UniFirst ($UNF) Stock Plummets 7% Despite Q3 Profit Beat & Raised Guidance—Flat Margins Spook Investors

Wall Street's love-hate relationship with mixed earnings continues. UniFirst just delivered a textbook example.

Profit up, stock down: The uniform giant posted higher Q3 earnings but saw shares tank 7%—proving once again that markets punish even winners when margins don’t dance.

Guidance glow-up: Management raised full-year targets, yet flat margins stole the spotlight. Because in today’s market, ‘good’ only counts if it’s wrapped in hypergrowth.

The cynical take: Another case of ‘buy the rumor, sell the news’—traders clearly expected confetti cannons, not just solid fundamentals. Stay tuned for the next episode of As the Spreadsheet Turns.

TLDR

• Q3 FY25 EPS rose 4.9% YoY to $2.13, beating prior-year results
• Revenue increased 1.2% to $610.8 million, driven by Core Laundry segment
• Operating income fell 0.6% due to higher healthcare and advisory expenses
• Guidance lifted: EPS range now $7.60–$8.00; revenue target unchanged
• $196.5M in nine-month operating cash flow; $211.9M in cash reserves

UniFirst Corporation (NYSE: UNF) shares dropped 7.81% to $175.22 during Wednesday trading, despite reporting solid third-quarter fiscal 2025 earnings.

UniFirst Corporation (UNF)

The company’s diluted EPS grew nearly 5% year over year to $2.13, supported by revenue growth and margin efficiencies, although rising costs and one-time expenses limited operating income.

Revenue and Earnings Rise, But Margins Tighten

For the quarter ended May 31, 2025, UniFirst posted $610.8 million in revenue, a 1.2% increase from $603.3 million a year earlier. Net income ROSE to $39.7 million from $38.1 million, while EPS improved to $2.13 from $2.03. However, operating income dipped 0.6% to $48.2 million, reflecting rising healthcare costs and $5.7 million in legal and advisory expenses.

The company’s largest unit, Core Laundry Operations, generated $533.2 million in revenue, up 0.9% year over year, with organic growth at 1.1%. Operating margin for the segment narrowed slightly to 6.9%, down from 7.0%, although adjusted EBITDA margin remained steady at 13.5%.

UniFirst Corporation, $UNF, Q3-25. Results:

📊 EPS: $2.13 🟢
💰 Revenue: $610.8M 🔴
📈 Net Income: $39.7M
🔎 Strategic investments and gross margin improvements drove solid execution and profitability gains pic.twitter.com/Pcrym9P1Qz

— EarningsTime (@Earnings_Time) July 2, 2025

Key Initiatives and One-Time Gains

During the quarter, UniFirst continued investing in its CRM and ERP projects, referred to as Key Initiatives. These costs impacted margins but were lower than previously forecasted, leading management to revise full-year cost estimates to $7.5 million. These initiatives reduced EPS by $0.04 and net income by $0.7 million in the third quarter.

UniFirst also recorded a $2.8 million gain from the sale of a non-operating property, which contributed to the quarterly results but was excluded from adjusted EBITDA calculations.

Balance Sheet Strength and Shareholder Returns

The company maintained a solid financial position, with $211.9 million in cash and short-term investments as of May 31. Cash flows from operations for the first nine months totaled $196.5 million, highlighting strong liquidity. During the quarter, UniFirst repurchased $13.6 million worth of its stock, leaving $86.4 million in remaining repurchase authorization.

Improved Guidance Reflects Operational Optimism

Despite margin pressure, UniFirst raised its full-year EPS guidance to $7.60–$8.00, up from prior estimates, while keeping its revenue forecast steady at $2.422 to $2.432 billion. The revision reflects lower expected spending on Key Initiatives and better execution in CORE operations.

CEO Steven Sintros emphasized that the results were in line with expectations and credited gross margin improvements and team efforts across the company for driving performance. He acknowledged ongoing challenges but said UniFirst remains focused on delivering consistent service and long-term shareholder value.

Conclusion

UniFirst’s Q3 FY25 results showed modest revenue and profit growth, buoyed by cost control and strategic gains. Still, the market reacted negatively to slight operating income contraction and increased one-time expenses. Investors will be watching closely to see if margin improvements and revised earnings guidance translate into stronger momentum in the quarters ahead.