temporarily impacted until the unauthorized activity could be contained, and we could safely restore the core systems that our customers and suppliers use, enabling business operations to normalize. As a result of the Cybersecurity Incident, we experienced reduced sales volume and increased operational costs in the fourth quarter of fiscal 2025, which negatively impacted our results of operations. We incurred incremental costs of approximately $26 million in the fourth quarter of fiscal 2025 as a result of the Cybersecurity Incident. These costs related to services provided to investigate and remediate the Cybersecurity , such as third-party cybersecurity, legal and governance experts, as well as increased operating costs from the resulting to our business operations. We have submitted, and intend to continue to submit, to our insurers for reimbursement of some of the costs, expenses, and stemming from the Cybersecurity and expect that the full claim and settlement process will extend throughout fiscal 2026.
Wholesale Distribution Network Optimization
We are working to optimize our distribution center network to better and more efficiently service customers and suppliers. In the first quarter of fiscal 2025, we consolidated the volume of two distribution centers into other facilities in the Central region. In the second quarter of fiscal 2025, we announced the closure of a third distribution center in the Central region, which was completed in the third quarter of fiscal 2025. We expect to achieve cost savings as a result of these efforts through streamlining operations and delivering efficiencies, including incurring lower operating and shrink expenses, while also improving product assortment and overall customer experience.
In the fourth quarter of fiscal 2025, we came to a mutual agreement with a customer in the East region to terminate our supply agreement, pursuant to which we served as the primary grocery wholesaler to this customer’s locations in the Northeast. In connection with this termination, we ceased operations at our Allentown, Pennsylvania distribution center in early fiscal 2026 with the remaining volume consolidated into other facilities in the Northeast. Business with this customer in the Northeast accounted for approximately $1 billion in annual sales. The termination enables us to accelerate progress toward our longer-term strategic and three-year financial objectives.
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In the first quarter of fiscal 2025, we began operating a new distribution center in Manchester, Pennsylvania, which has approximately 1.3 million square feet, optimizes volume from the other nearby distribution centers in the East region and primarily distributes natural products. In the third quarter of fiscal 2025, we implemented a full case automation system at the Manchester distribution center and are increasing the volume that utilizes this new solution. Also in the first quarter of fiscal 2025, we began the development of a new automated distribution center in Sarasota, Florida, which has approximately 1.0 million square feet, replaces a smaller legacy distribution center and primarily distributes natural products. We recognized a $118 million right-of-use asset and operating lease liability for this distribution center in the first quarter of fiscal 2025. We began operations in this facility in the fourth quarter of fiscal 2025, with volume expanding at the beginning of fiscal 2026.
We plan to continue to evaluate our distribution center network to further optimize performance and expect to incur incremental expenses related to any future network realignment, expansion or improvements, including network optimization and automation initiatives. We are working to both minimize future costs and obtain new business to further improve the efficiency of our distribution network.
Retail Operations
We operated 75 grocery stores, including 54 Cub Foods stores and 21 Shoppers stores, as of August 2, 2025. In addition, we supplied another 26 Cub Foods stores operated by our wholesale customers through franchise and minority equity ownership arrangements. We operated 80 pharmacies primarily within the stores we operate and the stores of our franchisees. In addition, we operated 24 “Cub Wine and Spirit” and “Cub Liquor” stores.
We plan to continue to invest in and optimize our Retail segment in areas such as customer-facing merchandising initiatives, physical facilities, technology and operational tools.
Impact of Product Cost Changes
We experienced a mix of inflation across product categories during fiscal 2025. In the aggregate across our businesses, including the mix of products, management estimates our businesses experienced product cost inflation of approximately two percent in fiscal 2025 as compared to fiscal 2024. Cost inflation estimates are based on individual like items sold during the periods being compared. Our pricing to our customers is determined at the time of sale, primarily based on the then prevailing vendor listed base cost, and includes discounts we offer to customers. Changes in merchandising, customer buying habits and competitive pressures create inherent difficulties in measuring the impact of inflation and deflation on Net sales and Gross profit.
Generally, in an inflationary environment as a wholesaler, rising vendor costs result in higher Net sales driven by higher vendor prices when other variables such as quantities sold, mix of units sold and vendor promotions are constant. Under the last-in, first out (“LIFO”) method of inventory accounting, product cost increases are recognized within Cost of sales based on expected year-end inventory quantities and costs, which generally has the effect of decreasing Gross profit and the carrying value of inventory during periods of inflation. In fiscal 2025, we experienced fewer and less significant vendor product cost increases as compared to fiscal 2024. These decreases negatively impacted our gross profit rate when comparing fiscal 2025 to fiscal 2024.
Composition of Consolidated Statements of Operations and Business Performance Assessment
Net Sales
Our Net sales consist primarily of product sales of natural, organic, specialty, produce, and conventional grocery and non-food products, adjusted for customer volume discounts, vendor incentives when applicable, returns and allowances, and professional services revenue. Net sales also include amounts charged by us to customers for shipping and handling and fuel surcharges.
Cost of Sales and Gross Profit
The principal components of our Cost of sales include the amounts paid to suppliers for product sold, plus transportation costs necessary to bring the product to, or move product between, our distribution centers and retail stores, partially offset by consideration received from suppliers in connection with the purchase, transportation or promotion of the suppliers’ products.
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Operating Expenses
Operating expenses include distribution expenses of warehousing, delivery, purchasing, receiving, selecting, and outbound transportation expenses, and selling and administrative expenses. These expenses include salaries and wages, employee benefits, occupancy, insurance, depreciation and amortization expense and share-based compensation expense.
Restructuring, Acquisition and Integration Related Expenses
Restructuring, acquisition and integration related expenses reflect expenses resulting from restructuring activities, including severance costs, facility closure costs, contract exit-related costs, share-based compensation acceleration charges and acquisition and integration related expenses. Integration related expenses include certain professional consulting expenses and incremental expenses related to combining facilities required to optimize our distribution network as a result of acquisitions.
Loss on Sale of Assets and Other Asset Charges
Loss on sale of assets and other asset charges primarily includes losses (gains) on sales of assets, losses on sales of financial assets, and asset impairments.
Net Periodic Benefit Income, Excluding Service Cost
Net periodic benefit income, excluding service cost reflects the recognition of expected returns on benefit plan assets and interest costs on plan liabilities.
Interest Expense, Net
Interest expense, net includes primarily interest expense on long-term debt, net of capitalized interest, loss on debt extinguishment, interest expense on finance lease obligations, amortization of financing costs and discounts, and interest income.
Adjusted EBITDA
Our Consolidated Financial Statements are prepared and presented in accordance with generally accepted accounting principles in the United States (“GAAP”). In addition to the GAAP results, we consider certain non-GAAP financial measures to assess the performance of our business and understand underlying operating performance and core business trends, which we use to facilitate operating performance comparisons of our business on a consistent basis over time. Adjusted EBITDA is provided as a supplement to our results of operations and related analysis, and should not be considered superior to, a substitute for or an alternative to, any financial measure of performance prepared and presented in accordance with GAAP. Adjusted EBITDA excludes certain items because they are non-cash items or items that do not reflect management’s assessment of ongoing business performance.
