FRPT

Freshpet’s second quarter results were met with a positive market reaction, reflecting solid execution in a challenging consumer environment. Management credited the quarter’s performance to robust sales volumes, effective omnichannel expansion, and gains from targeted marketing campaigns. CEO Billy Cyr highlighted the importance of focusing on high-value pet-owning households, noting, “An increasing share of our growth is coming from increases in the buying rate of our consumers.” The company’s manufacturing upgrades also contributed, allowing Freshpet to maintain operating margins despite higher logistics costs and continued investments in marketing. Is now the time to buy FRPT? Find out in our full research report (it’s free). Revenue: $305.6 million vs analyst estimates of $292.3 million (15.5% year-on-year growth, 4.5% beat) Adjusted EPS: $0.29 vs analyst estimates of $0.22 (30.3% beat) Adjusted EBITDA: $52.2 million vs analyst estimates of $45.91 million (17.1% margin, 13.7% beat) EBITDA guidance for the full year is $215 million at the midpoint, above analyst estimates of $211.3 million Operating Margin: 7.1%, in line with the same quarter last year Locations: 30,721 at quarter end, up from 29,141 in the same quarter last year Organic Revenue rose 15.5% year on year (beat) Sales Volumes rose 15.7% year on year (10.8% in the same quarter last year) Market Capitalization: $3.45 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Robert Moskow (TD Cowen) asked about the sustainability of household penetration growth and its relationship to long-term sales targets. CEO William Cyr emphasized that higher buying rates among MVP (most valuable pet) households can offset any flattening in household penetration, maintaining confidence in the company’s growth model. Peter Benedict (Baird) inquired about the performance and expansion plans for fridge island units. COO Nicola Baty explained that while island units are performing well, broader distribution expansion will come from multiple strategies beyond just these units, including assortment and capacity enhancements. Rupesh Parikh (Oppenheimer) questioned whether Freshpet would increase advertising if EBITDA outperformed. Cyr responded that the company is open to increasing advertising spend when returns are justified, particularly to target high-value consumer segments. Thomas Palmer (JPMorgan) sought clarification on the contribution of new manufacturing technology to gross margin improvements. CFO John O’Connor noted that most recent gains have come from operational improvements, with limited impact from new technology so far, but expects this to increase in future quarters. Jon Andersen (William Blair) asked about the competitive landscape and recent leadership changes. Cyr highlighted Freshpet’s ongoing talent acquisition to support growth and reaffirmed the company’s competitive advantages in cost, quality, and omnichannel reach. In the next few quarters, our analyst team will be watching (1) the pace of omnichannel and retail expansion, especially in club and rural channels, (2) incremental gross margin improvements from continued optimization of new manufacturing technology, and (3) how Freshpet navigates input cost pressures, including logistics and fuel. We will also monitor the impact of targeted marketing on consumer engagement and MVP household growth. Freshpet currently trades at $71.79, up from $62.38 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members). WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses. But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.

