Vestis 2025 Q2 Earnings Misses Targets as Net Income Deteriorates 566%

Vestis Corporation (NYSE: VSTS) reported its fiscal 2025 Q2 earnings on May 06, 2025, revealing a miss on Wall Street expectations. The company posted a net loss of $27.83 million, or $0.21 per share, significantly underperforming analyst predictions of $0.15 per share earnings. This comes alongside a revenue of $665.25 million, falling short of the forecasted $691.5 million. The company adjusted its guidance for the upcoming quarter, projecting revenue between $674 million and $682 million with an Adjusted EBITDA of at least $63 million, highlighting a focus on revenue recovery amidst ongoing challenges.

Revenue

The total revenue for Vestis decreased by 5.7% to $665.25 million in 2025 Q2, down from $705.37 million in 2024 Q2. The decline in revenue was driven by factors including lost business and decreased direct sales, impacting the overall financial performance.

Earnings/Net Income

Vestis swung to a loss of $0.21 per share in 2025 Q2 from a profit of $0.05 per share in 2024 Q2, representing a 520.0% negative change. The company reported a net loss of $27.83 million, reflecting a 566.6% deterioration from the net income of $5.96 million in 2024 Q2. The results indicate significant earnings pressure and operational challenges faced by Vestis during the quarter.

Post-Earnings Price Action Review

The strategy of purchasing Vestis shares after a quarter with revenue growth and holding for 30 days has been unprofitable over the past five years, yielding a return of -7.98%. This performance starkly contrasts with the benchmark return of 25.97%, resulting in an excess return of -33.95%. The strategy's compound annual growth rate (CAGR) was -5.23%, reflecting substantial financial losses. Additionally, the approach experienced a high maximum drawdown of -13.80% and a negative Sharpe ratio of -0.33, underscoring the significant risk and adverse returns associated with this investment strategy.

CEO Commentary

Interim CEO Phillip Holloman expressed disappointment with the second quarter results, highlighting an operating loss of $9 million and a net loss of $28 million. Despite these challenges, he noted improvements in new customer sales and emphasized the attractive market potential for the uniform and workplace supplies industry. CFO Kelly Janzen acknowledged a recovery in sales volume after a decline in January and reported continued revenue growth through April. She highlighted the successful amendment of the credit agreement, enhancing financial flexibility and strengthening the company's balance sheet.

Guidance

The company expects continued revenue growth following a recovery from the seasonal decline in customer demand. Management anticipates that the market remains highly attractive, providing significant long-term value creation opportunities. The amendment to the credit agreement is expected to support financial flexibility through the end of fiscal 2026, indicating a strategic focus on strengthening the balance sheet amidst current challenges.

Additional News

Vestis announced the appointment of Jim Barber as President and Chief Executive Officer, effective June 2, 2025, succeeding Phillip Holloman. Holloman will return to his role as Chairman of the Board following the transition, aiming to steer the company towards improved performance. Additionally, Vestis amended its revolving and term loan credit agreements to increase financial flexibility by extending the net leverage covenant ratio of 5.25x through fiscal 2026. As part of this amendment, the company has decided to eliminate dividend payments to reinforce its balance sheet. These strategic moves highlight Vestis's efforts to navigate ongoing challenges and focus on long-term growth and stability.