Unifi Q3 2025 slides: Asset sale planned as losses deepen

Textile manufacturer continues restructuring amid challenging market conditions

Introduction & Market Context

Unifi, Inc. (NYSE:UFI) presented its third quarter fiscal 2025 results on March 30, revealing deepening financial challenges as the company continues its restructuring efforts. The global textile solutions provider reported a consolidated revenue decline of 1.6% year-over-year to $146.6 million, with adjusted EBITDA falling to negative $4.9 million, a significant deterioration from the same period last year.

The company’s stock closed at $5.05 on April 30, 2025, near the lower end of its 52-week range of $4.25 to $7.91, reflecting ongoing investor concerns about the company’s performance. After-hours trading showed minimal movement, with the stock up just 0.79% to $5.09.

Quarterly Performance Highlights

Unifi’s third quarter results showed continued pressure across most financial metrics. The company reported an adjusted loss per share of $0.76, representing a 33.5% deterioration compared to the same quarter last year. Most concerning was the company’s gross profit, which turned negative at ($0.4) million, compared to a positive $4.8 million in Q3 FY24.

As shown in the following consolidated highlights:

The company’s gross margin fell to negative 0.3%, a 350 basis point decline from the 3.2% reported in the prior year period. Management attributed this deterioration to inflationary pressures and transition costs related to ongoing restructuring efforts.

REPREVE Fiber, the company’s flagship recycled product line, maintained its position at 31% of total sales, consistent with the year-ago period. The following chart illustrates the quarterly and annual trends in REPREVE Fiber sales:

Segment Performance

Unifi’s performance varied significantly across its geographic segments. The Americas segment, which accounts for approximately 64% of total revenue, saw a 2.6% increase in net sales to $93.5 million. However, gross losses in this segment nearly doubled to $7.0 million, resulting in a negative gross margin of 7.4%, compared to negative 3.9% in the prior year period.

The Brazil segment continued to be a relative bright spot, despite a 4.9% decline in net sales to $28.1 million. The segment maintained a positive gross margin of 10.6%, though this represented a 240 basis point decline from the prior year. Management attributed the sales decline primarily to unfavorable foreign currency translation.

The Asia segment experienced the most significant revenue decline, with net sales falling 12.0% to $24.9 million and gross profit decreasing 20.6% to $3.5 million. The company cited lower sales volumes, less favorable sales mix, and challenging pricing dynamics in China as the primary factors behind this performance.

Strategic Initiatives & Restructuring

The most significant development in Unifi’s presentation was the announcement of a pending asset sale expected to reduce debt principal by $50 million. This transaction is projected to generate annual savings of $3 million in interest expenses and $20 million in manufacturing costs, representing a crucial step in the company’s restructuring efforts.

The company’s capital structure has been under pressure, with net debt increasing to $124 million in Q3 FY25 from $101 million in the same period last year, as illustrated in the following chart:

Despite financial challenges, Unifi continues to invest in innovation and sustainability initiatives. The company highlighted several new product launches and collaborations, including Integr8™, REPREVE with CiCLO, and partnerships with retailers like Walmart (NYSE:WMT) for the JOYSPUN brand and FAHERTY using REPREVE Takeback™ fibers.

The following image showcases these new product launches and partnerships:

Unifi’s commitment to sustainability has earned industry recognition, with the company receiving several prestigious awards, including being named among the World’s Most Innovative Companies of 2025 by Fast Company and America’s Most Responsible Companies 2025 by Newsweek.

Forward-Looking Statements

Looking ahead to the fourth quarter of fiscal 2025, Unifi expects sequential improvement in both net sales and Adjusted EBITDA compared to Q3. However, the company anticipates continued restructuring and transition expenses of between $6.0 million and $8.0 million, along with ongoing volatility in the effective tax rate.

As outlined in the Q4 outlook:

Management emphasized that the company is positioning itself to pivot to growth in fiscal 2026, with strategic priorities focused on:

1. Optimizing operations and footprint to improve financial profile

2. Investing in innovation, the REPREVE platform, and Beyond Apparel products

3. Increasing customer engagement across all business segments

4. Positioning each business segment for growth in fiscal 2026

This represents a slight shift from the more optimistic timeline presented in previous earnings communications, which had suggested a recovery beginning in early fiscal 2025 with stronger performance in the second half of the year. The current presentation indicates that meaningful growth may not materialize until fiscal 2026.

The pending asset sale appears to be a critical component of Unifi’s strategy to strengthen its balance sheet and reduce operating costs, potentially providing the financial flexibility needed to execute its longer-term growth initiatives. However, investors may need to exercise patience as the company continues to navigate challenging market conditions and complete its restructuring efforts before returning to sustainable profitability.

Full presentation:

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