A class action lawsuit was filed against Vestis Corporation (VSTS) by Levi & Korsinsky on June 9, 2025. The plaintiffs (shareholders) alleged that they bought VSTS stock at artificially inflated prices between May 2, 2024, and May 6, 2025 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Vestis stock during that period can click here to learn about joining the lawsuit. Vestis is scheduled to release its Q3FY25 results after the market closes on August 5.
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Vestis is one of the largest suppliers of uniform rentals and workplace supplies in the U.S. and Canada. The company offers a broad range of products, including uniforms and workplace supplies such as towels, aprons, floor mats, linen services, managed restroom supply services, and first aid and safety products, among others.
The company’s claims about its ability to grow its business, improve customer experience, drive new customer acquisition, increase customer retention, and boost revenue from existing customers are at the heart of the current complaint.
Vestis’ Misleading Claims
According to the lawsuit, Vestis and two of its former senior officers (the Defendants) repeatedly made false and misleading public statements throughout the Class Period. In particular, they are accused of omitting truthful information about the company’s ability to execute certain business strategies pertaining to customer growth, retention, and revenue, from SEC filings and related material.
During the Class Period, the company’s former CEO stated that Vestis was employing strategic initiatives to enhance lifetime customer value. He added that when customers experience service problems, they become more sensitive to price changes. Thus, satisfied customers don’t leave because of a price increase, but it can sometimes lead to cancellations or quits.
Additionally, during an earnings call held on November 21, 2024, the then-CFO noted that Vestis expects Q1 FY25 revenue and EBITDA to be similar to Q4 FY24. He also mentioned that the company anticipates incremental improvement throughout the year as it continues to implement strategic initiatives and enhance its cost structure.
Finally, during the Q1FY25 results announcement, the then-CEO stated that by the end of Q2, Vestis expects new volume growth to exceed lost business, driven by “field sales productivity, national account wins, new frontline sales headcount growth, and solid retention metrics.”
However, subsequent events (detailed below) reveal that the defendants failed to inform investors about deteriorating financial performance, declining revenues, and customer cancellations.
Plaintiffs’ Arguments
The plaintiffs maintain that the defendants deceived investors by lying and withholding critical information about the business and prospects during the Class Period. Importantly, the defendants are accused of misleading investors about the company’s potential growth and revenue prospects.
The information became clear on May 7, 2025, when Vestis released its second-quarter fiscal 2025 results. The company missed its Q2 earnings per share expectations and withdrew its revenue and growth outlook for the full fiscal year 2025. Moreover, its Q1 guidance fell short of analysts’ expectations. Following the news, VSTS stock plunged 37.5% the same day.
Vestis attributed the poor performance to “lost business in excess of new business,” but primarily due to “lower adds over stops,” which it describes as volume changes within existing customers. The company also attributed its decision to withdraw full-year guidance and provide disappointing third-quarter targets to the “increasingly uncertain macro environment.”
To conclude, the defendants failed to inform investors and concealed material adverse facts concerning the true state of Vestis’ ability to grow its business. As a result of these issues, VSTS stock has lost 62.3% so far this year.
