UniFirst Corp (UNF) Q3 2025 Earnings Call Highlights: Revenue Growth Amidst Pricing Challenges

Yahoo

03-07-2025

Revenue: $610.8 million, up 1.2% from $603.3 million in the previous year.
Operating Income: Decreased to $48.2 million from $48.5 million, a decline of 0.6%.
Net Income: Increased to $39.7 million, or $2.13 per diluted share, from $38.1 million, or $2.03 per diluted share.
Adjusted EBITDA: Increased to $85.8 million from $84.8 million, up 1.2%.
Effective Tax Rate: Increased to 25.7% from 22.9% in the prior year.
Core Laundry Operations Revenue: $533.2 million, an increase of 0.9% from the previous year.
Core Laundry Operating Margin: Declined to 6.9% from 7% in the previous year.
Specialty Garments Revenue: Increased to $47.8 million from $47.6 million, up 0.5%.
Specialty Garments Operating Margin: Decreased to 22.8% from 23.9% in the prior year.
First Aid Segment Revenue: Increased to $29.8 million from $27.3 million, up 9%.
Cash and Cash Equivalents: Totaled $211.9 million with no long-term debt.
Free Cash Flow: Increased 22% to $86.7 million.
Capital Expenditures: $109.8 million.
Stock Repurchase: $25.6 million worth of common stock repurchased.
Acquisitions: Acquired four small first aid businesses for $5.4 million.
Annual Revenue Guidance: Maintained within the range of $2.422 billion to $2.432 billion.
Diluted EPS Guidance: Increased to a range of $7.60 to $8.00.
Warning! GuruFocus has detected 4 Warning Signs with UNF.
Release Date: July 02, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
UniFirst Corp (NYSE:UNF) reported a 1.2% increase in consolidated revenues for Q3 2025, reaching $610.8 million.
Net income for the quarter increased to $39.7 million, or $2.13 per diluted share, up from $38.1 million, or $2.03 per diluted share, in the previous year.
The company saw improvements in gross margin and operational execution, with lower merchandise and production costs contributing positively.
The First Aid segment experienced a 9% revenue increase, driven by growth in van operations.
UniFirst Corp (NYSE:UNF) maintained a solid balance sheet with no long-term debt and cash, cash equivalents, and short-term investments totaling $211.9 million.
Consolidated operating income decreased slightly by 0.6% to $48.2 million from $48.5 million in the previous year.
The pricing environment remains challenging, with some vendors increasing prices due to additional sourcing costs.
Core Laundry segment's operating margin declined slightly to 6.9% from 7% in the previous year.
There was a decrease in direct sales revenues compared to the same quarter of the previous year, impacting overall growth.
The company incurred approximately $5.7 million in expenses related to advisory and legal costs, impacting profitability.
Q: Can you elaborate on the organic growth and demand environment, particularly regarding new bids, retention, pricing challenges, and wearer levels? A: Steven Sintros, President and CEO, explained that the existing customer base is somewhat cautious, with some targeted reductions in employment levels, particularly in the manufacturing sector. Despite improved retention and solid sales performance, these reductions have offset growth. The company feels positive about new account sales and retention but acknowledges some softness impacting short-term growth.
Q: Could you provide more insight into the pricing dynamics and vendor cost increases? A: Steven Sintros noted that the pricing environment remains fluid, transitioning from a high inflationary period to potential tariff impacts. Companies are still recovering from past inflation, and the situation is unclear for the next quarters. Pricing challenges are consistent across the customer base, with no specific sector being more impacted.
Q: How is the progress on key initiatives, and what are the drivers behind the reduction in costs? A: Shane O'Connor, CFO, stated that the ERP implementation is progressing well, with costs primarily related to capitalized activities. Future costs related to change management and training will be expensed, potentially increasing P&L costs. The reduction in current costs is due to the nature of activities being capitalized rather than a decrease in spending.
Q: What impact could tariffs have on the cost structure, and where would this be most evident? A: Steven Sintros explained that tariffs could impact garment costs, as most are sourced internationally. The situation is fluid, with varying tariffs across countries. The company has limited exposure to higher tariffs from China, but the overall impact will depend on future trade deals and tariff changes.
Q: Can you discuss the growth and success in the First Aid segment? A: Steven Sintros highlighted strong growth in the First Aid segment, particularly in van operations, which grew by about 15%. The company is successfully penetrating existing UniFirst customers and expanding services like safety training and AEDs. There is positive momentum in improving the profitability of this division.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.