We believe Adjusted EBITDA is useful because it provides additional information regarding factors and trends affecting our business, which are used in the business planning process to understand expected operating performance, to evaluate results against those expectations, and because of its importance as a measure of underlying operating performance, as the primary compensation performance measure under certain compensation programs and plans. We believe Adjusted EBITDA is reflective of factors that affect our underlying operating performance and facilitate operating performance comparisons of our business on a consistent basis over time. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. Certain adjustments to our GAAP financial measures reflected below exclude items that may be considered recurring in nature and may be reflected in our financial results for the foreseeable future. These measurements and items may be different from non-GAAP financial measures used by other companies. Adjusted EBITDA should be reviewed in conjunction with our results reported in accordance with GAAP in this Annual Report.
There are significant limitations to using Adjusted EBITDA as a financial measure including, but not limited to, it not reflecting the cost of cash expenditures for capital assets or certain other contractual commitments, finance lease obligation and debt service expenses, income taxes and any impacts from changes in working capital.
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We define Adjusted EBITDA as a consolidated measure which we reconcile by adding Net (loss) income including noncontrolling interests, less Net income attributable to noncontrolling interests, plus Non-operating income and expenses, including Net periodic benefit income, excluding service cost, Interest expense, net and Other (income) expense, net, plus (Benefit) provision for income taxes and Depreciation and amortization all calculated in accordance with GAAP, plus adjustments for Share-based compensation, non-cash LIFO charge or benefit, Restructuring, acquisition and integration related expenses, Goodwill impairment charges, Loss (gain) on sale of assets and other asset charges, certain legal charges and gains, and certain other non-cash charges or other items, as determined by management.
Assessment of Our Business Results
The following table sets forth a summary of our results of operations and Adjusted EBITDA for the periods indicated.
(in millions)
(52 weeks)
(53 weeks)
Increase (Decrease)
Net sales
Cost of sales
Gross profit
Operating expenses
Restructuring, acquisition and integration related expenses
Loss on sale of assets and other asset charges
Operating (loss) income
Net periodic benefit income, excluding service cost
Interest expense, net
Other income, net
Loss before income taxes
Benefit for income taxes
Net loss including noncontrolling interests
Less net income attributable to noncontrolling interests
Net loss attributable to United Natural Foods, Inc.
Adjusted EBITDA
The following table reconciles Net loss including noncontrolling interests to Adjusted EBITDA.
(in millions)
(52 weeks)
(53 weeks)
Net loss including noncontrolling interests
Adjustments to net loss including noncontrolling interests:
Less net income attributable to noncontrolling interests
Net periodic benefit income, excluding service cost
Interest expense, net
Other income, net
Benefit for income taxes
Depreciation and amortization
Share-based compensation
LIFO (benefit) charge
Restructuring, acquisition and integration related expenses (1)
Loss on sale of assets and other asset charges (2)
Business transformation costs (3)
Cybersecurity incident (4)
Other adjustments (5)
Adjusted EBITDA
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(1) Fiscal 2025 primarily reflects the $53 million charge related to the Company’s termination of its supply agreement with a customer in the East region and costs associated with certain employee severance and other employee separation costs and outsourcing certain corporate functions under restructuring initiatives. Fiscal 2024 primarily reflects costs associated with certain employee severance and other employee separation costs.
(2) Fiscal 2025 primarily includes a $24 million non-cash asset impairment charge related to a distribution center in our East region and $19 million in losses on the sales of receivables under the accounts receivable monetization program. Fiscal 2024 primarily includes a $21 million non-cash asset impairment charge related to one of our corporate-owned office locations, a $7 million non-cash asset impairment charge related to the decision to close certain retail store locations, a $15 million non-cash impairment charge related to the decision to close certain leased and owned distribution center locations and $21 million in losses on the sales of receivables under the accounts receivable monetization program. Refer to Note 3—Revenue Recognition and Note 5—Property and Equipment, Net in Part II, Item 8 of this Annual Report for additional information.
(3) Reflects costs associated with business transformation initiatives, primarily including third-party consulting costs and licensing costs, and third-party professional service fees related to strategic initiatives and the board-led financial review in fiscal 2024, all of which are included within Operating expenses in the Consolidated Statements of Operations.
(4) Reflects costs and charges related to the Cybersecurity Incident, primarily including shrink and remediation costs related to third-party cybersecurity, legal and governance experts, of which $15 million are included within Gross profit and $11 million are included within Operating expenses in the Consolidated Statements of Operations.
(5) Fiscal 2025 primarily reflects certain accrued legal-related costs, which are included within Operating expenses in the Consolidated Statements of Operations. Fiscal 2024 primarily reflects third-party professional service fees related to shareholder negotiations, which are included within Operating expenses in the Consolidated Statements of Operations.
Within the following results of operations, we have estimated the impact of the additional week in fiscal 2024, where applicable and estimable, to provide more comparable financial results on a year-over-year basis. The impact of the 53rd week discussed below represents an estimate of the contribution from the additional week in fiscal 2024 and is calculated by taking one-fifth of the respective metrics for the last five-week period within the 14-week fourth quarter of fiscal 2024. The 53rd week in fiscal 2024 had no impact on Restructuring, acquisition and integration related expenses or Loss on sale of assets and other asset charges.
RESULTS OF OPERATIONS
Fiscal year ended August 2, 2025 (fiscal 2025) compared to fiscal year ended August 3, 2024 (fiscal 2024)
Net Sales
The following table sets forth our Net sales by segment. Refer to Note 16—Business Segments in Part II, Item 8 of this Annual Report for additional information. Within the following table, we have estimated the impact of the additional 53rd week in fiscal 2024 to provide more comparable financial results on a year-over-year basis.
(52 weeks)
(53 weeks)
(53rd week estimated impact)
(52 weeks) (1)
Comparable 52-Week Increase (Decrease) (1)
(in millions except percentages)
Natural
Conventional
Retail
Eliminations
Total Net sales
(1) Excludes the estimated impact of the 53rd week in fiscal 2024.
Our Net sales for fiscal 2025 increased $804 million, or 2.6%, to $31.8 billion in fiscal 2025, from $31.0 billion in fiscal 2024, which included an estimated $582 million benefit from the 53rd week. Net sales increased approximately 4.6% when excluding the impact of the 53rd week in fiscal 2024. The increase in Net sales was primarily driven by an increase in Natural unit volumes, including new business with existing and new customers, as well as inflation. Net sales were adversely impacted by an estimated $400 million in lost sales related to the Cybersecurity Incident in fiscal 2025.
Natural Net sales increased $1,069, or 7.2%, to $16.0 billion in fiscal 2025, from $14.9 billion in fiscal 2024, which included an estimated $280 million benefit from the 53rd week. Natural Net sales increased approximately 9.2% when excluding the impact from the 53rd week in fiscal 2024. The increase in Natural Net sales, excluding the 53rd week, was primarily driven by an increase in unit volumes, including new business with existing and new customers, as well as inflation.
