This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, 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," "plans," "goal," "seek," "should," "will," and "would," or similar words. You should read statements that contain these words 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 or false. 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;

†          our sensitivity to general economic conditions, including the current
economic environment;

†          changes in disposable income levels and consumer spending trends;

†          our ability to reduce our expenses in amounts sufficient to offset

† our ability to timely and successfully deploy our new warehouse management system throughout our distribution centers;

†          increased fuel costs;

†          our sensitivity to inflationary and deflationary pressures.

†          the relatively low margins and economic sensitivity of our business;

†          the ability to identify and successfully complete acquisitions of
other natural, organic and specialty food and related product distributors; and

†          management's allocation of capital and the timing of capital
expenditures.

This list of risks and uncertainties, however, is only a summary of some of the most important factors and is not intended to be exhaustive. You should carefully review the risks described under "Part I. Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended July 30, 2011 and any cautionary language in this Quarterly Report on Form 10-Q, as the occurrence of any of these events could have an adverse effect on our business, results of operation and financial condition.

Overview

We believe we are the leading national distributor of natural, organic and specialty foods and non-food products in the United States and Canada. We carry more than 60,000 high-quality natural, organic and specialty foods and non-food products, consisting of national brands, regional brands, private label and master distribution products, in six product categories: grocery and general merchandise, produce, perishables and frozen foods, nutritional supplements and sports nutrition, bulk and food service products and personal care items. We serve more than 23,000 customer locations primarily located across the United States and Canada, the majority of which can be classified into one of the following categories: independently owned natural products retailers, which include buying clubs; supernatural chains, which consist solely of Whole Foods Market; conventional supermarkets, which include mass market chains; and other which includes foodservice and international.

Our operations are comprised of three principal operating divisions. These operating divisions are:

† our wholesale division, which includes our broadline natural, organic and specialty distribution business in the United States, UNFI Canada, which is our natural, organic and specialty distribution business in Canada, Albert's, which is a leading distributor within the United States of organically grown produce and perishable items, and Select Nutrition, which distributes vitamins, minerals and supplements;

† our retail division, consisting of Earth Origins Market, which operates our 12 natural products retail stores within the United States; and

† our manufacturing division, consisting of Woodstock Farms Manufacturing, which specializes in the international importation, roasting, packaging and distribution of nuts, dried fruit, seeds, trail mixes, granola, natural and organic snack items, and confections, and our Blue Marble Brands product lines.

In recent years, our sales to existing and new customers have increased through the continued growth of the natural and organic products industry in general; our efforts to increase the number of conventional supermarket customers to whom we distribute

products; increased market share through our high quality service and a broader product selection, including specialty products, and the acquisition of, or merger with, natural, organic and specialty products distributors; the construction of new distribution centers; the introduction of new products and the development of our own line of natural and organic branded products. Through these efforts, we believe that we have been able to broaden our geographic penetration, expand our customer base, enhance and diversify our product selections and increase our market share. Beginning in fiscal 2009, our strategic plan has focused on increasing market share, particularly in our conventional supermarket channel. This channel typically generates lower gross margins than our independent retailer channel, but also typically has lower operating expenses. Our strategic plan also includes the rollout of a national warehouse management and procurement system upgrade, which was launched in our Lancaster, Texas distribution center in September 2010 and is expected to be rolled out in all of our distribution centers by the end of fiscal 2014. These steps and others are intended to promote operational efficiencies and further reduce our operating expenses to offset the lower gross margins associated with increased sales to the conventional supermarket and supernatural channels.

Our 2012 fiscal year to date has been a pivotal period for us. We completed the divestiture of our conventional non-food and general merchandise lines of business that began in the fourth quarter of fiscal 2011. In connection with the divestiture, we moved the remaining specialty food inventory from our Harrison, Arkansas distribution center to other distribution centers across the United States, and closed the Harrison, Arkansas distribution center. We were also successful in bringing onboard the single largest national customer at one time in our history. Each of these significant events impacted our financial results for the nine months ended April 28, 2012.

Inflation also impacted our financial results for the first nine months of fiscal 2012, as it increased five of the first nine months of the fiscal year. We believe though that based on the recent trend that levels are stabilizing near 4%. Moderate levels of inflation, which we generally consider to be between 2% and 4%, are beneficial to our results as the majority of our pricing is on a cost plus structure, and price changes in this range are more easily passed through the supply chain. We believe the current trend of moderate inflation will continue over the next 12 to 24 months.

