US' Unifi still optimistic despite 8.4% plunge in sales of Q1 FY23

The reduction of net sales is primarily attributable to temporary demand disruption in the Americas and Asia Segments from inventory destocking measures taken by apparel brands and retailers. The demand for apparel production declined significantly in the first quarter of fiscal 2023 as brands and retailers took temporary actions to reduce their inventory levels. Conversely, the Brazil Segment generated strong sales performance within its domestic market where apparel demand had not suffered.

Unifi’s gross profit was $6.6 million in Q1 FY23 compared to $26.1 million for the first quarter of fiscal 2022, primarily impacted by lower facility utilisation. Gross margin was 3.7 per cent compared to 13.3 per cent in fiscal 2022’s first quarter. The company’s operating loss was $4.7 million in Q1 FY23 compared to operating income of $13.3 million for the first quarter of fiscal 2022, while the gross profit was $6.6 million compared to $26.1 million, primarily impacted by lower facility utilisation. Unifi incurred a net loss of $7.8 million, or $0.44 per share, in Q1FY22, compared to net income of $8.7 million, or $0.46 per share. Furthermore, the adjusted EBITDA was reported $2.3 million compared to $19.8 million for the first quarter of fiscal 2022.

Due to previously anticipated investments in new yarn texturing innovation and working capital to support future growth, cash and cash equivalents decreased to $47.2 million on October 2, 2022, from $53.3 million on July 3, 2022. Accordingly, net debt increased to $79.8 million, compared to $61.0 million.

The operating environment and textile demand trends for the apparel market are expected to remain suppressed for the remainder of calendar 2022, Unifi said in a press release. While the company expects significant demand recovery and profitability acceleration to occur following the inventory destocking measures currently in progress at major apparel brands and retailers, the timing of an apparel production recovery is uncertain.

The company has withdrawn its previously issued full year fiscal 2023 outlook and anticipates approximately 10 per cent to 15 per cent lower net sales than the first quarter of fiscal 2023. Unifi is expecting continued profitability pressures and performance resembling the first quarter of fiscal 2023, primarily attributable to weak cost absorption in the Americas Segment in connection with a seasonally pressured period that includes annual customer shutdowns and holidays exacerbated by lower-than-normal sales and productivity levels driving consolidated adjusted EBITDA between $5.0 million and $0.0 million. Moreover, the volatility and unfavorability is expected to continue in the effective tax rate. The capital expenditures of the company are estimated to be around $10.0 million to $12.0 million, as UNIFI continues investing in new yarn texturing machinery within the US, El Salvador, and Brazil.

An existing credit facility was amended and extended to support future growth and to provide additional liquidity in October 2022. Also, Frank Blake, non-executive chairman of Delta Air Lines, Inc, joined the board of directors.

“Our first quarter fiscal 2023 results were adversely impacted by a difficult demand environment and volatile global market. With brand and retailer inventories recently reaching historically high levels, apparel companies and retailers reduced orders and delayed certain programs into calendar 2023. As a result, our demand visibility diminished quickly. While we believe these destocking measures will be temporary, the duration of this disruption is uncertain. Accordingly, we quickly implemented meaningful cost savings actions in North America to improve the profit margins in the short- and long-term periods. Our business remains well-positioned to support the continued acceleration in the demand for sustainable fibres,” said Eddie Ingle, chief executive officer of Unifi.

Fibre2Fashion News Desk (DP)