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Conventional Net sales decreased $279 million, or 1.9%, to $14.7 billion in fiscal 2025, from $14.9 billion in fiscal 2024, which included an estimated $280 million benefit from the 53rd week. Conventional Net sales were approximately flat to fiscal 2024, when excluding the impact from the 53rd week in fiscal 2024, due to increases from inflation and new business with existing customers, which were largely offset by a decline in unit volumes.
Retail Net sales decreased $94 million, or 3.9%, to $2.3 billion in fiscal 2025, from $2.4 billion in fiscal 2024, which included an estimated $45 million benefit from the 53rd week. Retail Net sales decreased approximately 2.0% when excluding the impact from the 53rd week in fiscal 2024. The decrease in Retail Net sales was primarily driven by a 0.6% decrease in identical store sales from lower volume, and store closures.
Lower eliminations of Net sales for fiscal 2025 as compared to fiscal 2024 were primarily due to a decrease in Conventional to Retail sales, which are eliminated upon consolidation.
Cost of Sales and Gross Profit
Our Gross profit increased $21 million, or 0.5%, to $4,222 million in fiscal 2025, from $4,201 million in fiscal 2024. The 53rd week in fiscal 2024 contributed an estimated $82 million to Gross profit in fiscal 2024. Our Gross profit as a percentage of Net sales decreased to 13.3% in fiscal 2025 compared to 13.6% in fiscal 2024. The decrease in gross profit rate of 28 basis points was primarily driven by lower product margin rates and customer and product mix, which were partially offset through supplier programs and the benefit of lower shrink expense. The reduction in shrink expense was compressed due to the adverse impact of the Cybersecurity Incident in fiscal 2025.
Operating Expenses
Operating expenses increased $17 million, or 0.4%, to $4,117 million, or 13.0% of Net sales, in fiscal 2025 compared to $4,100 million, or 13.2% of Net sales, in fiscal 2024. The 53rd week in fiscal 2024 contributed an estimated $78 million to Operating expenses in fiscal 2024. The decrease in Operating expenses as a percentage of Net sales was primarily driven by benefits from cost saving initiatives and the leveraging impact of higher sales, partially offset by higher costs associated with occupancy, union and other employee benefits and costs related to the Cybersecurity Incident in fiscal 2025.
Restructuring, Acquisition and Integration Related Expenses
Restructuring, acquisition and integration related expenses increased $58 million to $94 million for fiscal 2025, from $36 million for fiscal 2024. The increase was primarily driven by the $53 million charge related to the Company’s termination of its supply agreement with a customer in the East region, increased costs associated with outsourcing certain corporate functions under restructuring initiatives and higher closed property charges and costs, partially offset by a decrease in certain employee severance and other employee separation costs.
Loss on Sale of Assets and Other Asset Charges
Loss on sale of assets and other asset charges decreased $15 million to $42 million for fiscal 2025, from $57 million for fiscal 2024. The decrease in fiscal 2025 was primarily driven by lower asset impairment charges. Fiscal 2025 primarily included a $24 million asset impairment charge related to our Allentown, Pennsylvania distribution center and $19 million in losses on the sales of receivables. Fiscal 2024 primarily included $43 million in asset impairment charges related to one of our corporate-owned office locations, certain leased and owned distribution centers and certain retail store locations and $21 million in losses on the sales of receivables.
Operating (Loss) Income
Reflecting the factors described above, Operating loss was $31 million for fiscal 2025, a $39 million decrease from Operating income of $8 million in fiscal 2024. The decrease was primarily driven by an increase in Restructuring, acquisition and integration related expenses and Operating expenses, partially offset by an increase in Gross profit and a decrease in Loss on sale of assets and other asset charges, each as described above.
Net Periodic Benefit Income, Excluding Service Cost
Net periodic benefit income, excluding service cost increased $5 million to $20 million in fiscal 2025, from $15 million in fiscal 2024. The increase in Net periodic benefit income, excluding service cost was primarily driven by lower interest costs from a lower discount rate utilized in the measurement of pension liabilities.
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Interest Expense, Net
(in millions)
(52 weeks)
(53 weeks)
Increase (Decrease)
Interest expense on long-term debt, net of capitalized interest
Interest expense on finance lease obligations
Amortization of financing costs and discounts
Loss on debt extinguishment
Interest income
Interest expense, net
The decrease in Interest expense, net for fiscal 2025 compared to fiscal 2024 includes an estimated $3 million impact from the 53rd week in fiscal 2024. The remaining decrease was primarily driven by lower outstanding long-term debt balances and lower losses on debt extinguishment.
Benefit for Income Taxes
The effective tax rate was a benefit rate of 25.3% on a pre-tax loss for fiscal 2025 compared to a benefit rate of 19.7% on a pre-tax loss for fiscal 2024. For fiscal 2025, the effective tax rate was impacted by the establishment of valuation allowances against deferred tax assets with limited lives resulting from the One, Big, Beautiful Bill Act (“OBBBA”), partially offset by the tax credit impact of a fiscal 2025 investment in an equity method partnership. For fiscal 2024, the effective tax rate was impacted by non-deductible share-based compensation and the establishment of valuation allowances against deferred tax assets with limited lives.
Net Loss Attributable to United Natural Foods, Inc.
Reflecting the factors described in more detail above, Net loss attributable to United Natural Foods, Inc. was $118 million, or $1.95 per diluted common share, for fiscal 2025, compared to Net loss attributable to United Natural Foods, Inc. of $112 million, or $1.89 per diluted common share, for fiscal 2024.
Adjusted EBITDA
The following table sets forth Adjusted EBITDA by segment for the periods indicated. Refer to Note 16—Business Segments in Part II, Item 8 of this Annual Report for additional information. As a result of the Cybersecurity Incident, we experienced reduced sales volume as described above, which is estimated to have adversely impacted our Adjusted EBITDA results in fiscal 2025 by approximately $50 million.
(in millions)
(52 weeks)
(53 weeks)
Increase (Decrease)
Natural
Conventional
Retail
Corporate and Other
Total Adjusted EBITDA (1)
(1) Fiscal 2024 Adjusted EBITDA included an approximate $10 million benefit from the additional week. The estimated contribution from the additional week is calculated by taking one-fifth of Adjusted EBITDA for the last five-week period within the fourth quarter of fiscal 2024.
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Natural Adjusted EBITDA increased 26.3% for fiscal 2025 as compared to fiscal 2024. The increase was driven by an increase in gross profit, partially offset by an increase in operating expenses.
• Natural Gross profit, which excludes the LIFO (benefit) charge and other adjustments as outlined in Note 16—Business Segments in Part II, Item 8 of this Annual Report, increased $104 million. The 53rd week in fiscal 2024 contributed an estimated $38 million to Natural Gross profit in fiscal 2024. Natural gross profit rate decreased approximately 25 basis points primarily driven by lower product margin rates and customer and product mix, which were partially offset through supplier programs and the benefit of lower shrink expense.