We have been the primary distributor to Whole Foods Market for more than 13 years. Effective June 2010, we amended our distribution agreement with Whole Foods Market to extend the term of the agreement for an additional seven years. Under the terms of the amended agreement, we will continue to serve as the primary wholesale natural grocery distributor to Whole Foods Market in its United States regions where we were serving as the primary distributor at the time of the amendment. The amendment extended the expiration date of the agreement from September 25, 2013 to September 25, 2020. On July 28, 2010, we announced that we had entered into an asset purchase agreement under which we agreed to acquire certain assets of Whole Foods Distribution, Inc. previously used for their self-distribution of non-perishables in their Rocky Mountain and Southwest regions, and to become the primary distributor in these regions. We closed this transaction in late September 2010 in the case of the Southwest region and early October 2010 in the case of the Rocky Mountain region. We now serve as the primary distributor to Whole Foods Market in all of its regions in the United States, and have amended our distribution agreement with Whole Foods Market effective October 11, 2010 to include these regions. Whole Foods Market accounted for approximately 36% of our net sales for each of the three and nine months ended April 28, 2012 and April 30, 2011.

In June 2010, UNFI Canada acquired the SDG assets for cash consideration of $65.8 million. With the acquisition, we became the largest distributor of natural, organic and specialty foods, including kosher foods, in Canada. In the first nine months of fiscal 2012, we have utilized our UNFI Canada platform to further expand in the Canadian market, including through our recent acquisition of substantially all of the assets of a specialty food distribution business in the Ontario market.

The ability to distribute specialty food items (including ethnic, kosher and gourmet) has accelerated our expansion into a number of high-growth business markets and allowed us to establish immediate market share in the fast-growing specialty foods market. We have now integrated specialty food products and natural and organic specialty non-food items into most of our broadline distribution centers across the United States and Canada. Due to our expansion into specialty foods, we were awarded new business with a number of conventional supermarkets since fiscal 2010 that previously had not done business with us because we did not distribute specialty products. We believe that distribution of these products enhances our conventional supermarket business channel and that our complementary product lines continue to present opportunities for cross-selling.

On June 9, 2011, we entered into an asset purchase agreement with L&R Distributors pursuant to which we agreed to sell our conventional non-foods and general merchandise lines of business, including certain inventory related to this business. This divestiture was completed in the first quarter of fiscal 2012 and has allowed us to concentrate on our core business of the distribution of natural, organic, and specialty foods and non-food products.

To maintain our market leadership and improve our operating efficiencies, we seek to continually:

† expand our marketing and customer service programs across regions;

† expand our national purchasing opportunities;

† offer a broader product selection;

† offer operational excellence with high service levels and a higher percentage of on-time deliveries than our competitors;

†          centralize general and administrative functions to reduce expenses;



†          consolidate systems applications among physical locations and
regions;

† increase our investment in people, facilities, equipment and technology;

† integrate administrative and accounting functions; and

† reduce the geographic overlap between regions.

Our continued growth has allowed us to expand our existing facilities and open new facilities in an effort to achieve increasing operating efficiencies. We have made significant capital expenditures and incurred considerable expenses in connection with the opening and expansion of our facilities. We have increased our distribution capacity to approximately 7.6 million square feet. In September 2010, we began shipping products from our new distribution center in Lancaster, Texas, which serves customers throughout the Southwestern United States, including Texas, Oklahoma, New Mexico, Arkansas and Louisiana. In October 2010, in connection with the acquisition of the Rocky Mountain distribution business of Whole Foods Distribution, we took over the operations, including the assumption of an operating lease, at a distribution center in Aurora, Colorado, augmenting our existing Aurora, Colorado distribution center, which was at capacity, in serving customers in Colorado, Utah, Arizona, and New Mexico. In April 2012, we signed an agreement to lease a new distribution center in Aurora, Colorado which, when completed during the fourth quarter of fiscal 2013, will allow us to consolidate the operations of our two existing distribution centers in the area into one building, creating additional cost efficiencies for this important market.

Our net sales consist primarily of sales of natural, organic and specialty products to retailers, adjusted for customer volume discounts, returns and allowances. Net sales also consist of amounts charged by us to customers for shipping and handling and fuel surcharges. The principal components of our cost of sales include the amounts paid to manufacturers and growers for product sold, plus the cost of transportation necessary to bring the product to our distribution centers, offset by consideration received from suppliers in connection with the purchase or promotion of the suppliers' products. Cost of sales also includes amounts incurred by us at our manufacturing subsidiary, Woodstock Farms Manufacturing, for inbound transportation costs and depreciation for manufacturing equipment. Our gross margin may not be comparable to other similar companies within our industry that may include all costs related to their distribution network in their costs of sales rather than as operating expenses. We include purchasing and outbound transportation expenses within our operating expenses rather than in our cost of sales. Total operating expenses include salaries and wages, employee benefits (including payments under our Employee Stock Ownership Plan), warehousing and delivery, selling, occupancy, insurance, administrative, share-based compensation, depreciation and amortization expense. Other expenses (income) include interest on our outstanding indebtedness, interest income, unrealized foreign exchange gains or losses and other miscellaneous income and expenses.

