UniFirst Corporation (NYSE: UNF) released its financial results for the first quarter of fiscal year 2026, reporting a modest rise in revenue alongside decreased profitability metrics, reflective of the company's strategic investments in growth and technology. Following the announcement, the company's shares declined as investors evaluated the mixed financial performance and the forward-looking guidance.
For the quarter, UniFirst reported total revenue of $621.3 million, representing a 2.7% increase compared to the previous year and surpassing consensus estimates of $615.3 million. Despite the top-line growth, adjusted earnings per share (EPS) fell short of market expectations, logging $1.97 per share against an estimate of $2.06. On a Generally Accepted Accounting Principles (GAAP) basis, diluted EPS stood at $1.89, declining from $2.31 in the same period last year due to elevated expenses linked to planned initiatives.
Net income contracted to $34.4 million from $43.1 million in the prior-year quarter, while the operating margin narrowed to 7.3% from 9.2%. This reduction largely stems from deliberate investments designed to accelerate growth trajectories and drive digital transformation, reflecting the company’s commitment to long-term operational enhancement. Concurrently, the adjusted EBITDA margin decreased to 13.3% from 15.5% year over year, underscoring the impact of increased expenditure.
Steven Sintros, President and Chief Executive Officer of UniFirst, contextualized the financial results, noting that the quarter’s outcomes aligned with management's expectations given the strategic priorities. He emphasized that while near-term margins are affected by these investments, the company remains confident in their ability to improve long-term profitability. Sintros further highlighted the company's organic growth momentum, particularly driven by new customer acquisitions and higher retention rates, underpinned by UniFirst's distinctive service approach emphasizing reliability, local accountability, and fostering enduring client relationships.
Breaking down the segment performance, the Uniform & Facility Service Solutions segment generated revenue of $565.9 million, reflecting a 2.4% year-over-year increase. Its operating margin reached 7.4%, with an adjusted EBITDA margin of 13.6%, indicating steady operational efficiency amid expansion efforts. The First Aid & Safety Solutions segment exhibited robust revenue growth, escalating 15.3% to $30.2 million. Nonetheless, this segment recorded a marginal operating loss of $0.4 million while posting an adjusted EBITDA of $0.8 million. The Other revenue category declined by 2.9% to $25.2 million, but maintained operating income of $3.9 million and adjusted EBITDA of $4.8 million, signifying continued contributions from subsidiary operations.
The financial results incorporated approximately $2.3 million in expenses associated with UniFirst’s enterprise resource planning project dubbed the “Key Initiative.” These costs contributed to a $1.7 million reduction in net income and a 9-cent dilution in diluted EPS, emphasizing short-term impacts of major system upgrades intended to streamline future operations.
From a cash flow perspective, UniFirst generated $14.9 million in net cash from operating activities during the quarter. Its liquidity position remained strong, with total cash, cash equivalents, and short-term investments amounting to $129.5 million at quarter-end. The company reported zero long-term debt, underscoring a sound financial foundation supporting its investment ambitions.
Regarding shareholder return, UniFirst repurchased $31.7 million in shares during the quarter, leaving an $8.9 million authorization balance available for additional buybacks. The board also declared a quarterly cash dividend of $0.365 per share, maintaining a commitment to delivering value to investors.
UniFirst’s earnings release was accompanied by an update on corporate developments related to an unsolicited acquisition proposal. In December, the company disclosed receipt of a non-binding, all-cash offer from Cintas Corporation, valued at $275 per share, marking the third approach by Cintas to acquire UniFirst. The board has retained independent financial and legal advisors to evaluate the proposal thoroughly, in adherence to fiduciary responsibilities. UniFirst has reserved commentary until this review process concludes.
Looking ahead, UniFirst reaffirmed its fiscal 2026 full-year outlook, projecting consolidated revenue in the range of $2.475 billion to $2.495 billion, which aligns closely with the consensus estimate of $2.485 billion. The company anticipates fully diluted EPS between $6.58 and $6.98, compared with the market’s consensus forecast of $6.78. Notably, the guidance incorporates an estimated $7 million charge associated with the ongoing Key Initiative, but excludes potential impacts from any future share repurchase programs.
At the close of trading on the day of the announcement, UniFirst’s stock price declined 5.56%, closing at $188.00 per share, reflecting market reactions to the earnings release and the broader strategic context.