• Natural Operating expense, which excludes depreciation and amortization, share-based compensation and other adjustments as outlined in Note 16—Business Segments in Part II, Item 8 of this Annual Report, increased $12 million. The 53rd week in fiscal 2024 contributed an estimated $32 million to Natural Operating expense in fiscal 2024. Natural operating expense rate decreased approximately 67 basis points primarily due to benefits from cost saving initiatives and the leveraging impact of higher sales, partially offset by higher rent and other occupancy costs primarily resulting from new leased distribution centers.
Conventional Adjusted EBITDA decreased 20.5% for fiscal 2025 as compared to fiscal 2024. The decrease was driven by a decrease in gross profit, partially offset by a decrease in operating expenses.
• Conventional Gross profit, which excludes the LIFO (benefit) charge and other adjustments as outlined in Note 16—Business Segments in Part II, Item 8 of this Annual Report, decreased $48 million. The 53rd week in fiscal 2024 contributed an estimated $29 million to Conventional Gross profit in fiscal 2024. Conventional gross profit rate decreased approximately 13 basis points primarily driven by recoveries from vendors related to legal settlements in fiscal 2024 and lower product margin rates, which were partially offset through supplier programs and the benefit of lower shrink expense.
• Conventional Operating expense, which excludes depreciation and amortization, share-based compensation and other adjustments as outlined in Note 16—Business Segments in Part II, Item 8 of this Annual Report, decreased $3 million. The 53rd week in fiscal 2024 contributed an estimated $25 million to Conventional Operating expense in fiscal 2024. Conventional operating expense rate increased approximately 15 basis points primarily due to higher costs associated with union and other employee benefits, transportation fleet and maintenance, and insurance, all of which were partially offset by benefits from cost saving initiatives.
Retail Adjusted EBITDA decreased $2 million to $6 million for fiscal 2025 as compared to fiscal 2024.
• Retail Gross profit, which excludes the LIFO (benefit) charge and other adjustments as outlined in Note 16—Business Segments in Part II, Item 8 of this Annual Report, decreased $25 million. The 53rd week in fiscal 2024 contributed an estimated $11 million to Retail Gross profit in fiscal 2024. Retail gross profit rate was approximately flat to fiscal 2024, while dollars decreased primarily due to lower sales volume and store closures, offset by a reduction in shrink.
• Retail Operating expense, which excludes depreciation and amortization, share-based compensation and other adjustments as outlined in Note 16—Business Segments in Part II, Item 8 of this Annual Report, decreased $23 million. The 53rd week in fiscal 2024 contributed an estimated $11 million to Retail Operating expense in fiscal 2024. Retail operating expense rate was approximately flat to fiscal 2024 primarily driven by the deleveraging impact of lower sales and increases in labor costs, offset by operating efficiencies and lower costs from store closures.
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Fiscal year ended August 3, 2024 (fiscal 2024) compared to fiscal year ended July 29, 2023 (fiscal 2023)
The updates to our segment reporting structure resulted in a recast of prior period financial information to conform with current period presentation, and as a result the following reflects an updated segment results discussion for fiscal 2024 compared to fiscal 2023.
Net Sales
The following table sets forth our Net sales by segment. Refer to Note 16—Business Segments in Part II, Item 8 of this Annual Report for additional information. Within the following table, we have estimated the impact of the additional 53rd week in fiscal 2024 to provide more comparable financial results on a year-over-year basis.
(53 weeks)
(53rd week estimated impact)
(52 weeks) (1)
(52 weeks)
Comparable 52-Week Increase (Decrease) (1)
(in millions except percentages)
Natural
Conventional
Retail
Eliminations
Total Net sales
(1) Excludes the estimated impact of the 53rd week in fiscal 2024.
Natural Net sales increased $784 million, or 5.5%, to $14.9 billion in fiscal 2024, from $14.2 billion in fiscal 2023. The 53rd week in fiscal 2024 contributed an estimated $280 million to Natural Net sales. Excluding the impact of the 53rd week, Natural Net sales were $14.7 billion, an increase of approximately 3.6% from fiscal 2023. The increase in Natural Net sales was primarily driven by inflation and new business with existing customers. These increases were partially offset by a decline in unit volumes.
Conventional Net sales decreased $83 million, or 0.6%, to $14.9 billion in fiscal 2024, from $15.0 billion in fiscal 2023. The 53rd week in fiscal 2024 contributed an estimated $280 million to Conventional Net sales. Excluding the impact of the 53rd week, Conventional Net sales were $14.7 billion, a decrease of approximately 2.4% from fiscal 2023. The decrease in Conventional Net sales was primarily driven by a decline in unit volumes, which was partially offset by inflation and new business with existing customers.
Retail Net sales decreased $44 million, or 1.8%, to $2.4 billion in fiscal 2024, from $2.5 billion in fiscal 2023. The 53rd week in fiscal 2024 contributed an estimated $45 million to Retail Net sales. Excluding the impact of the 53rd week, Retail Net sales decreased approximately 3.6%, primarily due to lower volume and store closures. Identical store sales decreased 3.7%.
Lower eliminations of Net sales for fiscal 2024 as compared to fiscal 2023 were primarily due to a decrease in Conventional to Retail sales, which are eliminated upon consolidation.
Adjusted EBITDA
The following table sets forth Adjusted EBITDA by segment for the periods indicated. Refer to Note 16—Business Segments in Part II, Item 8 of this Annual Report for additional information.
(in millions)
(53 weeks)
(52 weeks)
Increase (Decrease)
Natural
Conventional
Retail
Corporate and Other
Total Adjusted EBITDA (1)
(1) Fiscal 2024 Adjusted EBITDA included an approximate $10 million benefit from the additional week. The estimated contribution from the additional week is calculated by taking one-fifth of Adjusted EBITDA for the last five-week period within the fourth quarter of fiscal 2024.
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Natural Adjusted EBITDA increased 6.7% for fiscal 2024 as compared to fiscal 2023. The increase was driven by an increase in gross profit, partially offset by an increase in operating expenses.
• Natural Gross profit, which excludes the LIFO charge and other adjustments as outlined in Note 16—Business Segments in Part II, Item 8 of this Annual Report, increased $60 million. The 53rd week in fiscal 2024 contributed an estimated $38 million to Natural Gross profit in fiscal 2024. Natural gross profit rate decreased approximately 32 basis points primarily driven by lower levels of procurement gains resulting from decelerating inflation, partially offset by the benefit of lower shrink expense.
• Natural Operating expense, which excludes depreciation and amortization, share-based compensation and other adjustments as outlined in Note 16—Business Segments in Part II, Item 8 of this Annual Report, increased $38 million. The 53rd week in fiscal 2024 contributed an estimated $32 million to Natural Operating expense in fiscal 2024. Natural operating expense rate decreased approximately 35 basis points primarily due to lower transportation costs and other operational supply chain efficiencies, partially offset by higher incentive compensation expense and higher occupancy-related costs.