Critical Accounting Policies

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 related disclosure of contingent assets and liabilities. The Securities and Exchange Commission ("SEC") has defined critical accounting policies as those that are both most important to the portrayal of our financial condition and results of operations and require our most difficult, complex or subjective judgments or estimates. Based on this definition and as further described in our Annual Report on Form 10-K for the year ended July 30, 2011, we believe our critical accounting policies include the following: (i) determining our allowance for doubtful accounts,
(ii) determining our reserves for the self-insured portions of our workers' compensation and automobile liabilities and (iii) valuing goodwill and intangible assets. For all financial statement periods presented, there have been no material modifications to the application of these critical accounting policies or estimates since our most recently filed Annual Report on Form 10-K.

Results of Operations



The following table presents, for the periods indicated, certain income and
expense items expressed as a percentage of net sales:



                                   Three months ended        Nine months ended
                                 April 28,    April 30,    April 28,    April 30,
                                   2012         2011         2012         2011

Net sales                            100.0 %      100.0 %      100.0 %      100.0 %
Cost of sales                         82.4 %       81.8 %       82.4 %       81.9 %
Gross profit                          17.6 %       18.2 %       17.6 %       18.1 %

Operating expenses                    14.1 %       14.9 %       14.6 %       15.1 %
Restructuring and asset
impairment expenses                    0.0 %        0.0 %        0.1 %        0.0 %
Total operating expenses              14.1 %       14.9 %       14.7 %       15.1 %

Operating income                       3.5 %        3.2 %*       2.9 %        3.0 %

Other expense (income):
Interest expense                       0.1 %        0.1 %        0.1 %        0.1 %
Interest income                        0.0 %       (0.1 )%       0.0 %        0.0 %
Other, net                             0.0 %        0.0 %        0.0 %        0.0 %
Total other expense                    0.1 %        0.0 %        0.1 %        0.1 %

Income before income taxes             3.5 %*       3.2 %        2.8 %        2.9 %

Provision for income taxes             1.4 %        1.3 %        1.1 %        1.1 %

Net income                             2.1 %        1.9 %        1.7 %        1.8 %*

Three Months Ended April 28, 2012 Compared To Three Months Ended April 30, 2011

Net Sales

Our net sales for the three months ended April 28, 2012 increased approximately 15.3%, or $184.0 million, to $1.39 billion, from $1.20 billion for the three months ended April 30, 2011. This increase was primarily due to organic growth (sales growth excluding the impact of acquisitions) within our conventional supermarket channel due in part to the addition of our newest national customer and from increased sales to our supernatural chain customer. Our organic growth is due to the continued growth of the natural and organic products industry in general, increased market share as a result of our focus on service and value added services and a broader selection of products, including specialty foods. Net sales also benefited from food price inflation of approximately 4.4% that we experienced in the quarter ended April 28, 2012 compared to price levels in the prior year comparable quarter.

Our net sales by customer type for the three months ended April 28, 2012 and April 30, 2011 were as follows (in millions):

                                          Net Sales for the Three Months Ended
                                  April 28,         % of        April 30,         % of
Customer Type                       2012         Net Sales         2011        Net Sales
Independently owned natural
products retailers              $         487            35 %  $        447            37 %
Supernatural chains                       496            36 %           432            36 %
Conventional supermarkets                 336            24 %           262            22 %
Other                                      69             5 %            63             5 %
Total                           $       1,388           100 %  $      1,204           100 %

Net sales to our independent retailer channel increased by approximately $40 million, or 9% during the three months ended April 28, 2012 compared to the three months ended April 30, 2011. While net sales in this channel have increased, they have grown at a slower rate than net sales in our supernatural and conventional supermarket channels, and therefore represent a lower percentage of our total net sales in the third quarter of fiscal 2012 compared to the third quarter of fiscal 2011.

Whole Foods Market is our only supernatural chain customer, and net sales to Whole Foods Market for the three months ended April 28, 2012 increased by approximately $64 million or 15% as compared to the prior fiscal year's comparable quarter, and accounted for approximately 36% of our total net sales for each of the three months ended April 28, 2012 and April 30, 2011. The increase in sales to Whole Foods Market is primarily due to increases in same-store sales and new store openings.

Net sales to conventional supermarkets for the three months ended April 28, 2012 increased by approximately $74 million, or 28% from the three months ended April 30, 2011 and represented approximately 24% of total net sales in the three months ended April 28, 2012 compared to 22% in the three months ended April 30, 2011. The increase in net sales to conventional supermarkets is primarily due to a large customer that we began servicing in the third quarter of fiscal 2011 and the addition of our newest national customer which we began servicing during the first quarter of fiscal 2012 as part of our strategy to be the sole supplier of natural, organic and specialty products to our conventional supermarket customers.

