On August 11, Vestis (NYSE:VSTS) reported fiscal third-quarter results that mark a turning point for a company that has spent its short public life trying to prove its uniform and workplace supply business can actually get more profitable, not just bigger. Adjusted EBITDA climbed to about $81 million, up roughly $15 million or 23% year over year, and for the first time since the company separated from Aramark, revenue per pound rose instead of fell. That single shift, small as it sounds, is the thread running through the entire quarter.
Bull Case: Turning A Corner On Pricing
The headline number is revenue per pound, which reached $1.42 in the quarter, up $0.04 year over year and $0.05 sequentially. Management framed this as the first year-over-year increase in that metric since Vestis became a public company, driven by disciplined pricing, better customer segmentation, and a deliberate shift away from lower-margin linen volume, which fell 6% year over year on a pounds-processed basis. Vestis also let go of about 22 million pounds of volume that carried an average revenue per pound of just $0.55, meaning the business got smaller but higher quality at the same time.
Cost of services dropped about $15 million year over year, and SG&A fell roughly $7 million, or about 6%, while cost per pound held flat at $1.24 even as the company exited unprofitable business. Plant productivity rose 9% year over year, on-time delivery improved 80 basis points, and customer complaints fell 74 basis points, evidence that the operational cleanup is showing up in day-to-day service, not just the income statement. Net income swung to $11 million from a $0.7 million loss a year earlier, and the company raised its full-year free cash flow guidance to a range of $160 million to $170 million, up from $120 million to $150 million previously.
Bear Case: Debt And An Uneven Network
The improvement comes against a backdrop that still looks shaky in places. Total revenue for the quarter was about $662 million, down 1.8% year over year, and pounds processed fell 4.5% as Vestis kept shedding volume it didn’t want. Net debt stood at $1.2 billion at quarter-end, with $1.1 billion of principal bank debt outstanding, and the company used quarterly cash flow to pay down just $30 million of term loan debt.
Management also acknowledged that the operational playbook it has been running is not producing uniform results, describing a meaningful gap between its strongest and weakest markets that it now plans to address with more customized, market-by-market execution rather than a one-size-fits-all approach. Full-year revenue guidance remains flat to down 2%, and the company disclosed it is accruing a management incentive bonus for the first time at this level since going public, a cost that is already embedded in guidance but still subject to year-end certification. None of this derails the quarter’s progress, but it is a reminder that Vestis is still mid-turnaround, not finished with it.
Hedge Funds Trim Their Stakes
Hedge fund ownership of Vestis slipped to 29 funds in the most recent quarter from 30 in the prior one, a modest pullback rather than a rush for the exits. Short interest sits at 8.67% of float, a level that points to a real, organized bear case rather than incidental hedging. That combination suggests the market remains split on whether the pricing turnaround is durable enough to offset the debt load and uneven network performance.
Where The Story Goes Next
Vestis has now strung together two straight quarters of year-over-year adjusted EBITDA growth and just posted its first positive revenue-per-pound quarter as a public company, which is the clearest evidence yet that the pricing and mix strategy is working. But revenue is still shrinking, debt reduction has been modest, and management itself admits performance varies widely across markets. For the improvement to stick, the company will need the next phase of its transformation, tailored playbooks for individual markets, to close that internal gap without slowing the pricing discipline that finally moved the needle this quarter.
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