Conventional Adjusted EBITDA decreased 27.2% for fiscal 2024 as compared to fiscal 2023. The decrease was driven by a decrease in gross profit, combined with an increase in operating expenses.
• Conventional Gross profit, which excludes the LIFO charge and other adjustments as outlined in Note 16—Business Segments in Part II, Item 8 of this Annual Report, decreased $62 million. The 53rd week in fiscal 2024 contributed an estimated $29 million to Conventional Gross profit in fiscal 2024. Conventional gross profit rate decreased approximately 35 basis points primarily driven by lower levels of procurement gains resulting from decelerating inflation, partially offset by the benefit of lower shrink expense and recoveries from vendors related to legal settlements.
• Conventional Operating expense, which excludes depreciation and amortization, share-based compensation and other adjustments as outlined in Note 16—Business Segments in Part II, Item 8 of this Annual Report, increased $20 million. The 53rd week in fiscal 2024 contributed an estimated $25 million to Conventional Operating expense in fiscal 2024. Conventional operating expense rate increased approximately 18 basis points primarily due to higher incentive compensation expense and the deleveraging impact of lower sales on higher costs, partially offset by lower transportation costs.
Retail Adjusted EBITDA decreased 88.9% for fiscal 2024 as compared to fiscal 2023.
• Retail Gross profit, which excludes the LIFO charge and other adjustments as outlined in Note 16—Business Segments in Part II, Item 8 of this Annual Report, decreased $44 million. The 53rd week in fiscal 2024 contributed an estimated $11 million to Retail Gross profit in fiscal 2024. Retail gross profit rate decreased approximately 132 basis points from margin rate investments intended to drive traffic and lower sales volume.
• Retail Operating expense, which excludes depreciation and amortization, share-based compensation and other adjustments as outlined in Note 16—Business Segments in Part II, Item 8 of this Annual Report, increased $20 million. The 53rd week in fiscal 2024 contributed an estimated $11 million to Retail Operating expense in fiscal 2024. Retail operating expense rate increased approximately 125 basis points primarily driven by the deleveraging impact of lower sales and higher fixed and variable costs.
LIQUIDITY AND CAPITAL RESOURCES
Highlights
• Total liquidity as of August 2, 2025 was $1,497 million and consisted of the following:
◦ $1,453 million of unused credit under our asset-based revolving credit facility (the “ABL Credit Facility”), which increased $218 million from $1,235 million as of August 3, 2024, primarily due to a reduction of net borrowings under the ABL Credit Facility and an increase in the borrowing base; and
◦ $44 million of cash and cash equivalents, which increased $4 million from $40 million as of August 3, 2024.
• Total debt decreased $223 million to $1,862 million as of August 2, 2025 from $2,085 million as of August 3, 2024, primarily related to debt repayments and a reduction in net borrowings under the ABL Credit Facility due to net cash provided by operating activities, partially offset by payments for capital expenditures and investments.
• Working capital decreased $216 million to $821 million as of August 2, 2025 from $1,037 million as of August 3, 2024, primarily due to an increase in accounts payable to support higher purchasing levels combined with a decrease in inventory levels, partially offset by increases in accounts receivable from higher sales.
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• In the fourth quarter of fiscal 2025, we made a voluntary prepayment of $100 million on the Term Loan Facility funded with incremental borrowings under the ABL Credit Facility.
• In connection with the contract termination described further in Note 4—Restructuring, Acquisition and Integration Related Expenses, we paid $18 million in the fourth quarter of fiscal 2025 and an additional $18 million was paid subsequent to the end of fiscal 2025. Remaining installments totaling $17 million are expected to be paid in the first quarter of fiscal 2026.
• In fiscal 2026, scheduled debt maturities are expected to be $5 million. Based on our Consolidated First Lien Net Leverage Ratio (as defined in the Term Loan Agreement) at the end of fiscal 2025, no prepayment from Excess Cash Flow in fiscal 2025 is required to be made on the Term Loan Facility in fiscal 2026.
Sources and Uses of Cash
We expect to continue to replenish operating assets and pay down debt obligations with internally generated funds. A significant reduction in operating earnings or the incurrence of operating losses could have a negative impact on our operating cash flow, which may limit our ability to pay down our outstanding indebtedness as planned. Our credit facilities are secured by a substantial portion of our total assets. We expect to be able to fund debt maturities and finance lease liabilities through fiscal 2026 with internally generated funds and borrowings under the ABL Credit Facility.
Our primary sources of liquidity are from internally generated funds and from borrowing capacity under the ABL Credit Facility. We believe our short-term and long-term financing abilities are adequate as a supplement to internally generated cash flows to satisfy debt obligations and fund capital expenditures as opportunities arise. Our continued access to short-term and long-term financing through credit markets depends on numerous factors, including the condition of the credit markets and our results of operations, cash flows, financial position and credit ratings.
Primary uses of cash include debt service, capital expenditures, working capital maintenance depending on seasonality and other fluctuations, investments in cloud technologies and income tax payments. We typically finance working capital needs with cash provided from operating activities and short-term borrowings. Inventories are managed primarily through demand forecasting and replenishing depleted inventories.
We currently do not pay a dividend on our common stock. In addition, we are limited in the aggregate amount of dividends that we may pay under the terms of our Term Loan Facility, ABL Credit Facility and our $500 million of unsecured 6.750% senior notes due October 15, 2028 (the “Senior Notes”). Subject to certain limitations contained in our debt agreements and as market conditions warrant, we may from time to time refinance indebtedness that we have incurred, including through the incurrence or repayment of loans under existing or new credit facilities or the issuance or repayment of debt securities. Proceeds from the sale of any properties mortgaged and encumbered under our Term Loan Facility are required to be used to make additional Term Loan Facility payments or to be reinvested in the business.
Long-Term Debt
During fiscal 2025, we reduced borrowings under the ABL Credit Facility by a net $114 million, and made voluntary and mandatory prepayments on the Term Loan Facility totaling $116 million. Refer to Note 9—Long-Term Debt in Part II, Item 8 of this Annual Report for a detailed discussion of the provisions of our credit facilities and certain long-term debt agreements and additional information.
Our Term Loan Agreement and Senior Notes do not include any financial maintenance covenants. Our ABL Loan Agreement subjects us to a fixed charge coverage ratio of at least 1.0 to 1.0 calculated at the end of each of our fiscal quarters on a rolling four quarter basis, if the adjusted aggregate availability is ever less than the greater of (i) $220 million, or $210 million if no ABL FILO Loans are then outstanding at such time and (ii) 10% of the aggregate borrowing base. We have not been subject to the fixed charge coverage ratio covenant under the ABL Loan Agreement, including through the filing date of this Annual Report. The Term Loan Agreement, Senior Notes and ABL Loan Agreement contain certain operational and informational covenants customary for debt securities of these types that limit our and our restricted subsidiaries’ ability to, among other things, incur debt, declare or pay dividends or make other distributions to our stockholders, transfer or sell assets, create liens on our assets, engage in transactions with affiliates, and merge, consolidate or sell all or substantially all of our and our subsidiaries’ assets on a consolidated basis. We were in compliance with all such covenants for all periods presented. If we fail to comply with any of these covenants, we may be in default under the applicable debt agreement, and all amounts due thereunder may become immediately due and payable.
