UniFirst Reports 11.7% Rise in Q2 Operating Income

UniFirst Corporation (NYSE: UNF) has released its financial results for the second quarter of fiscal 2025, ending March 1, 2025. The company experienced a 1.9% increase in consolidated revenues, totaling $602.2 million, compared to the same period in the previous year. Operating income saw a significant rise of 11.7%, reaching $31.2 million.

This improvement was supported by a decrease in the quarterly tax rate to 25.0% from 26.2% in the prior year. Net income also showed a noteworthy increase of 19.6%, amounting to $24.5 million, up from $20.5 million in the previous year.

Diluted earnings per share (EPS) rose by 20.2% to $1.31, a clear indicator of the company’s positive trajectory. The company’s core laundry operations, a major segment, reported a revenue increase of 1.5%, totaling $530.4 million. Organic growth, excluding acquisitions and currency fluctuations, was at 1.9%. Operating margin for this segment improved to 4.6% from 3.6%, while adjusted EBITDA margin increased to 11.2% from 10.3%.

These improvements were primarily due to lower merchandise and production costs relative to revenues, although offset by higher healthcare claims and administrative costs. In the specialty garments segment, revenues grew by 2.2% to $44.4 million, driven by growth in European nuclear operations.

However, the operating margin decreased to 16.7% from 22.8% due to increased merchandise and payroll costs. The segment’s results can vary significantly due to seasonal factors and project timing.

UniFirst Reports $602.2 Million in Revenue for Q2 FY’25

The financial outcomes of the quarter were largely in line with UniFirst’s expectations, though not without some shortfalls. The company’s revenue of $602.2 million came in slightly below the anticipated $603.85 million. However, the diluted EPS of $1.31 was under the expected $1.42, indicating a shortfall in meeting profitability expectations. Despite these discrepancies, the company managed to deliver a solid performance, as highlighted by CEO Steven Sintros, who expressed satisfaction with the returns on business investments, which have improved profitability and operational execution.

The company’s focus on its Key Initiatives, which include customer relationship management and enterprise resource planning projects, has had both positive and negative impacts. These initiatives decreased operating income and adjusted EBITDA by $1.9 million and net income by $1.6 million. Diluted EPS was reduced by $0.09 due to these initiatives. While these projects are essential for long-term growth, they have temporarily affected financial performance metrics.

Despite the slight miss on revenue and EPS expectations, UniFirst’s core laundry operations showed resilience with a 1.5% revenue increase and improved margins. The specialty garments segment, while facing margin pressures, still contributed positively to the overall revenue growth.

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UNF Expects Revenue Between $2.422 Billion and $2.432 Billion for Fiscal 2025

Looking ahead, UniFirst has provided guidance for fiscal 2025, projecting revenues between $2.422 billion and $2.432 billion. This range reflects an anticipated negative impact due to the Canadian dollar exchange rate. The company expects diluted EPS to be between $7.30 and $7.70, indicating confidence in improved operating income, particularly within the core laundry operations. The guidance also assumes that the costs related to the Key Initiatives will approximate $12.0 million, revised down from prior estimates.

The financial outlook does not account for potential impacts from future share buybacks or unexpected economic events. UniFirst has emphasized the importance of its strategic initiatives and investments in driving future growth and enhancing shareholder value. The company remains focused on operational efficiency and capitalizing on growth opportunities in its core and specialty segments.

UniFirst’s strategic priorities include maintaining a strong balance sheet and prudent capital allocation. As of March 1, 2025, the company had $201.0 million in cash, cash equivalents, and short-term investments, with no long-term debt. This financial stability allows UniFirst to pursue growth initiatives and return value to shareholders through stock repurchases and dividends.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.

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