Investing.com -- United Natural Foods Inc. shares fell over 7% in premarket trading on Tuesday after the grocery distributor reported a 4.2% drop in quarterly revenue even as profit and margins improved, with the company holding its full-year guidance midpoints flat despite the earnings strength.

Net sales for the 13 weeks ended May 2, fell to $7.72 billion from $8.06 billion a year earlier. The company said approximately 450 basis points of that decline came from deliberate network optimization actions, including the transition out of its Allentown, Pennsylvania distribution center completed in the first quarter.

Conventional segment sales dropped 13.6% to $3.14 billion, while the Natural segment grew 4.4% to $4.34 billion. Retail fell 10.1% to $515 million.

Despite the revenue weakness, gross profit margin widened to 13.6% of net sales from 13.4% a year earlier, with gross profit at $1.05 billion compared to $1.08 billion in the third quarter of fiscal 2025.

Operating expenses fell to $954 million, or 12.4% of net sales, from $1.03 billion, or 12.7% of net sales, driven by insurance proceeds and cost-saving initiatives.

Adjusted EBITDA rose 16.6% to $183 million from $157 million, and net income came in at $33 million compared to a net loss of $7 million a year ago, per the earnings release. Adjusted earnings per share hit $0.77, up from $0.44.

Yet with those gains in hand, the company narrowed but held midpoints flat across every full-year metric, net sales guidance stayed at $31.10 billion to $31.30 billion, Adjusted EBITDA at $685 million to $705 million, and Adjusted EPS at $2.40 to $2.60, according to the updated outlook table.

Adding to the pressure, free cash flow dropped 54.6% to $54 million from $119 million in the same period last year.

Net cash from operating activities fell to $98 million from $173 million, reflecting higher working capital use, the company said. The full-year free cash flow target remains approximately $330 million, implying a sharp recovery in the fourth quarter.

Net debt fell to $1.63 billion from $1.93 billion a year earlier, bringing the net leverage ratio to 2.5x. The company repurchased 82,233 shares during the quarter at an average price of $48.64.