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Refer to Note 9—Long-Term Debt in Part II, Item 8 of this Annual Report for further detail of our scheduled debt maturities by fiscal year and by debt instrument, which excludes debt prepayments that may be required from Excess Cash Flow (as defined in the Term Loan Agreement) generated or sales of mortgaged properties in fiscal 2026 or beyond. Based on our Consolidated First Lien Net Leverage Ratio (as defined in the Term Loan Agreement) at the end of fiscal 2025, no prepayment from Excess Cash Flow in fiscal 2025 is required to be made on the Term Loan Facility in fiscal 2026.
Derivatives and Hedging Activity
We enter into interest rate swap contracts from time to time to mitigate our exposure to changes in market interest rates as part of our strategy to manage our debt portfolio to achieve an overall desired position of notional debt amounts subject to fixed and floating interest rates. Interest rate swap contracts are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures.
As of August 2, 2025, we had an aggregate of $750 million of floating rate notional debt subject to active interest rate swap contracts, which effectively fix the Secured Overnight Financing Rate (“SOFR”) component of our floating interest payments through pay fixed and receive floating interest rate swap agreements. These fixed rates range from 2.475% to 4.130%, with maturities between October 2025 and June 2028. The fair values of these interest rate derivatives represent a total net liability of $2 million as of August 2, 2025, and are subject to volatility based on changes in market interest rates. Refer to Note 8—Derivatives in Part II, Item 8 and Interest Rate Risk in Part II, Item 7A of this Annual Report for additional information.
From time-to-time, we enter into fixed price fuel supply agreements and foreign currency hedges . As of August 2, 2025, we had fixed price fuel contracts and foreign currency forward agreements outstanding. Gains and losses and the outstanding assets and liabilities from these arrangements are insignificant.
Payments for Capital Expenditures and Cloud Technology Implementation Expenditures
Our capital expenditures for fiscal 2025 were $231 million compared to $345 million for fiscal 2024, a decrease of $114 million. Our capital spending for fiscal 2025 and 2024 principally included supply chain and information technology expenditures, including investments in growth initiatives and maintenance expenditures. Fiscal 2025 included $193 million of distribution center improvements, technology and other expenditures, including investments in automation, $20 million of Retail expenditures and $18 million of investments in new distribution centers. Fiscal 2024 included $280 million of distribution center improvements, technology and other expenditures, $41 million of investments in new distribution centers, primarily the new Manchester, Pennsylvania distribution center, and $24 million of Retail expenditures. Cloud technology implementation expenditures, which are included in operating activities in the Consolidated Statements of Cash Flows, were $7 million for fiscal 2025 compared to $25 million for fiscal 2024.
Fiscal 2026 capital and cloud implementation spending is expected to be approximately $250 million and includes technology platform investments and projects that automate and optimize our distribution network. The components of capital and cloud implementation expenditures for fiscal 2026 will be primarily dependent on the nature of certain contracts to be executed. We expect to finance fiscal 2026 capital and cloud implementation expenditures requirements with cash generated from operations and borrowings under our ABL Credit Facility. Future investments may be financed through long-term debt or borrowings under our ABL Credit Facility and cash from operations.
Cash Flow Information
The following summarizes our Consolidated Statements of Cash Flows:
(in millions)
(52 weeks)
(53 weeks)
Change
Net cash provided by operating activities
Net cash used in investing activities
Net cash (used in) provided by financing activities
Effect of exchange rate on cash
Net increase in cash and cash equivalents
Cash and cash equivalents, at beginning of period
Cash and cash equivalents at end of period
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The increase in net cash provided by operating activities was primarily due to higher levels of cash generated by net working capital, primarily resulting from an increase in Accounts payable in fiscal 2025 related to higher purchasing levels to support higher sales levels.
The decrease in net cash used in investing activities was primarily due to lower payments for capital expenditures.
The increase in net cash used in financing activities was primarily due to an increase in net repayments of borrowings under the ABL Credit Facility resulting from the increase in net cash provided by operating activities and the decrease in net cash used in investing activities, as described above, partially offset by lower levels of repayments of long-term debt and finance leases.
Other Obligations and Commitments
Our principal contractual obligations and commitments consist of obligations under our long-term debt, interest on long-term debt, operating and finance leases, purchase obligations, self-insurance liabilities and multiemployer plan withdrawal liabilities.
Refer to Note 9—Long-Term Debt, Note 11—Leases, Note 13—Benefit Plans, Note 1—Significant Accounting Policies and Note 17—Commitments, Contingencies and Off-Balance Sheet Arrangements in Part II, Item 8 of this Annual Report for more information on the nature and timing of obligations for debt, leases, benefit plans, self-insurance and purchase obligations, respectively. The future amount and timing of interest expense payments are expected to vary with the amount and then prevailing contractual interest rates over our debt as discussed in Interest Rate Risk in Part II, Item 7A of this Annual Report.
Pension and Other Postretirement Benefit Obligations
We contributed $1 million and $1 million to our defined benefit pension and other postretirement benefit plans, respectively, in fiscal 2025. In fiscal 2026, no minimum pension contributions are required to be made to the SUPERVALU INC. Retirement Plan under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). An insignificant amount of contributions is expected to be made to other defined benefit pension plans and postretirement benefit plans in fiscal 2026. We fund our tax-qualified defined benefit pension plan based on the minimum contribution required under ERISA, the Pension Protection Act of 2006 and other applicable laws and additional contributions made at our discretion. We may accelerate contributions or undertake contributions in excess of the minimum requirements from time to time subject to the availability of cash in excess of operating and financing needs or other factors as may be applicable. We assess the relative attractiveness of the use of cash to accelerate contributions considering such factors as expected return on assets, discount rates, cost of debt, reducing or eliminating required Pension Benefit Guaranty Corporation variable rate premiums or the ability to exemption from participant notices of underfunding.
Off-Balance Sheet Multiemployer Pension Arrangements
We contribute to various multiemployer pension plans under collective bargaining agreements, primarily defined benefit pension plans. These multiemployer plans generally provide retirement benefits to participants based on their service to contributing employers. The benefits are paid from assets held in trust for that purpose. Plan trustees are typically responsible for determining the level of benefits to be provided to participants as well as the investment of the assets and plan administration. Trustees are appointed in equal number by employers and the unions that are parties to the relevant collective bargaining agreements. Based on the assessment of the most recent information available from the multiemployer plans, we believe that most of the plans to which we contribute are underfunded. We are only one of a number of employers contributing to these plans and the underfunding is not a direct obligation or liability to us.