Image source: The Motley Fool. Wed., Aug. 5, 2026 at 8:00 a.m. ET Vice President of Investor Relations and Corporate Communications - Rachel Perkins-Ulsh Chief Executive Officer - William Cyr Chief Financial Officer - John O'Connor Chief Operating Officer - Nicola Baty Operator: Good morning, and welcome to the Freshpet Second Quarter 2026 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Rachel Ulsh, Vice President of Investor Relations and Corporate Communications. Please go ahead. Rachel Perkins-Ulsh: Good morning, and welcome to Freshpet's Second Quarter 2026 Earnings Call and Webcast. On today's call are Billy Cyr, Chief Executive Officer; and John O'Connor, Chief Financial Officer. Nicki Baty, Chief Operating Officer, will also be available for Q&A. Before we begin, please remember that during the course of this call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements related to the size of the category and our TAM, our strategy and expectations for growth, the competitive advantages of our manufacturing on quality and cost, fridge expansion expectations, opportunities and capital efficiencies, timing of new lines of capital spending, 2026 guidance and 2027 targets. They involve risks and uncertainties that could cause actual results to differ materially from any forward-looking statements made today including those associated with these statements and those discussed in our earnings press release and our most recent filings with the SEC, including our 2025 annual report on Form 10-K, which are all available on our website. Please note that on today's call, management will refer to certain non-GAAP financial measures such as EBITDA and adjusted EBITDA, among others. While the company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release for how management defines such non-GAAP measures, why management believes such non-GAAP measures are useful, a reconciliation of the non-GAAP financial measures to the most comparable measures are in accordance with GAAP and limitations associated with such non-GAAP measures. Finally, the company has produced a presentation that contains many of the key metrics that will be discussed on this call. That presentation can be found on the company's investor website. Management's commentary will not specifically walk through the presentation on the call. Rather, it is a summary of the results and guidance they will discuss today. With that, I'd like to turn the call over to Billy Cyr, Chief Executive Officer. William Cyr: Thank you, Rachel, and good morning, everyone. The message I would like you to take away from today's call is that our results and the number of competitors trying to emulate us continue to prove that Fresh is the future of pet food and we remain well positioned to capture a meaningful share of what we believe can become a $10 billion category over time. Our confidence is grounded in the scale, quality and cost advantages we have built through our owned manufacturing network, our broad product portfolio and our expanding omnichannel presence. We have built a business over the last 20 years around a wide range of product forms, sizes, prices and channels and believe our manufacturing scale and expertise is one of our greatest competitive advantages, enabling us to create the highest quality products at the lowest cost. Our second quarter financial results were ahead of our guidance range for the year demonstrating the power of our business model. We delivered our strongest growth rate in over a year and our highest adjusted gross margin since Q1 of 2020. As a result, we're raising our sales and adjusted EBITDA guidance ranges for 2026, which John will cover in a few moments. We accomplished this against a challenging consumer backdrop with higher gas prices and weaker consumer sentiment affecting trade-up behavior across a number of categories, including pet food. This is the pattern we have seen before and it is one we anticipated. We are encouraged by recent improvements in consumer sentiment, but we are also mindful that the macro remains volatile and are not relying on sustained improvements to deliver our updated guidance. Amidst that volatile consumer backdrop, our consumer franchise remains healthy with an increasing share of our growth coming from increases in the buying rate of our consumers. That is a reflection of both our focus on the MVPs who spend 5x more per year than the average household and account for 71% of our sales and the tentative consumer backdrop. We closely monitor the combination of household penetration growth and buying rate growth as a good proxy for our total net sales growth and know that the balance between the two can shift over time based on the economic backdrop and the strength of our efforts to win more MVPs. Over the last 52 weeks, that combination totaled 13%, with 7% coming from buying rate growth as we grew MVPs at a much higher rate than we grew overall households. Those strong results give us the confidence to continue investing behind the long-term opportunity while maintaining discipline in how we balance growth, profitability and returns on capital. We are seeing encouraging evidence that our business model is working across 3 key areas: omnichannel access, marketing and consumer engagement and manufacturing scale and expertise. First, omni-channel. We continue to expand access to Freshpet in places and channels where consumers increasingly want to shop. We believe