UNIFIRST CORP (UNF)·Q3 2025 Earnings Summary

Executive Summary

• Q3 2025 results were largely in line: revenue grew 1.2% YoY to $610.8M while diluted EPS rose 4.9% YoY to $2.13; Core Laundry organic growth was 1.1% amid a competitive pricing environment and softer net wearer levels .
• Against S&P Global consensus, UNF delivered an EPS beat and a slight revenue miss: Primary EPS $2.17* vs $2.09* and revenue $610.8M vs $614.5M*; management raised FY25 EPS guidance to $7.60–$8.00 and maintained revenue at $2.422–$2.432B .
• Margins showed underlying improvement (gross cost disciplines) despite ~$5.7M advisory/legal expense and $1.0M Key Initiatives costs; energy costs were 4.1% of revenue vs 4.3% YoY .
• Balance sheet and cash generation remain strong (no long‑term debt; cash $211.9M; YTD CFO $196.5M; FCF +22% to $86.7M), and a regular dividend of $0.35 per Common share was declared post‑quarter .

What Went Well and What Went Wrong

• What Went Well

  • Execution and cost controls: “gross margin improvement and more effective execution across the business” with lower merchandise and production costs aiding Core Laundry margins .
  • EPS guidance raised on lower expensed ERP costs: FY25 EPS to $7.60–$8.00 (from $7.30–$7.70) as expected Key Initiative costs revised to ~$7.5M (from ~$12M) .
  • First Aid momentum and cash generation: First Aid revenue +9% YoY; van operations grew ~15% with FCF +22% to $86.7M and cash $211.9M .

• What Went Wrong

  • Top‑line still sluggish: Consolidated revenue +1.2% YoY with Core Laundry organic +1.1%; direct sales were “a few million dollars lower” YoY, trimming growth .
  • Pricing and demand: pricing remained challenging; net wearer levels turned and stayed negative QoQ; softness was broad‑based across customers .
  • Non‑operational headwinds: ~$5.7M advisory/legal expense within Core Laundry; Key Initiatives still a drag (–0.2pp to segment operating and adj. EBITDA margins in Q3) .

Financial Results

Headline metrics vs prior periods

Actual vs S&P Global consensus (Q3 2025)

Segment breakdown (Q3 2025 vs Q3 2024)

Key KPIs and cash

Context on non-GAAP and one‑offs (Q3 2025): ~$1.0M Key Initiatives costs (–$0.04 diluted EPS; reduces Core Laundry margins by ~0.2pp); ~$2.8M gain on sale in other income (excluded from Adj. EBITDA); ~$5.7M advisory/legal expense in Core Laundry .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “It is rewarding to see our recent investments beginning to yield measurable returns, evidenced by gross margin improvement and more effective execution across the business.” — CEO Steven Sintros .
• “Core laundry operations’ key operational costs continue to trend favorably, with benefits being recognized in both merchandise and plant production expenses.” — CEO .
• “We are increasing our diluted earnings per share guidance to a range of $7.60–$8.00… our Key Initiative costs in fiscal 2025 will be approximately $7.5 million.” — CEO/CFO guidance update .
• “During the quarter, we… incurred approximately $5.7 million in expense related to advisory costs for a strategic matter and legal costs related to an employee matter.” — CFO Shane O’Connor .
• “To date, we have not experienced significant headwinds from the newly imposed tariffs… we foresee potential for future increases.” — CEO .

Q&A Highlights

• Demand/pricing: Management cited a challenging pricing backdrop; retention is improving but net wearer levels remain modestly negative and broad‑based; direct sales were a few million dollars lower YoY, impacting reported growth trajectory .
• Tariffs: No material impact yet, but vendors are starting to raise prices; diversified sourcing helps; impact remains fluid .
• ERP costs: Lower expensed ERP cost this year reflects capitalization mix in the finance‑centric release; expect expensed training/change‑management costs nearer deployment .
• One‑offs: ~$5.7M expense included ~$3.5M for prior strategic discussions with Cintas and a reserve for an ongoing employee legal matter; no expectation of a long tail .
• Operations/technology: Route efficiency and merchandise controls are improving; telematics roll‑out (with cameras) to support route optimization .

Estimates Context

• EPS beat; revenue slight miss versus S&P Global: Primary EPS $2.17* vs $2.09*; revenue $610.8M vs $614.5M*; 5 EPS estimates and 3 revenue estimates contributed to consensus .
  Values marked with asterisks (*) retrieved from S&P Global.

Key Takeaways for Investors

• Underlying margin execution is improving (merchandise/production cost tailwinds; energy modest), supporting EPS outperformance despite modest top‑line growth and non‑operational costs .
• FY25 EPS guidance raised with lower expensed ERP costs; P&L relief likely persists near term, though training/change‑management expenses may surface near deployments .
• Top‑line trajectory remains the swing factor: improved retention and new business installs vs. negative net wearer trends, competitive pricing, and direct sales timing .
• First Aid is a bright spot (van mid‑teens growth) with a multi‑year runway to expand penetration and profitability .
• Balance sheet optionality (cash $211.9M, no LT debt) supports continued capex, tuck‑in M&A (First Aid), and buybacks (authorization remaining $86.4M) .
• Watch tariff developments and any subsequent vendor pass‑throughs; management indicates diversified sourcing and readiness to pivot .
• Potential stock catalysts: sustained Core Laundry margin improvement, tariff clarity, continued First Aid outperformance, and ERP milestones; one‑off advisory/legal spend appears behind the company .

Notes:

• Company-reported diluted EPS for Q3 2025 was $2.13; S&P “Primary EPS” actual used for estimate comparison was $2.17* .
  Values with asterisks (*) retrieved from S&P Global.