UniFirst (NYSE:UNF) management said first-quarter fiscal 2026 results were “largely in line” with internal expectations and reaffirmed full-year guidance, while noting that planned investments and higher-than-anticipated healthcare claims and legal costs pressured profitability during the period.
First-quarter results and profitability pressure
For the quarter, UniFirst reported revenue of $621.3 million, up 2.7% from $604.9 million a year earlier. Operating income declined to $45.3 million from $55.5 million, and net income fell to $34.4 million, or $1.89 per diluted share, compared with $43.1 million, or $2.31 per diluted share, in the prior-year period. Adjusted EBITDA was $82.8 million versus $94.0 million last year.
CFO Shane O’Connor also noted the company’s effective tax rate rose to 26.9% from 25.6%, which he attributed primarily to the “timing and amount of excess tax benefits and deficiencies related to employee share-based payments.” He said UniFirst still expects a full-year tax rate of approximately 26%.
Segment performance: Uniforms steady, First Aid growth, nuclear services softer
In the core Uniform and Facility Service Solutions segment, revenue increased to $565.9 million from $552.8 million. Organic growth, which adjusts for acquisitions and Canadian dollar fluctuations, was 2.4%, driven by “strong new account sales and improved customer retention,” O’Connor said. Sintros added that new customer wins exceeded the prior-year quarter and that retention logged “a second year in a row of quarter-over-quarter improvement.”
Margins in the Uniform and Facility Service Solutions segment declined. Operating margin was 7.4% (operating income of $41.8 million) compared with 8.8% (operating income of $48.5 million) a year ago. The segment’s Adjusted EBITDA margin was 13.6% versus 15.4% in the prior-year quarter. Management attributed the margin decline to the planned growth and leverage investments, as well as elevated healthcare claims and legal costs. O’Connor said energy costs in the quarter were 4.1% of revenues.
In First Aid and Safety Solutions, revenue rose 15.3% to $30.2 million from $26.2 million, which management tied primarily to investments in the First Aid van business and “some small bolt-on acquisitions.” The segment recorded a nominal operating loss of $0.4 million, reflecting continued investment to drive growth and improved profitability. Sintros said growth was “somewhat tempered” by a softer employment climate affecting rental and direct sale accounts, but he said the company remains confident its investments are improving key operating areas.
In the “Other” segment, which consists of specialized nuclear decontamination services, revenue decreased 2.9% to $25.2 million from $25.9 million. O’Connor cited the anticipated wind-down of a large refurbishment project and fewer reactor outages. Segment operating margin was 15.4%, down year over year due to the high fixed-cost nature of the business. Management reiterated that results in the nuclear business can vary significantly due to seasonality and the timing and profitability of outages and projects.
Investments in sales, service, and operational initiatives
Sintros said UniFirst has been investing in sales and service organizations to build a “stronger, more sustainable platform” for faster growth. He pointed to targeted additions to the sales team in the second half of fiscal 2025 and investments to expand capacity and stability in service teams. Management said these enhancements are beginning to show up in operating metrics including retention, new account sales, and additional product placements with existing customers.
During Q&A, Sintros described a shift toward a more “tiered” sales organization, aimed at better coverage across customer sizes. He said UniFirst has made progress over time in “mid-size accounts” that fall between very small local accounts and true national accounts.
On the service side, Sintros said the company made strategic headcount additions to support account management and retention and to help execute other growth pillars such as upselling and price management across the customer base. He cited improved discipline in account renewal processes as one operational example that has supported retention.
ERP, margin outlook, and timing of longer-term goals
Asked about the timeline for longer-term goals discussed in prior periods—mid-single-digit organic growth and high-teens adjusted EBITDA margins—Sintros said the company has not provided specific fiscal years for achieving those milestones. However, he said UniFirst expects “steady improvement” through 2027 and 2028, and suggested getting “closer to those mid-single-digit numbers” by “the third year or so.”
On profitability, Sintros said several initiatives could inflect results over the next 18 to 24 months, particularly as technology projects progress. He also flagged potential tariff impacts on costs as an item to watch.
Management highlighted several categories of initiatives tied to margin opportunity, including:
- Operational excellence through the “UniFirst Way,” the company’s operating framework for scalable, repeatable processes
- Inventory management, procurement, and sourcing improvements supported by ERP implementation
- G&A productivity tied to digital transformation and automation
On ERP, management said fiscal 2026 work will include releases focused on “core financial foundation” modules. In 2027, UniFirst expects supply chain- and procurement-related enhancements to come online, though executives said exact end dates are not yet set. O’Connor said the overall ERP timeline, with a final supply chain-centric release “largely through 2027,” has not changed, with benefits expected to support the latter half of 2027 and into 2028.
Executives also said some margin headwinds from investments were more pronounced in the first quarter, since certain costs were added in the back half of fiscal 2025; as a result, comparisons should become less pronounced as the year progresses.
Capital allocation, guidance reaffirmed, and Cintas proposal update
UniFirst ended the quarter with cash, cash equivalents, and short-term investments of $129.5 million and no long-term debt. O’Connor said free cash flow in the first three months was impacted by lower profitability and “heavy working capital needs,” including merchandise and service related to installing a couple of large national account customers, as well as the timing of income tax and vendor payments.
During the quarter, the company reported capital expenditures of $38.9 million, repurchased $31.7 million of common stock, and acquired four first-aid businesses for $14.9 million. Sintros said UniFirst repurchased approximately $32 million of stock during the quarter and more than $77 million over the past two quarters, and the company “again increased” its common stock dividend.
Management reaffirmed fiscal 2026 guidance for revenue of $2.475 billion to $2.495 billion and diluted earnings per share of $6.58 to $6.98. O’Connor said the guidance includes an estimated $7 million of costs directly attributable to the company’s ERP-related “key initiative” expected to be expensed in fiscal 2026, and noted that guidance does not assume future share repurchases.
Sintros also briefly addressed UniFirst’s receipt of an unsolicited non-binding proposal from Cintas, reiterating that the board has engaged independent financial and legal advisors to evaluate the proposal and determine the course of action in the best interest of UniFirst and its stakeholders. He said the evaluation is ongoing and that the company will provide an update once it is completed. Management told analysts it did not intend to answer additional questions on that topic during the call.
About Unifirst (NYSE:UNF)
UniFirst Corporation (NYSE: UNF) is a leading provider of customized uniform rental and facility service programs in North America and Europe. The company specializes in the rental, laundering and maintenance of workwear, corporate apparel and protective garments for a broad range of industries, including manufacturing, automotive, hospitality, healthcare and food processing. UniFirst also offers a suite of facility service products such as entrance mats, restroom supplies, wipers, mops and hygienic services designed to help customers maintain clean and safe environments.
In addition to its core uniform rental business, UniFirst has expanded its product portfolio to include safety and first-responder gear, flame-resistant clothing, high-visibility apparel and personal protective equipment (PPE).
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