UniFirst Corporation (UNF) Q3 2026: Revenue Growth Amid Profit Decline — Disappointing Quarter for Shareholders

UniFirst Corporation (NYSE: UNF) reported its financial results for the third quarter of fiscal 2026, revealing a mixed performance that ultimately disappointed shareholders. The company achieved consolidated revenues of $634.4 million, an increase of $23.6 million or 3.9% compared to $610.8 million in the same quarter of fiscal 2025. However, this revenue growth was overshadowed by significant declines in profitability metrics.

Key Financial Metrics

• Consolidated Revenues: $634.4 million, up $23.6 million or +3.9% YoY
• Operating Income: $23.0 million, down $25.2 million or -52.3% YoY
• Adjusted EBITDA: $82.6 million, down $3.2 million or -3.7% YoY
• Net Income: $19.9 million, down $19.8 million or -49.9% YoY
• Diluted Earnings Per Share (EPS): $1.09, down $1.04 or -48.8% YoY
• Operating Margin: 3.6%, down from 7.9% in the prior year
• Adjusted EBITDA Margin: 13.0%, down from 14.1% in the prior year

Analyst View

This quarter can be characterized as disappointing for shareholders. While revenue growth is a positive sign, the drastic decline in operating income and net income raises concerns about the company's profitability and operational efficiency. The operating margin fell to 3.6%, a significant drop from 7.9% in the previous year, indicating that the company is facing challenges in managing costs effectively. The decline in diluted EPS to $1.09 from $2.13 further underscores the impact of rising costs and transaction-related expenses on the bottom line.

Transaction-Related Costs Impact

The results for Q3 2026 included approximately $20.7 million in costs associated with the proposed merger with Cintas Corporation, which significantly impacted profitability. These transaction-related costs, along with $5.2 million related to the company's enterprise resource planning project, contributed to a decrease in operating income by $26.0 million and net income by $19.6 million. The substantial costs associated with the merger and other initiatives highlight the financial strain on the company during this transitional period.

Dividend and Share Buyback

UniFirst declared a quarterly cash dividend of $0.365 per Common Stock share and $0.292 per Class B Common Stock on April 14, 2026. However, the company did not repurchase any shares of its Common Stock during the third quarter, which may signal a cautious approach to capital allocation amid declining profitability.

Forward-Looking Catalysts

Investors should closely monitor the regulatory review process of the proposed merger with Cintas, as the transaction is expected to close in the second half of calendar 2026, pending necessary approvals. Additionally, the company has suspended financial guidance due to the pending transaction, making it crucial for investors to watch for updates on the merger's progress and any potential impacts on UniFirst's operational strategy moving forward.

In conclusion, while UniFirst's revenue growth is a positive indicator, the significant declines in profitability metrics and the impact of transaction-related costs present a challenging outlook for shareholders. The upcoming quarter will be pivotal as the company navigates the merger process and seeks to stabilize its financial performance.

Consolidated Statements of Income

(In thousands)

Note: The amounts in the following table are in thousands.

Thirteen Weeks Ended	May 30, 2026	May 31, 2025	Thirty-Nine Weeks Ended	May 30, 2026	May 31, 2025
Revenues	$634,426	$610,769	$1,878,105	$1,817,212
Operating expense
Cost of revenues	399,617	385,113	1,196,770	1,160,123
Selling and administrative expense	175,949	142,676	481,135	418,119
Depreciation and amortization	35,771	34,722	106,384	104,476
Total operating expense	611,337	562,511	1,783,289	1,682,718
Operating income	23,030	48,177	94,352	134,494
Other (income) expense
Interest income	-1,779	-2,514	-5,284	-7,422
Other expense	365	-2,704	874	-1,620
(Income) net
Total other expense	-1,414	-5,218	-4,410	-9,042
Income before income taxes	24,444	53,395	98,762	143,964
Provision for income taxes	4,528	13,715	23,999	36,720
Net income	$19,916	$39,680	$74,763	$107,244
Income per share
– Basic	$1.15	$2.22	$4.30	$6.01
Class B Common Stock	$0.92	$1.78	$3.44	$4.80
Income per share
– Diluted	$1.09	$2.13	$4.11	$5.76
Income allocable to – Basic
Common Stock	$16,659	$33,346	$62,545	$90,126
Class B Common Stock	$3,257	$6,334	$12,218	$17,118
Income allocable to – Diluted
Common Stock	$19,916	$39,680	$74,763	$107,244
Weighed average shares outstanding – Basic
Common Stock	14,532	14,990	14,549	15,007
Class B Common Stock	3,551	3,557	3,551	3,563
Weighed average shares outstanding – Diluted
Common Stock	18,216	18,607	18,175	18,633

(1) Exclusive of depreciation on the Company's property, plant and equipment and amortization on its intangible assets.

Condensed Consolidated Balance Sheets

(In thousands)

Note: The amounts in the following table are in thousands.

	May 30, 2026	August 30, 2025
Assets
Current assets:
Cash and cash equivalents	$163,225	$203,501
Short-term investments	5,651	5,672
Receivables, net	295,580	285,297
Inventories	148,495	145,197
Rental merchandise in service	237,344	227,720
Prepaid taxes	6,074	7,708
Prepaid expenses and other current assets	63,571	49,508
Total current assets	919,940	924,603
Property, plant and equipment, net	846,697	829,622
Goodwill	669,925	657,748
Customer contracts and other intangible assets, net	92,593	105,829
Deferred income taxes	854	977
Operating lease right-of-use assets, net	82,825	70,110
Other assets	207,860	189,266
Total assets	$2,820,694	$2,778,155
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$89,560	$94,980
Accrued liabilities	185,312	176,903
Accrued taxes	—	674
Operating lease liabilities, current	20,822	17,846
Total current liabilities	295,694	290,403
Long-term liabilities:
Accrued liabilities	129,572	128,554
Accrued and deferred income taxes	133,157	135,648
Operating lease liabilities	64,226	54,593
Total liabilities	622,649	609,198
Shareholders’ equity:
Common Stock	1,453	1,468
Class B Common Stock	355	355
Capital surplus	112,621	109,107
Retained earnings	2,105,352	2,079,812
Accumulated other comprehensive loss	-21,736	-21,785
Total shareholders’ equity	2,198,045	2,168,957
Total liabilities and shareholders’ equity	$2,820,694	$2,778,155

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