Unifi's Q3 2025 Earnings Call: Unpacking Contradictions in Tariffs, Consolidation, and Product Profitability

Impact of tariffs and trade policies, facility consolidation and cost savings, demand and production expectations in Brazil, profitability of REPREVE product margins, and profitability of new products are the key contradictions discussed in Unifi's latest 2025Q3 earnings call.



Operational and Strategic Changes:
- UNIFI is enhancing its North American business operations by closing its Madison, North Carolina facility, transitioning activities to Yadkinville and El Salvador, and expecting improved capacity utilization.
- The company aims to optimize its balance sheet by selling the Madison facility, anticipated to result in a $53.2 million sale, which will provide proceeds to retire debt and enhance financial position.
- These actions are intended to improve profitability and leverage fixed costs more efficiently.

Recovery and Growth in Americas Segment:
- The Americas Segment witnessed a 3% increase in net sales compared to the prior year, driven by Beyond Apparel and REPREVE initiatives.
- The segment is experiencing growth, particularly in Central America, with more than 50% of business now comprising REPREVE products.
- The recovery is attributed to improved demand and increased production from brands and retailers moving to Central America.

Impact of Tariffs and Trade Environment:
- UNIFI is closely monitoring the evolving tariff situation, with potential benefits anticipated for U.S. operations due to increased costs for Chinese imports.
- The company expects tariffs to negatively impact Asia operations, potentially leading to a 10% to 15% decline in revenues.
- The company is exploring options to mitigate these impacts, leveraging its asset-light model in Asia.

Cost Savings and Financial Performance:
- Savings from facility consolidations are expected to result in a $20 million reduction in cost of sales by calendar 2026.
- Upon facility sale, $50 million of debt will be repaid, reducing leverage and providing flexibility for future investments.
- UNIFI aims to achieve EBITDA profitability by late 2025, assuming no protracted global recession.