we're uniquely positioned to compete in multiple channels rather than 1, and this will really unlock that MVP consumer. Our products are available in over 30,000 stores and approximately 25% of our U.S. and Canadian stores have multiple fridges. That footprint is increasingly valuable because our fridges do more than support in-store sales. They also serve as micro fulfillment points for omnichannel demand. Our multiple chiller expansion will enable holding capacity to support both online and in-store sales and the broadest possible assortment to be available nationally. In the second quarter, digital orders grew 41% and accounted for 16.7% of our total business. This was up from 16.1% in the first quarter and approximately 78% of those sales volume went through our extensive fridge network. Additionally, our growth in DTC and Pure Play e-commerce was particularly strong in the quarter. We are encouraged by the way retailers are responding to consumer demand for Freshpet food with total distribution points up 13% in the second quarter. We continue to see opportunities to add fridges to existing high-velocity locations expand selectively with new retail partners and broaden our presence in channels such as club. For example, we have 33 fridge islands in market today across select stores in mass, pet specialty and grocery. Further, we now expect to expand our presence to at least 700 rural lifestyle retail stores by the end of the year, and we are now taking third SKU in a set of club stores. We will continue experimenting with retail partners on what fridge configuration and merchandising work best, but at this point, do not expect a material expansion of our fridge islands 2026. Discussions for 2027 are underway now. Taken together, we believe that both retail-based TDP growth and e-commerce growth are a good representation of how we can continue to deliver strong omnichannel growth. We still have limited market share in the category, with only 4.3% in U.S. dog food and treats, according to Nielsen omnichannel data. However, we are the fastest-growing brand in dog food in dollars and the second most popular brand among new Gen Z and Millennial dog households. Second, our marketing and consumer engagement is becoming more effective as we sharpen both the message and audience definition. Our latest campaign, "better food for your better half" is designed to deepen the emotional connection with pet parents while reinforcing the difference fresh food can make. In terms of households, we are particularly encouraged by the strength we are seeing among millennials, e-commerce shoppers, club shoppers and our high-value households. These are areas where we made deliberate investments and the early results suggest those investments are beginning to pay off. We are disproportionately winning with Millennials and Gen Z compared to the category and/or the future pet parents that are driving the total addressable market growth. They also over-indexed the purchasing online and in the club channel, where we see a long runway for growth. We are building a stronger, more durable consumer franchise by increasing availability and improving relevance and deepening relationships with the pet parents who are most likely to participate in the long-term shift from conventional pet food to fresh. Third, our manufacturing scale, technical capability and expertise continue to be a meaningful competitive advantage, and that is evident in both the operating performance we have delivered and the noticeable difference between the products we produce and those that our competitors are able to produce. We now have 3 lines utilizing our new bag product technology 2 in Bethlehem and 1 in Ennis, and we are encouraged by the improvement in quality, throughput yield and unit economics, and what it could mean for innovation. Those lines are running well, and we expect to continue to refine our operating performance on those lines for the balance of the year, but as you would expect with any breakthrough new technology. You can see some evidence of that in a slightly higher quality costs in the quarter, which are due to disposals we incurred during the start-up phase. We have clear line of sight to the margin improvements that we can unlock with this technology. At fully optimized performance, we expect over 100 basis points of gross margin improvement on the entire business from the lines we have already installed. We expect approximately 25 basis points of improvement from the new technology in 2026 and more in 2027 as we continue to improve and optimize performance. These technology investments are not just operational improvements, they are strategic enablers. They support better product quality, greater capacity and new forms of innovation that can help us serve a broader range of consumer needs over time and attract new MVPs to the brand. When fully optimized, the new technology can produce more product per day than a conventional line, higher quality and more innovative products and do it with greater yields. We've already begun to launch new innovation from these lines in a cross-section of stores including HomeStyle Creations, Beef and Healthy Mixers. These new products are evidence of our new manufacturing capabilities, and we have a multiyear pipeline of other exciting new innovations, utilizing the new technology. Beyond the new bag technology, we're driving greater capital efficiency through our operational