UNFI - United Natural Foods cut to Hold as UBS amid significant margin headwinds

2023-03-13 08:31:16 ET

United Natural Foods ( NYSE: UNFI ) was downgraded to Neutral at UBS on Monday as the bank sees escalating margin headwinds into 2023.

Equity analyst Mark Carden said that inventory issues and labor inflation headwinds are likely to continue impacting the company into the year. Additionally, shifts in consumer behavior could hamper the grocer in months to come.

“UNFI is likely to face profitability headwinds in 2H'23 as it cycles past ‘significant’ procurement gains,” he wrote. “We're also cautious on the outlook for independent grocers, as consumers gravitate towards discount players like WMT (which has 22% grocery market share alone) while grappling with cost of living pressures. This could curtail private label & specialized services growth.”

While Carden advised there is still a longer term opportunity available for United Natural Foods ( UNF ), the near-term headwinds necessitate a step to the sidelines. He cut his price target to $32 from a prior $48 alongside the downgrade to Neutral from Buy.

Read more on the company’s post-earnings plunge .

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