Unifi Sees Narrower Loss Amid Cost-Cuts, Market Reaction Muted
UNIFI INC (NYSE:UFI) reported financial results for its second fiscal quarter of 2026, delivering a mixed performance that highlighted significant progress in cost reduction against a backdrop of persistent market softness. The maker of recycled REPREVE® fibers posted a net loss that was narrower than analyst expectations, but revenue continued to decline year-over-year. The market's initial reaction in after-hours trading was positive, with shares rising approximately 2.4%.
Earnings and Revenue Versus Estimates
The company's results presented a tale of two metrics: a bottom-line beat and a top-line miss that aligned with diminished expectations.
- Earnings Per Share (EPS): Unifi reported a net loss of $0.53 per diluted share on a GAAP basis. When adjusted for restructuring costs, the Adjusted Net Loss was $8.9 million, or an Adjusted EPS of approximately -$0.48. This performance surpassed the consensus analyst estimate, which had anticipated a deeper loss of -$0.58 per share.
- Revenue: Net sales for the quarter were $121.4 million, marking a 12.6% decrease from the $138.9 million reported in the prior-year period. This figure came in essentially in line with the analyst revenue estimate of $121.4 million, indicating the market had accurately anticipated the continued sales pressure.
The divergence between the EPS beat and the revenue decline underscores the central theme of Unifi's current strategy: aggressively managing its cost structure to improve profitability at a lower revenue base.
Market Reaction and Price Action
Following the earnings release, UFI shares traded higher in the after-market session. This positive knee-jerk reaction suggests investors were encouraged by the better-than-feared loss and the company's progress on its restructuring plan. The recent weekly and monthly performance, showing gains of approximately 5.7% and 14.2% respectively, indicates some positive sentiment may have been building ahead of the report, potentially in anticipation of operational improvements.
Key Takeaways from the Quarterly Report
The earnings release emphasized a multi-year transformation effort now coming to fruition. The most critical elements include:
- Substantial Cost Realignment: The company highlighted the completion of "cost and footprint reductions," which have created a leaner operational model. This was evidenced by a 25% year-over-year reduction in SG&A expenses to $9.7 million and a dramatic improvement in gross margin, which expanded to 3.0% from 0.4% in the prior-year quarter.
- Improved Cash Flow and Debt Management: A standout positive was the generation of $25.3 million in cash from operating activities during the quarter. This strength allowed Unifi to reduce its Net Debt to $75.2 million, down from $85.3 million at the end of the previous fiscal year.
- Ongoing Market Challenges: Management attributed the sales decline primarily to "trade and tariff-related uncertainty and demand volatility" across all business segments. Revenue from the flagship REPREVE Fiber products also fell to $34.3 million (28% of sales) from $43.3 million a year ago.
- Cautious Near-Term Outlook: CEO Eddie Ingle noted "initial signs of a return to a more normalized operating environment" but cautioned that the third fiscal quarter would likely see lower operating cash flows as the company rebuilds working capital to support an expected sales increase later in calendar 2026.
Forward-Looking Expectations
While Unifi did not provide specific quantitative guidance, management's commentary on rebuilding inventory for future sales aligns with analyst projections for growth in the coming periods. Current consensus estimates forecast sales of $152.2 million for the third quarter (Q3 2026) and a full-year revenue estimate of $579.3 million. The focus for investors will be on whether the streamlined cost structure can leverage this anticipated revenue recovery to drive the company back to sustained profitability.
For a detailed look at Unifi's historical earnings, future estimates, and analyst projections, visit the UFI earnings and estimates page on Chartmill.
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