United Natural Foods Inc. (UNFI) signed a three-year distribution pact with Safeway Inc. (SWY) under which it will provide nonproprietary organic, natural and specialty products to the supermarket operator starting in October.
United Natural, which has continued to gain market share, expects the contract will boost its annual revenue by 4% in its fiscal year starting Aug. 1. The company expects to incur about $1.5 million to $2.5 million in start-up expenses related to the contract. It estimated that $500,000 to $1 million in costs will be posted for the fiscal fourth quarter ending July 30, with the remainder in the fiscal first quarter of next year.
United Natural, which is the primary distributor to Whole Foods Market Inc. (WFM), in June reported that its fiscal third-quarter profit climbed 20% as revenue surged, benefiting from acquisitions last year.
Safeway--which operates regional chains such as Vons, Randalls and Tom Thumb--saw earnings rise 3.2% in the second quarter as it benefited from cost cutting and as revenue rose 7.1%, mostly on higher fuel sales and a boost from Canadian exchange rates.
Shares of United Natural and Safeway closed Friday at $44.52 and $20.93, respectively. Neither was active premarket.
-By Tess Stynes, Dow Jones Newswires; 212-416-2481; Tess.Stynes@dowjones.com