United Natural Foods Inc. (UNFI) said advances in artificial intelligence and supply-chain automation played an increasingly significant role in its operational turnaround, as the distributor reported stronger profitability, improved free cash flow, and higher service levels in the first quarter of fiscal 2026.
On its earnings call, CEO James Alexander Douglas said UNFI’s deployment of Relex — an AI-driven forecasting and replenishment platform — is now running across half of the company’s distribution network. The rollout will extend to the rest of the network by year-end.
According to Douglas, early results show the technology is improving procurement accuracy, reducing waste, and helping cut out-of-stocks — all critical issues for grocers facing tight margins and unpredictable demand. “This solution is helping us partner with our customers and suppliers to make smarter procurement decisions by using an AI-based platform to predict demand, avoid waste and reduce out of stocks,” he said.
Fill rates, a key performance metric for retailers, are now trending above levels seen in fiscal 2024 and 2025. Douglas attributed that improvement to a combination of AI forecasting, expanded lean management practices inside distribution centers, and a more localized management structure that speeds up daily decision-making.
UNFI reported first-quarter net sales of $7.8 billion, flat from a year earlier. An 11% increase in the Natural Products segment offset a 12% decline in Conventional Products tied to UNFI’s exit from its Allentown, Pennsylvania, distribution center — a planned move that removed volume but improved profitability.
Adjusted EBITDA rose 25% to $167 million. Gross margin increased 20 basis points to 13.4%, while throughput inside distribution centers — measured as cases managed per hour — climbed more than 2% year over year and 10% compared with the same quarter in fiscal 2024.
Free cash flow improved by approximately $105 million from last year’s first quarter, supported by higher profitability and more efficient working-capital management. UNFI reduced its net leverage ratio to 3.2x, down one turn from the prior year.
CFO Giorgio Tarditi said the company’s focus on automation, lean daily management, and network optimization is beginning to yield consistent financial benefits. “We remain committed to our strategy of adding value to our customers and suppliers while making UNFI more effective and efficient as a business partner,” he said.
The company also ramped operations at its new automated natural-products distribution center in Sarasota, Florida, which is designed to serve a high-growth market and support a more efficient national footprint.
Lean daily management — which provides real-time metrics for safety, delivery, and productivity — is now in place at 34 distribution centers. UNFI said both lean practices and Relex are driving better visibility into demand and inventory, allowing employees to identify and solve problems faster.
Executives said the combination of these technologies is creating a more resilient, responsive network as retailers navigate shifting consumer demand and rising competition from digitally advanced grocery chains.
UNFI will highlight its technological investments, including AI-based supply-chain and merchandising capabilities, during its Investor Day next week. The event will feature operational leaders involved in rolling out Relex, expanding private brands, and improving supplier onboarding — areas the company views as essential to long-term growth.
The company reaffirmed its full-year fiscal 2026 outlook, including projected sales of $31.6 billion to $32 billion, adjusted EBITDA of $630 million to $700 million, and free cash flow of about $300 million.
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