United Natural Foods Inc.’s (UNFI) third-quarter earnings call on Tuesday turned into a crisis-management situation as executives provided an update on a security breach that occurred late last week. The cyberattack could impact the shelves of UNFI’s biggest customer, Whole Foods, in the coming days. 

The breach overshadowed what was a strong third quarter, with UNFI posting a net sales year-over-year increase of 7.5% to just over $8 billion. Natural net sales rose 12%, while conventional food net sales increased 2.7%.

UNFI first became aware of the security breach on Thursday, CEO Sandy Douglas said during the call. The wholesaler activated its incident response plan, implemented containment measures, and started working to assess, mitigate, and remediate the incident. By Friday afternoon, UNFI had shut down its entire network.

UNFI is working with a third-party cybersecurity firm to implement a workaround, continuing to service customers as it is able. The distributor is bringing systems back online to restore customer service as soon as possible, Douglas said.

“We believe we are managing the incident capably with a very strong team of inside and outside professionals, including specialized experts,” Douglas said during the call. “We’ll continue to keep our customers, suppliers, and associates regularly updated on our progress and next steps.”

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The breach has already impacted UNFI’s business, limiting the company’s ability to ship to customers.

Douglas would not comment on how much the breach is affecting business in terms of percentage of orders shipped, but said the company said it was doing all it could to serve customers—including obtaining help from other wholesalers.

“The focus is making sure we serve our customers and help them do whatever they need to do the best they can in this environment. In parallel, our focus is to address the issues as quickly as possible, ensure the systems are safe, and bring them back online,” said Douglas.

The breach was not the only dose of bad news during the earnings call. UNFI also announced it was ending its northeastern distribution agreement with Key Food Stores, which Douglas described as an “unprofitable relationship.” The termination will also close UNFI’s Allentown, Pa., distribution facility.

“It was a clear choice to end the agreement with Key Food after careful consideration of all the options,” Douglas said.

UNFI reported during the call that Lean processes to make operations more efficient were now being used in 20 of its 52 distribution centers. Gross profit increased 6.1% year over year to $1.1 billion, and adjusted EBITDA for the third quarter was $157 million, compared to $130 million a year ago.

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This is a developing story and more details will be provided later.

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