Vestis Reports Q1 2026 Earnings
Shares of Vestis Corporation (VSTS) jumped 16.12% to $8.50 on Tuesday after the uniform provider reported a significant improvement in cash flow and operational metrics, overshadowing a miss on first-quarter revenue and earnings. The stock has traded in a 52-week range of $3.98 to $13.85. Despite the intraday gain, the shares remain below their post-spin-off highs as the company executes a multi-year business transformation.
Company Description
Vestis Corporation is a leading provider of uniforms and workplace supplies in the United States and Canada. The company specializes in B2B rental services, including uniform programs, floor mats, towels, and first aid supplies. It serves a diverse array of end markets including manufacturing, hospitality, healthcare, and retail. Vestis operates an integrated network of over 300 market centers and serves approximately 300,000 customer locations.
Current Stock Price
$8.50 (Feb 10, 2026)
Market Capitalization
Approximately $1.12 billion
Valuation
Vestis currently trades at a forward P/E ratio of 14.8x based on its reaffirmed fiscal 2026 adjusted guidance. The valuation reflects the market’s cautious optimism regarding the company’s “Transformation Plan,” weighing high net leverage of 4.83x against projected annual cost savings of $75 million.
Vestis Reports First Quarter 2026 Financial Results
The company reported a mixed start to fiscal 2026, with improved operational efficiency partially offset by lower revenue per pound in its rental segment.
- Revenue: Totaled $663.4 million, down 3% year-over-year from $683.8 million. The decline was driven by a $17.9 million drop in rental revenue.
- Profitability: Reported a GAAP net loss of $6.4 million, or $(0.05) per diluted share.
- Adjusted EBITDA: Fell to $70.4 million (10.6% margin) compared to $81.2 million (11.9% margin) in the prior-year period.
- Cash Flow: Demonstrated a sharp turnaround, with adjusted free cash flow reaching $42.9 million, compared to a negative $11 million in Q1 2025.
For the full year 2025, revenue was $2.69 billion. The company reaffirmed its 2026 outlook, guiding to revenue growth between flat and down 2% and adjusted EBITDA of $285 million to $315 million.
Earnings Call Highlights and Transformation Progress
Management detailed progress on its strategic transformation plan during the quarterly conference call:
- Operational Gains: Executives reported a 7% improvement in plant productivity and a 12% reduction in customer complaints year-over-year.
- Cost Savings: The company is on track to achieve $75 million in annual run-rate savings by the end of fiscal 2026 through route optimization and facility consolidation.
- Asset Optimization: Vestis is actively marketing non-core properties, with proceeds intended for debt reduction to lower its current $1.29 billion net debt.
- Customer Retention: A key focus area remains reducing the “lost business” drag, which impacted rental revenue by nearly $15 million in the previous quarter.
Macro Pressures and Geopolitical Risk
Vestis faces significant headwinds from inflationary labor costs and fluctuating energy prices affecting its delivery fleet. The company-specific challenge remains its high debt-to-EBITDA leverage, which restricts aggressive capital allocation.
Geopolitical Exposure: While operations are concentrated in North America, the company is indirectly exposed to tariff impacts on imported textiles and merchandise. Fluctuations in the Canadian dollar contributed a minor $0.2 million foreign exchange benefit this quarter but remain a recurring risk for its international segment.
Vestis Corporation (VSTS) SWOT Analysis
Strengths
- Market Position: Scale as the second-largest uniform provider in North America.
- Cash Flow Generation: Strong adjusted free cash flow conversion of 61% in Q1 2026.
- Operational Discipline: Successfully reduced cost-per-pound and improved on-time deliveries by 300 basis points.
Weaknesses
- Leverage: High net leverage ratio of 4.83x limits financial flexibility.
- Revenue Quality: Recent results reflect a shift toward lower-priced workplace supplies, diluting revenue per pound.
- Negative GAAP Earnings: Continued reporting of net losses due to transformation and separation-related costs.
Opportunities
- Transformation Savings: Projected $75 million in annual savings could significantly boost margins by 2027.
- Inorganic De-leveraging: Sale of non-core assets to pay down term loans.
- Cross-Selling: Increasing penetration of first-aid and ancillary workplace supplies into the existing uniform customer base.
Threats
- Macro Environment: Slowdown in manufacturing or industrial employment reduces demand for rental uniforms.
- Competitive Pricing: Aggressive bidding from larger peers like Cintas could pressure retention and renewal rates.
- Interest Rates: High debt load makes the company sensitive to sustained high interest rates on floating-rate debt components.