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Our contributions can fluctuate from year to year due to store closures, employer participation within the respective plans and reductions in headcount. Our contributions to these plans could increase in the near term. However, the amount of any increase or decrease in contributions will depend on a variety of factors, including the results of our collective bargaining efforts, investment returns on the assets held in the plans, actions taken by the trustees who manage the plans and requirements under the Pension Protection Act of 2006, the Multiemployer Pension Reform Act and Section 412 of the Internal Revenue Code. Expense is recognized in connection with these plans as contributions are funded, in accordance with GAAP. We made contributions to these plans, and recognized expense of $48 million, $47 million and $48 million in fiscal 2025, 2024 and 2023, respectively. In fiscal 2026, we expect to contribute approximately $50 million to multiemployer plans, subject to the outcome of collective bargaining and capital market conditions. If we were to significantly reduce contributions, exit certain markets or otherwise cease making contributions to these plans, we could trigger a partial or complete withdrawal that could require us to record a withdrawal liability obligation and make withdrawal liability payments to the fund. We expect required cash payments to fund multiemployer pension plans from which we have withdrawn to be insignificant in any one fiscal year, which would exclude any payments that may be agreed to on a lump sum basis to existing withdrawal liabilities. Any future withdrawal liability would be recorded when it is probable that a liability exists and can be reasonably estimated, in accordance with GAAP. Any triggered withdrawal obligation could result in a material charge and payment obligations that would be required to be made over an extended period of time.
We also make contributions to multiemployer health and welfare plans in amounts set forth in the related collective bargaining agreements. A small minority of collective bargaining agreements contain reserve requirements that may trigger unanticipated contributions resulting in increased healthcare expenses. If these healthcare provisions cannot be renegotiated in a manner that reduces the prospective healthcare cost as we intend, our Operating expenses could increase in the future.
Refer to Note 13—Benefit Plans in Part II, Item 8 of this Annual Report for additional information regarding the plans in which we participate.
Share Repurchases
In September 2022, our Board of Directors authorized a repurchase program for up to $200 million of our common stock over a term of four years (the “2022 Repurchase Program”). As of August 2, 2025, we had $138 million remaining authorized under the 2022 Repurchase Program. We did not repurchase any shares of our common stock in fiscal 2025.
We will manage the timing of any repurchases of our common stock in response to market conditions and other relevant factors, including any limitations on our ability to make repurchases under the terms of our ABL Credit Facility, Term Loan Facility and Senior Notes. We may implement the 2022 Repurchase Program pursuant to a plan or plans meeting the conditions of Rule 10b5-1 under the Exchange Act.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. Management believes the following critical accounting estimates reflect our more subjective or complex judgments and estimates used in the preparation of our Consolidated Financial Statements.
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Inventories
Inventories are predominantly valued at the lower of cost or market. Substantially all of our inventories consist of finished goods. Inventories are recorded net of vendor allowances and cash discounts. We evaluate inventory shortages (shrink) throughout each fiscal year based on physical counts in our facilities. The majority of our inventory is valued under the LIFO method, which allows for matching of costs and revenues, as the current acquisition cost is used to value cost of goods sold as inventory is sold in an inflationary environment. During fiscal 2025 and fiscal 2024, inventory quantities in certain LIFO layers were reduced. These reductions resulted in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the cost of fiscal 2025 and fiscal 2024 purchases, the effect of which decreased Cost of sales by approximately $28 million in fiscal 2025 and $15 million in fiscal 2024. If the first-in, first-out (“FIFO”) method had been used, Inventories, net, would have been higher by approximately $349 million and $351 million at August 2, 2025 and August 3, 2024, respectively. As of August 2, 2025, approximately $1.8 billion or 81% of inventory was valued under the LIFO method, before the application of any LIFO reserve, and primarily included grocery, frozen food and general merchandise products, with the remaining inventory valued under the first-in, first-out method and primarily included meat, dairy and deli products. When holding inventory levels and mix constant, as of August 2, 2025, we estimate a 50 basis point increase in the inflation rate on our ending LIFO-based inventory would result in an $8 million increase in the LIFO charge on an annualized basis.
Vendor funds
We receive funds from many of the vendors whose products we buy for resale. These vendor funds are generally provided to increase the purchasing and sell-through of the related products. We receive vendor funds for a variety of merchandising activities: placement of the vendors’ products in our advertising; display of the vendors’ products in prominent locations in our stores; support for the introduction of new products into our stores and distribution centers; exclusivity rights in certain categories; and compensation for temporary price reductions offered on products held for sale. We also receive vendor funds for buying activities such as volume commitment rebates, credits for purchasing products in advance of their need and cash discounts for the early payment of merchandise purchases. The majority of our vendor fund contracts have terms of less than a year, although some of the contracts have terms of longer than one year.
We recognize vendor funds for merchandising activities as a reduction of Cost of sales when the related products are sold, unless it has been determined that a discrete identifiable benefit has been provided to the vendor, in which case the related amounts are recognized within Net sales and represent less than 0.5% of total Net sales. Vendor funds that have been earned as a result of completing the required performance under the terms of the underlying agreements but for which the product has not yet been sold are recognized as reductions to the value of on-hand inventory.
The amount and timing of recognition of vendor funds as well as the amount of vendor funds to be recognized as a reduction to ending inventory requires management judgment and estimates. Management determines these amounts based on estimates of current year purchase volume using forecast and historical data and a review of average inventory turnover data. These judgments and estimates impact our reported Gross profit, Operating income and inventory amounts. The historical estimates have been reliable in the past, and we believe our methodology will continue to be reliable in the future. Based on previous experience, we do not expect significant changes in the level of vendor support. However, if such changes were to occur, Cost of sales and Net sales could change, depending on the specific vendors involved. If vendor advertising allowances were substantially reduced or eliminated, we would consider changing the volume, type and frequency of the advertising, which could increase or decrease our advertising exp ense.
Benefit plans
We sponsor pension and other postretirement plans in various forms covering substantially all employees who meet eligibility requirements. Pension benefits associated with these plans are generally based on each participant’s years of service, compensation, and age at retirement or termination. Our defined benefit pension plan and certain supplemental executive retirement plans are closed to new participants and service crediting ended for all participants.
While we believe the valuation methods used to determine the fair value of plan assets are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
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The determination of our obligation and related expense for Company-sponsored pension and other postretirement benefits is dependent, in part, on management’s selection of certain actuarial assumptions used in calculating these amounts. These assumptions include, among other things, the discount rate and the expected long-term rate of return on plan assets. We measure our defined benefit pension and other postretirement plan obligations as of the nearest calendar month end. Refer to Note 13—Benefit Plans in Part II, Item 8 of this Annual Report for information related to the actuarial assumptions used in determining pension and postretirement healthcare liabilities and expenses.
Discount rates
We review and select the discount rate to be used in connection with our pension and other postretirement obligations annually. The discount rate reflects the current rate at which the associated liabilities could be effectively settled at the end of the year. We set our rate to reflect the yield of a portfolio of high quality, fixed-income debt instruments that would produce cash flows sufficient in timing and amount to settle projected future benefits.
