Unifi. Inc. reported sales fell 22.7 percent in the fiscal first quarter ended October 1 due to “weak demand and depressed ordering patterns” in the apparel sector. The makers of Repreve-branded recycled and synthetic yarns, based in Greensboro, NC. posted a loss in the period.

First Quarter Fiscal 2024 Overview

  • Operating activities provided cash of $7.1 million and, primarily in combination with lower capital expenditure levels, generated a $4.6 million increase in cash.
  • Debt principal was $141.5 million and Net Debt was $90.0 million at October 1, 2023, compared to $140.9 million of debt principal and Net Debt of $93.9 million at July 2, 2023.
  • Net sales were $138.8 million, a decrease of 22.7 percent from the first quarter of fiscal 2023, primarily due to weak apparel demand from brands and retailers.
  • Revenues from Repreve Fiber products were $42.5 million and represented 31 percent of net sales, a sequential-quarter and year-over-year increase as a percentage of net sales.
  • Gross loss was $0.6 million, gross margin was (0.4) percent, and each was adversely impacted by lower apparel demand.
  • Net loss was $13.3 million, or ($0.73) per share. Adjusted EBITDA was ($4.8) million.
  • Adjusted EBITDA and Net Debt are non-GAAP financial measures. The schedules included in this press release reconcile each non-GAAP financial measure to its most directly comparable GAAP financial measure.

Eddie Ingle, chief executive officer of Unifi, Inc. said, “Our performance in the first quarter of fiscal 2024 reflects a continuation of the weak demand and depressed ordering patterns impacting the apparel industry and its supply chains. Given the current challenges facing the industry, our customers have continued to take a cautious approach to placing new orders as they work through existing inventory levels and monitor consumer activity. Such inventory appears to be approaching pre-pandemic levels, giving us confidence that we may soon experience improved order flow. Despite the difficult environment, our disciplined cost control measures enabled us to generate solid cash flows during the quarter and reduce net debt.”

Ingle continued, “We are encouraged by several opportunities to further diversify the business beyond apparel and leverage the market share gains in North America that we expect to see in the next few quarters. We will continue to manage our operations diligently and proactively maintain a healthy balance sheet so that our business is well-positioned to rebound quickly when the apparel demand environment normalizes.”

First Quarter Fiscal 2024 Compared to First Quarter Fiscal 2023
Net sales decreased to $138.8 million, from $179.5 million, primarily due to weak fiber demand for apparel driving a less favorable sales mix and lower average selling prices. The company continues to experience sales volume declines as a result of inventory de-stocking and cautious ordering patterns by apparel brands and retailers. Such volume declines are accompanied by lower average selling prices, in part due to lower raw material costs.

Gross loss was $0.6 million compared to gross profit of $6.6 million. The Americas segment gross loss increased $2.5 million, primarily as a result of lower fiber sales volumes driving weaker productivity and cost absorption. The Brazil segment gross profit decreased $4.6 million due to selling price pressures from foreign imports, most of which are sourced from China where lower demand has led to lower pricing. The gross margin for the Asia segment improved by 290 basis points due to a rich mix of Repreve products, which led to comparatively flat gross profit for the Asia Segment.

Operating loss was $12.0 million compared to $4.7 million, following the decrease in gross profit. Net loss was $13.3 million compared to $7.8 million. EPS was ($0.73) and Adjusted EBITDA was ($4.8) million, compared to ($0.44) and $2.3 million, respectively.

Operating activities provided cash of $7.1 million compared to using ($5.9) million. Accordingly, diligent cost, working capital, and spend management allowed a reduction in Net Debt to $90.0 million on October 1, 2023 from $93.9 million on July 2, 2023.

Second Quarter Fiscal 2024 Outlook
Unifi expects second-quarter fiscal 2024 net sales, Adjusted EBITDA, and capital expenditures to be generally consistent with first-quarter fiscal 2024 results, and the effective tax rate is expected to demonstrate continued volatility.

Ingle concluded, “While the pace of recovery across our business and the apparel industry has been slower than we anticipated, we are encouraged by the progress made with our beyond apparel strategic initiatives. The conversations we are having with customers are promising and we anticipate that calendar 2024 will bring an improved demand environment. As the leading global supplier of sustainable fibers, we remain optimistic about our long-term growth prospects, underscored by our team’s ability to drive innovation, grow the Repreve brand, and increase market share.”

Photo courtesy Fig x Repreve