United Natural Foods' Natural vs. Conventional: Margin Divide Widens?

United Natural Foods, Inc.’s (UNFI) first quarter of fiscal 2026 results highlighted a widening performance gap between its Natural and Conventional segments, underscoring how mix and execution are shaping margin outcomes. While consolidated sales decreased 0.4% year over year, the underlying drivers diverged sharply across the two businesses.

The Natural Products segment delivered 10.5% sales growth to $4,240 million, materially outperforming the broader natural and organic market. Management attributed this to strong unit growth, new business wins and sustained demand for natural, organic and specialty products. The company highlighted improved supplier collaboration and progress in private brand initiatives, which are part of broader efforts to support execution and profitability.

In contrast, the Conventional Products segment saw sales decline of 11.7% to $3,325 million, largely due to UNFI’s deliberate exit from the Allentown, PA, distribution center as part of its network optimization strategy. While this pressured top-line performance, it proved accretive to profitability and free cash flow. Management noted that Conventional EBITDA margins expanded during the fiscal first quarter, driven by network optimization, supplier programs and ongoing shrink reduction. However, the company also indicated that a portion of the margin improvement was tied to short-term procurement benefits.

Overall, the quarter underscored a growing divergence between the two segments. Natural continued to support top-line growth amid steadier demand trends, while Conventional reflected a strategic emphasis on efficiency and cash flow rather than volume. These dynamics illustrate how portfolio optimization is reshaping UNFI’s earnings mix, with Natural growth helping to offset lower Conventional volumes as margin profiles continue to separate.

United Natural Foods’ Zacks Rank & Share Price Performance

Shares of this Zacks Rank #1 (Strong Buy) company have lost 4% in the past month compared with the broader Consumer Staples sector and the industry’s 0.9% and 6.6% decline. UNFI has underperformed the S&P 500 index’s growth of 1.4% during the same period.

UNFI Stock's Past Month Performance

Is UNFI a Value Play Stock?

United Natural Foods currently trades at a forward 12-month P/E ratio of 18.28, which is up from the industry average of 14.1 and the sector average of 16.01. This valuation places the stock at a noticeable premium relative to comparable peers and the sector overall.

UNFI P/E Ratio (Forward 12 Months)

Other Top-Ranked Stocks

Mama's Creations, Inc. (MAMA) manufactures and markets fresh deli-prepared foods in the United States. At present, MAMA flaunts a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for Mama's Creations’ current fiscal-year sales and earnings implies growth of 39.9% and 44.4%, respectively, from the year-ago figures. MAMA delivered a trailing four-quarter earnings surprise of 133.3%, on average.

McCormick & Company, Incorporated (MKC) manufactures, markets and distributes spices, seasoning mixes, condiments and other flavorful products to the food industry. It holds a Zacks Rank #2 (Buy) at present. MKC delivered a trailing four-quarter earnings surprise of 2.2%, on average.

The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings implies growth of 1.6% and 2.4%, respectively, from the year-ago figures.

US Foods Holding Corp. (USFD) engages in the marketing, sale and distribution of fresh, frozen, and dry food and non-food products to foodservice customers in the United States. USFD currently carries a Zacks Rank #2. US Foods Holding delivered a trailing four-quarter earnings surprise of 2.5%, on average.

The Zacks Consensus Estimate for US Foods Holding’s current fiscal-year sales and earnings implies growth of 4.4% and 25.1%, respectively, from the year-ago figures.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research