Other net sales, which include sales to foodservice customers and sales from the United States to other countries, as well as sales through our retail division, manufacturing division, and our branded product lines, increased by approximately $6 million, or 10% during the three months ended April 28, 2012 compared to the three months ended April 30, 2011, and accounted for approximately 5% of total net sales for both periods.

We expect net sales for the remainder of fiscal 2012 to continue to grow over fiscal 2011. We believe that projected sales growth will come from both sales to new customers and an increase in the number of products that we sell to existing customers. We believe that the integration of our specialty business has allowed us to attract customers that we would not have been able to attract without that business as many customers continue to seek a single source for their natural, organic and specialty products. We also believe that this integration will continue to allow us to pursue a broader array of customers. We expect that most of this growth will occur in our lower gross margin supernatural and conventional supermarket channels. Although sales to these customers typically generate lower gross margins than sales to customers within our independent retailer channel, they also carry a lower average cost to serve than sales to our independent customers. We also believe that food price inflation similar to levels experienced in the first three quarters of fiscal 2012 will continue to contribute to our net sales growth in the remainder of fiscal 2012.

Gross Profit

Our gross profit increased approximately 11.9%, or $26.0 million, to $244.5 million for the three months ended April 28, 2012, from $218.5 million for the three months ended April 30, 2011. Our gross profit as a percentage of net sales was 17.6% for the three months ended April 28, 2012 and 18.2% for the three months ended April 30, 2011. The change in gross profit as a percentage of net sales is due to the change in the mix of net sales by channel that began during the second fiscal quarter of 2010.

Our gross profits are generally higher on net sales to independently owned retailers and lower on net sales in our conventional supermarket and supernatural channels. For the three months ended April 28, 2012 approximately 74% or $137 million of our $184 million total net sales growth was from increased net sales in our conventional supermarket and supernatural channels. As a result, approximately 60% of our total net sales in the three months ended April 28, 2012 were to the conventional supermarket and supernatural channels compared to approximately 58% in the three months ended April 30, 2011. This change in sales mix resulted in lower gross profits as a percentage of net sales during the three months ended April 28, 2012. We anticipate that net sales growth in the conventional supermarket and supernatural channels will continue to outpace growth in the independent channel.

Operating Expenses

Our total operating expenses increased approximately 9.1%, or $16.3 million, to $195.9 million for the three months ended April 28, 2012, from $179.6 million for the three months ended April 30, 2011. The increase in total operating expenses for the three months ended April 28, 2012 was primarily due to higher sales volume.

Total operating expenses for the three months ended April 28, 2012 include share-based compensation expense of $2.5 million, compared to $2.6 million in the three months ended April 30, 2011.

As a percentage of net sales, total operating expenses decreased to approximately 14.1% for the three months ended April 28, 2012, an all-time low, from approximately 14.9% for the three months ended April 30, 2011. The primary drivers for this decrease in total operating expenses as a percentage of net sales are the efficiencies that we have gained from our labor management tools,

centralization under our "one company" approach and the lower operating costs to serve our conventional supermarket and supernatural customers in relation to increased net sales in these channels. We also were able to reduce a portion of the negative impact of rising fuel prices in the three months ended April 28, 2012 by locking in the price of a portion of our expected fuel usage, updating and revising existing routes to reduce miles traveled, reducing idle times and other similar measures. Our expansion into Lancaster, Texas, from where we began servicing customers in September 2010, has helped to further reduce our fuel costs as a percentage of net sales as we have been able to reduce the number of miles traveled to serve our customers in Texas, Oklahoma, New Mexico, Arkansas and Louisiana who were formerly served primarily from our distribution center in Denver, Colorado. We expect that we will be able to continue to reduce our operating expenses as we continue the roll out of our supply chain initiatives including improving the effectiveness of the national warehouse management and procurement system which was launched in the Lancaster, Texas distribution center in the first quarter of fiscal 2011, and is expected to be rolled out in all of our distribution centers by the end of fiscal 2014.

Operating Income

Operating income increased approximately 25.0%, or $9.7 million, to $48.6 million for the three months ended April 28, 2012, from $38.9 million for the three months ended April 30, 2011. As a percentage of net sales, operating income was 3.5% for the three months ended April 28, 2012, compared with 3.2% for the three months ended April 30, 2011. The operating income percentage for the third quarter of fiscal 2012 was our highest since the second quarter of our 2007 fiscal year. The increase in operating income as a percentage of net sales is primarily attributable to efficiencies within our operating structure during the quarter exceeding the decrease in gross margin as a result of the change in our customer mix. Although our operating income percentage for the third quarter showed improvement, we continue to expect the decrease in gross profit . . .