Key Stats for Vestis Stock
- Pre-market Price Change for Vestis stock: -7%
- $VSTS Share Price as of Dec. 1: $6.72
- 52-Week High: $17.83
- $VSTS Stock Price Target: $5.67
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What Happened?
Vestis (VSTS) stock dropped roughly 7% in pre-market trading following a disappointing third-quarter earnings report. The workplace supplies and uniform rental provider earned just $0.03 per share on an adjusted basis, missing analyst expectations of $0.06 per share by 50%.
Revenue came in at $712 million for the quarter, which included an extra week of operations compared to the prior year. That extra week added $51.6 million to the top line. Stripping that out, revenue actually declined 3.5% year-over-year, driven by an $18 million drop in rental revenue and $5 million in lower direct sales.
The bigger story behind the decline in Vestis stock is the ongoing struggle with customer retention. The company continues to lose existing customers faster than it can bring on new ones, and the business it’s losing carries better pricing than the new contracts it’s signing. This unfavorable pricing dynamic is squeezing margins across the board.
Operating income dropped to $18 million from $30 million in the same quarter last year, and free cash flow came in at $16 million, down from $35 million in the prior year when you exclude a one-time favorable accounting treatment related to a receivables facility.
However, CEO Jim Barber announced a comprehensive turnaround plan during the earnings call that could eventually stabilize Vestis stock.
The company is launching a multi-year transformation strategy built around three pillars: Commercial Excellence, Operational Excellence, and Asset & Network Optimization.
The plan is expected to generate at least $75 million in annual cost savings by the end of fiscal 2026. Implementation costs will range from $25 million to $30 million, with the transformation substantially complete by the end of 2027.
For fiscal 2026, management guided revenue to be flat to down 2% compared to normalized fiscal 2025 results. Adjusted EBITDA is expected in the range of $285 million to $315 million, with free cash flow between $50 million and $60 million.
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What the Market Is Telling Us About Vestis Stock
The pullback in Vestis stock reflects skepticism about the company’s near-term prospects despite the announced turnaround plan.
Investors are concerned that the customer churn problem won’t be solved quickly, and the guidance for flat-to-declining revenue in fiscal 2026 doesn’t inspire confidence.
What’s working against Vestis right now is the fact that it’s losing higher-margin customers and replacing them with lower-margin business. That’s a tough hole to dig out of, even with $75 million in planned cost savings.
The company needs to not only stop the bleeding on customer losses but also improve the quality and pricing of new customer wins.
The transformation plan addresses the right issues.
- Commercial Excellence focuses on better customer segmentation and strategic pricing to improve profitability.
- Operational Excellence aims to standardize processes across facilities and modernize systems.
- Asset & Network Optimization will rationalize the company’s footprint and improve logistics efficiency.
Barber brings relevant experience from running similar route-based, asset-intensive businesses, which gives some credibility to the turnaround strategy. He’s been in the role for several months now and has identified concrete actions to unlock operating leverage.
The balance sheet provides some breathing room, given Vestis stock ended the quarter with $298 million in liquidity, including $30 million in cash.
Total debt stands at $1.34 billion, but there are no major maturities looming in the near term. Net leverage sits at manageable levels given the available liquidity cushion.
Still, investors will need to see proof that the transformation is working before VSTS stock can sustainably recover.
The guidance for fiscal 2026 suggests performance will remain challenged in the near term as initiatives ramp up.
Management expects improvements to be progressively realized throughout the year rather than all at once.
The key metrics to watch will be customer retention rates, pricing trends for new business versus lost business, and progress toward the $75 million cost-savings target.
If Vestis can demonstrate stabilizing revenue trends and expanding margins by mid-2026, sentiment around the stock could improve significantly.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
