Unifi, Inc., makers of Repreve and an innovator in recycled and synthetic yarns reported that net sales were $136.9 million in the fiscal second quarter ended December 31, an increase of 0.5 percent from the second quarter of fiscal 2023, driven by higher sales volumes that were muted by lower pricing in response to lower raw material costs. Revenues from Repreve Fiber products were $45.7 million in fiscal Q2 and represented 33 percent of net sales in the period.

Net sales of $136.9 million were relatively unchanged compared to $136.2 million in the prior-year period, primarily due to lower average selling prices resulting from lower raw material costs.

  • The Americas Segment experienced modest volume improvement, although sales levels remain below historical averages as a result of weakened demand for fiber in the apparel sector.
  • The Brazil Segment maintained its increased market share with strong sales volumes while facing ongoing pricing pressures from competitive imports.
  • The Asia Segment continued to experience weak apparel demand levels but attained a diverse sales mix.

Gross profit of $1.6 million improved significantly compared to negative $8.0 million in the prior-year period. Gross margin was 1.2 percent of sales in the period, representing sequential-quarter and year-over-year improvements through existing cost-saving initiatives, successful execution of renewed commercial efforts, and stabilized input costs.

  • Americas Segment gross profit increased $6.3 million, primarily driven by variable cost management efforts and more stable raw material costs.
  • Brazil Segment gross profit improved $1.8 million from higher sales volumes, which were partially offset by unfavorable import pricing dynamics.
  • The Asia Segment continued to demonstrate portfolio strength with a rich mix of Repreve products, achieving a gross profit increase of $1.5 million and 250 basis points of incremental gross margin.

Operating loss was $17.6 million in fiscal Q2, compared to $19.8 million in the prior-year period, aligning with the improvement in gross profit, partially offset by $5.1 million of restructuring costs and $1.3 million of bad debt expense.

The company’s net loss was $19.8 million, or a loss of $1.10 per share, in the fiscal second quarter, compared to a net loss of $18.0 million in the prior-year corresponding period.

Adjusted Net Loss was $14.7 million, which excludes $5.1 million of restructuring costs, compared to Adjusted Net Loss of $21.8 million for the second quarter of fiscal 2023, which excluded $3.8 million of income tax recoveries in Brazil. Adjusted EPS was a loss of 81 cents a share.

Adjusted EBITDA, which also excludes $5.1 million of restructuring costs, was negative $5.5 million, compared to negative $13.0 million for the prior-year period. Second quarter Adjusted EBITDA was comprised of $2.7 million related to the dissolution of an unprofitable joint venture and $2.4 million of severance costs.

Eddie Ingle, CEO of Unifi, Inc., stated, “Our second quarter fiscal 2024 results were in line with our expectations and reflect sequential improvement in our underlying gross profit performance, despite the negative impact from the ongoing challenges in the apparel industry and its supply chains. The recent strategic actions aimed at further reducing ongoing costs, optimizing our operations, and enhancing profitability will strengthen our position for the anticipated recovery in apparel demand in calendar 2024.”

Ingle continued, “Our focus remains on maintaining a disciplined approach to cost management and leveraging operational efficiencies in the short-term environment, but we will continue to invest prudently to support long-term growth and innovation for greater revenues and accretive margins. We are excited about the opportunities across the globe that expand our beyond apparel initiatives and build on our Repreve Fiber business.”

Fiscal 2024 Outlook

  • Unifi expects the following third-quarter fiscal 2024 results:
  • Net sales between $149.0 million and $154.0 million;
  • Adjusted EBITDA between ($2.0) million and $1.0 million;
  • Capital expenditures between $4.0 million and $5.0 million; and
  • Continued volatility in the effective tax rate.

Unifi also expects sequential improvement from the third quarter to the fourth quarter of fiscal 2024.

Ingle concluded, “While the apparel industry recession has persisted longer than we anticipated, we believe we will see an improved competitive environment moving forward. As one of the strongest textile solutions providers in the world, we stand to expand our global market share and accelerate our financial performance as our industry returns to growth. Further, our recently announced cost reset and commercial improvements should amplify quarterly revenue and earnings on a sequential basis. Our potential in Asia and Brazil continues to shine, demonstrating the strength of our dynamic global business model. As the demand in the Americas normalizes and the industry stabilizes, the results of our recent efforts to strengthen the business will become even more evident as we close our fiscal 2024.”

Image courtesy Unifi