Unifi, Inc. Q1 FY2026 earnings call

Tariff and Trade Impact

• Customers ordered heavily before April tariffs, leading to light orders since then, affecting Asia and Central America sales for ~8 weeks. Apparel sales growth remains +5% with declining inventory.

Internal Control Actions

• Closed Madison facility, moved volume to Yadkinville (adding 40% capacity). Transition costs now complete. Resized cost model with headcount reductions and price actions to be profitable at lower revenue levels.

REPREVE and Beyond Apparel

• REPREVE Fiber impacted by trade policy, but REPREVE polyester resin shows momentum. Beyond Apparel initiatives in carpet, military, packaging progress, with government shutdown not severely hampering military sales.

Cost Restructuring

• Recent cost restructuring initiative expected to save ~$5M annually in SG&A and ~$4M in fiscal 2026, with ~$5M per quarter savings in manufacturing costs for remainder of fiscal 2026.

During the first quarter of fiscal 2025, consolidated net sales were $135.7 million, down 8%. In the Americas segment, net sales were down 1.3% year-over-year due to price and sales mix, with gross profit decreasing by $300,000. The Brazil segment saw net sales and gross profit decrease versus the prior year due to import pricing pressures and lower sales volumes, but demand remains strong. The Asia segment had net sales and gross profit decline by 19% and 16% respectively, primarily due to lower sales volumes and pricing dynamics, though gross margin improved by 40 basis points. REPREVE Fiber represented 29% of sales, down 1% point from the previous year.

Second Quarter Forecast

• Expect adjusted EBITDA to improve sequentially from Q1, driven by cost savings in Americas. Net sales expected to drop slightly in Americas and Brazil, increase in Asia ahead of Lunar New Year. Anticipate global trade clarity by end of calendar 2025 and inventory reduction post-holiday to boost top line. Continued commercialization of value-added products.

Long-Term Outlook

• Focus on growing revenues and margins through commercialization of value-added technologies and new markets, aiming for long-term shareholder value.

• Tariff uncertainty impacting customer ordering and sales.
• Import pricing pressures in Brazil from Asian dumping.
• Government shutdown potential impact on military market sales if not resolved quickly.

Q: Volatility in demand and production in Americas A: Q1 had inventory build-up then rapid production reduction. October showed improvement, with better revenues in Americas. Expect Q3 to be better due to Central America pick-up and brand moves back to U.S. supply chain.

Q: REPREVE green shoots A: REPREVE in Asia sees growth in ordering patterns for ThermaLoop and Takeback. Americas business expected to grow in Q3 with renewed interest in performance apparel with REPREVE.

Q: Price increases details A: Price increases are responsive to costs and tariffs, working closely with customers to ensure fairness.

Q: Cost savings basis A: SG&A expected to decline from ~$49M in fiscal 2025 to under $45M in fiscal 2026. COGS expects $5M per quarter savings from Q1 onwards.

Q: Beyond apparel revenue and automotive A: Beyond apparel initiatives aim for ~$20M run rate by end of calendar 2026, with resin business growing. Automotive is a robust but still developing beyond apparel initiative.

Q: Brazil balance sheet and de minimis A: Brazil operation remains healthy with excess cash. De minimis import rule change benefits domestic brands as cheap imports via de minimis decline, but exact impact hard to determine due to government shutdown.