effectiveness program. We intend to, one, get more out of existing lines, primarily through OE improvements; two, get more out of existing sites, whether that be finding ways to optimize our network or add more lines or capabilities to our existing campuses; and three, develop and implement new technologies in order to improve returns on capital investments and we are pleased by the progress we've made to date. Given the strong operating performance of our existing lines, we have ample capacity to support projected demand this year and much of 2027. And when needed, the next new bag line will utilize our new technology. This approach gives us the flexibility to continue advancing our technology, incorporating further improvements that we believe can enhance capital efficiency, quality and cost before committing to additional new lines. We are very encouraged by the new opportunities for further improvement that this new technology enables and are committed to continue developing new generations of it so that we can further expand our leadership in manufacturing technology and drive innovation. These three proof points give us confidence that we are building on our advantaged position in the future pet food category, that we believe will be a $10 billion category. Pet food is still attractive with long-term tailwinds that we believe will continue to increase our total addressable market to above 10 million MVP households and 36 million total households as younger generations are increasingly interested in feeding high-quality food to every member of their family, including their pets. We continue to gain market share and expect to capture a large portion of the future growth of the Fresh Frozen category as it continues to become more mainstream. We are navigating a more volatile consumer environment today than we would like but we anticipated this, and we are doing so from a position of strength, with strong year-to-date growth, a more durable consumer franchise, expanding omnichannel access and a manufacturing platform that we believe is difficult to replicate. With that, I'll turn it over to John to walk through more details of our financial results. John OConnor: Thank you, Billy, and good morning, everyone. The second quarter results demonstrated strong sales and margin growth in the face of a more challenged economic backdrop. Net sales in the quarter were $305.6 million, up 15.5% year-over-year. Volume contributed 15.7% growth, partially offset by unfavorable price/mix of 0.2%. We again had broad-based consumption growth across channels and for Nielsen measured dollars, we saw a 12.9% growth in total U.S. pet retail plus with Costco. The delta between Nielsen growth of 12.9% and reported net sales of 15.5% was primarily driven by underreported or unmeasured e-commerce sales as well as an approximate 1 point benefit from the timing of shipments midyear in 2025 that provided a softer comp for Q2 this year and a tougher comp in Q3. In the second quarter, we delivered adjusted gross margin of 48.6%, a significant improvement from 46.9% in the prior year period. The 170 basis point increase was driven by strong leverage on planned expenses from higher sales and lower input costs, partially offset by disposal-related quality costs incurred in the commissioning of our new technology. We are incredibly proud of our improved operating performance, especially as it came while we were implementing our new technology. The strong performance comes as a result of our continued focus on operational improvements, and is a strong indicator of the progress we can make in this area. In the second quarter, we had limited benefit from the new bag technology, which remains in the start-up and optimization phase. As that technology scales and performance improves, we continue to expect it to become a more meaningful contributor to margin expansion over the next several quarters. Second quarter adjusted SG&A was 31.4% of net sales compared to 30.1% in the prior year period. This increase was primarily due to higher variable compensation and an increase in our logistics costs, which were 6.9% of net sales in the quarter compared to 5.7% a year ago. This increase in logistics was primarily due to higher fuel costs and capacity pressures in the trucking market. Media spending was 13.4% of net sales in the quarter, down from 15% in the prior year period. Second quarter net income was $19.5 million compared to net income of $16.4 million in the prior year period. The increase in net income was primarily due to contributions from higher sales favorable post-closing adjustments to the sale price of our equity investment in Ollie and decreased nonrecurring SG&A charges, partially offset by the increase in income tax expense related to the gain on the Ollie sale. Second quarter adjusted EBITDA was $52.2 million compared to $44.4 million a year ago, an increase of approximately 18%. This growth was primarily driven by higher sales and gross profit partially offset by higher adjusted SG&A expenses. Adjusted EBITDA margin was 17.1% in the second quarter compared to 16.8% in the prior year period. The year-over-year increase was primarily driven by improvements in adjusted gross margin, the cadence of media investments and was partially offset by higher variable compensation and logistics costs in the quarter. Operating cash flow in the quarter was $44.4 million, growth of 31% compared to the prior year period, while