We utilize the “full yield curve” approach for determining the interest and service cost components of net periodic benefit cost for defined benefit pension and other postretirement benefit plans. Under this method, the discount rate assumption used in the interest and service cost components of net periodic benefit cost is built through applying the specific spot rates along the yield curve used in the determination of the benefit obligation described above, to the relevant projected future cash flows of our pension and other postretirement benefit plans. We believe the “full yield curve” approach reflects a greater correlation between projected benefit cash flows and the corresponding yield curve spot rates and provides a more precise measurement of interest and service costs. Each 25-basis point reduction in the discount rate would increase our projected pension benefit obligation by $32 million, as of August 2, 2025, and for fiscal 2025 would increase Net periodic benefit income by approximately $2 million.
Expected rate of return on plan assets
Our expected long-term rate of return on plan assets assumption is determined based on the portfolio’s actual and target composition, current market conditions, forward-looking return and risk assumptions by asset class, and historical long-term investment performance. The assumed long-term rate of return on pension assets was 6.25% for fiscal 2025. The 10-year rolling average annualized return for the SUPERVALU INC. Retirement Plan is approximately 7.5% based on returns from 2016 to 2025. Each 25-basis point reduction in expected return on plan assets would decrease Net periodic benefit income for fiscal 2025 by approximately $4 million.
Amortizing gains and losses
In accordance with GAAP, actual results that differ from our assumptions are accumulated and amortized over future periods and, therefore, affect expense and obligations in future periods. We recognize the amortization of net actuarial loss on the SUPERVALU INC. Retirement Plan over the remaining life expectancy of inactive participants based on our determination that almost all of the defined benefit pension plan participants are inactive and the plan is frozen to new participants. For the purposes of inactive participants, we utilized a 90% threshold established under our policy.
Multiemployer pension plans
We contribute to various multiemployer pension plans based on obligations arising from collective bargaining agreements. These multiemployer pension plans generally provide retirement benefits to participants based on their service to contributing employers. The benefits are paid from assets held in trust for that purpose. Plan trustees are typically responsible for determining the level of benefits to be provided to participants as well as the investment of the assets and plan administration.
We continue to evaluate and address our potential exposure to underfunded multiemployer pension plans as it relates to our associates who are or were beneficiaries of these plans. In the future, we may consider opportunities to limit our exposure to underfunded multiemployer pension obligations by moving our active associates in such plans to defined contribution plans, and withdrawing from the pension plan or continuing to participate in the plans for prior obligations. As we continue to work to find solutions to underfunded multiemployer pension plans, it is possible we could incur withdrawal liabilities for certain additional multiemployer pension plan obligations in the future as we actively negotiate new collective bargaining agreements with a number of our unions in due course.
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The American Rescue Plan Act (“ARPA”) established the Special Financial Assistance (“SFA”) Program for financially troubled multiemployer pension plans. Under ARPA, eligible multiemployer pension plans can apply to receive a cash payment intended to keep the plans solvent and able to pay pension benefits through the plan year ending 2051. As of the end of fiscal 2025, two plans in which we participate have received SFA, and one other plan in which we participate received SFA funding subsequent to the end of fiscal 2025. Although these liabilities are not a direct obligation or liability of ours, addressing these uncertainties requires judgment in the timing of expense recognition when we determine our commitment is probable and estimable.
Refer to Note 13—Benefit Plans in Part II, Item 8 of this Annual Report for more information relating to our participation in these multiemployer pension plans and to the actuarial assumptions used in determining pension and other postretirement liabilities and expenses.
Self-insurance liabilities
We are primarily self-insured for workers’ compensation, general and automobile liability insurance. It is our policy to record the self-insured portions of our workers’ compensation, general and automobile liabilities based upon actuarial methods of estimating the future cost of claims and related expenses that have been reported but not settled, and that have been incurred but not yet reported. Any projection of losses concerning these liabilities is subject to a considerable degree of variability. Among the causes of this variability are unpredictable external factors affecting litigation trends, benefit level changes and claim settlement patterns. If actual claims incurred are greater than those anticipated, our reserves may be insufficient and additional costs could be recorded in our Consolidated Financial Statements. Accruals for workers’ compensation, general and automobile liabilities totaled $100 million and $89 million as of August 2, 2025 and August 3, 2024, respectively.
Recoverability of long-lived assets
We review long-lived assets, including definite-lived intangible assets at least annually, and on an interim basis if events occur or changes in circumstances indicate that the carrying value of the assets may not be recoverable. We evaluate these assets at the asset-group level, which is the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Cash flows expected to be generated by the related assets are estimated over the assets’ useful lives based on updated projections. When the undiscounted future cash flows are not sufficient to recover an asset’s carrying amount, the fair value is compared to the carrying value to determine the loss to be recorded.
Estimates of future cash flows and expected sales prices are judgments based on the Company’s experience and knowledge of operations. These estimates project cash flows several years into the future and include assumptions on variables such as changes in supply contracts, macroeconomic impacts and market competition.
In fiscal 2025, we recognized a $24 million non-cash asset impairment charge related to a distribution center in our East region.
Income taxes
We account for income taxes under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized within the provision for income tax in the period that includes the enactment date.
The calculation of our tax liabilities includes addressing uncertainties in the application of complex tax regulations and is based on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Addressing these uncertainties requires judgment and estimates; however, actual results could differ, and we may be exposed to losses or gains. Our effective tax rate in a given financial statement period could be affected based on favorable or unfavorable tax settlements. Unfavorable tax settlements will generally require the use of cash and may result in an increase to our effective tax rate in the period of resolution. Favorable tax settlements may be recognized as a reduction to our effective tax rate in the period of resolution.
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We regularly review our deferred tax assets for recoverability to evaluate whether it is more likely than not that they will be realized. In making this evaluation, we consider the statutory recovery periods for the assets, along with available sources of future taxable income, including reversals of existing and future taxable temporary differences, tax planning strategies, history of taxable income and projections of future income. We give more significance to objectively verifiable evidence, such as the existence of deferred tax liabilities that are forecast to generate taxable income within the relevant carryover periods and a history of earnings. A valuation allowance is provided when we conclude, based on all available evidence, that it is more likely than not that the deferred tax assets will not be realized during the applicable recovery period.
The OBBBA was signed into law on July 4, 2025. Accounting Standards Codification (“ASC”) 740, “Income Taxes”, requires the effects of changes in tax laws to be recognized in the period in which the legislation is enacted. The OBBBA includes numerous provisions that affect corporate taxation, including the immediate expensing of domestic research and development costs and modifying the interest expense limitation. Refer to Note 14—Income Taxes in Part II, Item 8 of this Annual Report for more information relating to effects of the new tax legislation on the Company.
Recently Issued Financial Accounting Standards
For a discussion of recently issued financial accounting standards, refer to Note 2—Recently Adopted and Issued Accounting Pronouncements in Part II, Item 8 of this Annual Report.
