Unifi Posts 12% Revenue Drop in Q4

Key Points

• Revenue (GAAP) dropped 12.0% year over year to $138.5 million, with reported net income (GAAP) positive only due to a one-time $35.8 million gain from asset sales.

• Gross profit (GAAP) and adjusted EBITDA (non-GAAP) both turned negative as demand softened, trade uncertainty continued, and inflation pushed input costs higher.

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Unifi (NYSE:UFI), a leading manufacturer specializing in recycled and synthetic yarns, reported its quarterly earnings on August 20, 2025.

The most critical news in the release was a sharp fall in GAAP net sales, even as GAAP revenue slightly exceeded forecasts and key margin metrics worsened. Revenue reached $138.5 million, just above the $138.3 million GAAP estimate, while non-GAAP earnings per share (EPS) landed at $(0.56). Gross margin turned negative, and adjusted metrics saw significant deterioration. Net income reflected a one-time $35.8 million gain from selling a production facility, temporarily masking broader operational challenges. Overall, the period showed continued pressure from lower demand, ongoing tariff uncertainty, and higher input costs.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q3 2025 earnings report.

About Unifi: Business Model and Priorities

Unifi produces specialty synthetic and recycled yarns with a focus on sustainability and innovation. Its core offerings include REPREVE Fiber, a yarn made from recycled materials, and a range of polyester and nylon products for apparel, home furnishings, and industrial markets.

The company aims to grow by investing in advanced manufacturing, bringing new high-performance fibers to market, and building supply chain flexibility through geographic diversification. A key part of its business model is expanding the REPREVE brand to capitalize on rising demand for sustainable textiles. Strategic initiatives target new applications, such as military and tactical textiles, and deploying new technology to manage costs and quality. Long-term success for Unifi relies on demand for recycled fibers, efficiency from manufacturing footprint changes, and resilience against inflation and trade-related disruptions.

Quarterly Review: Key Events and Performance Drivers

Unifi’s quarter was marked by a decline in demand and headwinds from global trade policy uncertainty. Revenue (GAAP) decreased 12.0%, reflecting lower sales in all geographies. The gross margin (GAAP), which had been positive in Q4 FY2024, moved to negative territory, signaling that higher input costs and transition expenses outpaced the company’s ability to adjust pricing or sales mix.

Sales in the Americas Segment fell 6.6%, with gross profit (GAAP) swinging to a loss. Management attributed the decline to inflation in labor and materials and direct costs tied to facility closures and consolidation. Brazil Segment revenue dropped 10.7%, due in part to unfavorable foreign exchange rates, which also drove gross profit sharply lower.

Asia Segment revenue declined 27.7% compared to Q4 FY2024, tied to weaker orders, changes in product mix, and competitive pressures on pricing.

The company’s main product line, REPREVE Fiber—recycled polyester yarns—saw its revenue shrink to $42.1 million and mix decrease to 30% of net sales, down from $53.6 million and 34% in Q4 FY2024. This is notable as REPREVE’s expansion is a strategic objective for Unifi, and in recent quarters, management had pointed to its growing importance in regions like Central America. However, the brand’s share of consolidated company sales fell back, likely due to global uncertainty around tariffs and changes in customer ordering patterns.

A major event in the period was the completed sale of the Madison, North Carolina manufacturing facility, resulting in a one-time $35.8 million gain. These proceeds were used to reduce net debt (non-GAAP) to $85.3 million as of June 29, 2025, from $103.5 million as of June 30, 2024. While this improved the company’s financial footing, it did not offset ongoing operational losses, with negative adjusted EBITDA and lower cash generation from core activities remaining a concern. Transition and restructuring expenses totaled $10.6 million, largely related to the facility closure, equipment relocation, and workforce adjustments. Management expects that annualized savings from this footprint reduction will gradually appear in future periods.

Looking Forward: Guidance and Matters to Watch

Management expects sequential improvement in both revenue and adjusted EBITDA (non-GAAP). This outlook is “primarily driven by cost savings for the Americas Segment,” as recently streamlined manufacturing is set to lower ongoing costs.

Transition and restructuring expenses are projected to continue, but at a lower level of $1 million to $2 million. Importantly, company leaders highlight that these savings will take effect over several quarters, with full realization expected toward late calendar year 2025 or early 2026.

There was no increase, initiation, or other change to the company’s dividend policy. UFI does not currently pay a dividend. As the next quarter approaches, investors and observers will be watching for signs that REPREVE sales recover. Management’s comments signal cautious optimism about a future uptick in orders, but the persistence of inflationary pressures, trade policy unpredictability, and the pace at which cost-saving measures kick in remain key areas to monitor.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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