What are the underlying reasons for the trade‑related uncertainty and demand volatility, and are they likely to persist in the coming quarters?

Underlying drivers:

The drop in UNIFI’s Q4 sales reflects two intertwined forces. First, geopolitical trade friction—particularly lingering tariff negotiations between the U.S. and major textile‑exporting regions (China, Vietnam, and Mexico)—has left buyers hesitant to commit to large, multi‑quarter contracts, prompting a “wait‑and‑see” stance that depresses order books. Second, the recycled‑yarn market is still in a nascent, demand‑elastic phase; end‑users (apparel brands and automotive interior suppliers) are scaling back short‑term purchases as they grapple with inventory overruns from the 2023‑24 sustainability push and with volatile raw‑material prices (oil‑derived polyester feedstock vs. post‑consumer PET). The combination of supply‑chain uncertainty and a “buy‑now‑or‑wait” mentality generates the short‑term volatility highlighted in the earnings release.

Persistence outlook & trade ideas:

Given that tariff talks are expected to continue well into 2025 and that the U.S. Inflation Reduction Act incentives for recycled fibers are still being phased in, the trade‑related uncertainty is likely to linger for at least another two‑to‑three quarters. Moreover, the macro‑cycle for sustainable textile demand is tied to discretionary consumer spending, which remains sensitive to interest‑rate outlooks and inflation, suggesting demand volatility will persist. From a technical perspective, UNIFI’s stock has broken below its 50‑day MA and is testing the 200‑day support around $14.50, with the RSI hovering near oversold levels (~35). For risk‑averse traders, a short‑term “sell‑on‑the‑dip” position with a stop just above the 50‑day MA (~$16) could capture further downside if earnings miss persist. Conversely, longer‑term investors might consider a “buy‑the‑dip” around $14‑$15, betting that once trade negotiations clarify and sustainability mandates become concrete, the company’s margin‑rich recycled yarns will regain pricing power and drive a bounce back in sales. Monitoring upcoming trade policy updates (e.g., U.S.‑China Phase‑One review) and the rollout of federal recycling credits will be key to timing entry and exit points.