Unifi Hit By A Sharp Downturn In Orders, But It Doesn't Unravel The Long-Term Story

Weaker retail sales and record-high retailer inventories has led to a sharp reversal in fortunes for Unifi (NYSE:UFI), as this leading producer of recycled polyester yarns has seen a sudden and sharp downturn in volumes this year. That downturn has not only thrown management’s guidance for FY’23 out of the window, but also likely put the company’s former FY’25 goals ($1.1B in revenue, 10%-plus EBITDA margin) out of reach.

This has had a massive negative impact on the share price, with the stock down more than 50% since my last update on the company. This is a huge setback, but I do note that the company is still leveraged to an ongoing trend among major retailers to shift to recycled polyesters and this inventory issue with retail and apparel customers will resolve over the next few quarters. Even with a sharp revision to near-term financials, I still believe there is a bullish case to be made for the shares, though it will take some time to recoup the losses seen in 2022.

 

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Unifi Hit By A Sharp Downturn In Orders, But It Doesn't Unravel The Long-Term Story