capital spending was $29.7 million, representing free cash flow of $14.7 million compared to $0.5 million a year ago. On May 21, we announced a $150 million share repurchase authorization and at the end of July, we had executed $86.5 million and repurchased 1.6 million shares while ending the quarter with cash on hand of $350.8 million. Now turning to our updated guidance for 2026. We were encouraged with our performance during a challenging macro backdrop in Q2. We now expect net sales growth of 10% to 12% compared to 8% to 11% previously. Our strong growth in the first half gives us confidence in our ability to navigate the challenging operating environment. However, we have a tougher comp in Q3 from the significant expansion in a large club customer and shipped in ordering around the fourth of July last year, which will impact our year-over-year growth by a little more than 2 points in the third quarter. We have also started to see total household penetration growth flow given increased inflationary pressure on consumers. To achieve the low end of our sales guidance, we assume the macro environment stays the same as it is today with little to no sequential sales or household penetration growth to meet or exceed our guidance, we would need to see greater impact from our advertising and outperformance of our omnichannel efforts and additional distribution gains. And from a category perspective, we would likely need to see stronger dog food category growth and/or resurgence in trade-up behaviors. At either end of our net sales range, we continue to expect to grow market share as we benefit from a generational shift from dry and wet food to fresh. We now expect adjusted EBITDA to be in the range of $210 million to $220 million, an increase of 7% to 12% year-over-year compared to $205 million to $215 million previously. Adjusted EBITDA dollars and margins are still expected to improve sequentially for the remainder of the year. Media as a percent of sales for the year is still expected to be roughly in line with 2025 at approximately 12.5% of net sales. We now expect further elevated logistics costs for the remainder of the year, primarily due to increased fuel costs and a pressured market for trucking capacity. Given where costs are today, this updated guidance assumes an additional $8 million versus our original expectations. As we said previously, 2026 is not necessarily indicative of the underlying operating leverage in our model given the significant investments in omnichannel capabilities we are annualizing from 2025 and the reset in variable compensation we previously outlined. Beyond 2026, we still expect adjusted EBITDA growth to exceed net sales growth with an expectation of continued gross margin expansion and a more consistent variable compensation expense. We now anticipate adjusted gross margin to improve by approximately 100 to 150 basis points this year at the midpoint of our net sales guidance compared to 50 to 100 basis points previously primarily driven by improved plant leverage and partially offset by mix. As we have raised our sales outlook for the year, we have decided to add additional staffing starting in the fourth quarter to support additional volumes. From an inflation standpoint, we are carefully watching for any higher costs to be sustained. To address any higher input and fuel costs, we are evaluating opportunities to offset through network efficiencies and product reformulations. Capital expenditures are still projected to be approximately $150 million in 2026. As Billy mentioned earlier, we do not expect to spend incremental capital on implementing new technology this year because our operating performance on our current base has exceeded expectations. Improved operating performance on the lines in place today and incremental staffing will also help defer future capital. Regarding our fiscal year 2027 targets, we are confident in our ability to deliver net sales growth well in excess of the U.S. dog food category growth. We are raising our adjusted gross margin goal from at least 48% to now at least 49% based on our significant gains in our operating performance this year and the small benefit from the new technology we expect in 2026. The upper bound for our adjusted gross margin in 2027 will be determined by sales and a number of factors, including commodity inflation, any pricing actions we take, formulation changes and other cost improvement activities. We also expect meaningful incremental contribution from running the new manufacturing technology at full rate, which we expect to reach during 2027. We are reiterating our 2027 adjusted EBITDA margin target of 20% to 22%. We expect leverage on G&A expenses and benefits from optimizing our logistics network. Our operating performance to date demonstrates our ability to achieve stronger adjusted gross margin and our ability to achieve our 2027 margin goals. To summarize, our ability to raise our outlook in this environment reinforces the resilience of our model and the bit of having multiple growth drivers across channels, households, buy rate and operating efficiency. We are pleased with our second quarter results and remain cautiously optimistic with our outlook for the remainder of the year given the volatile macro environment. Looking ahead, we see significant opportunities for continued growth and remain focused on leveraging our scale, expertise and innovation to reinforce our leadership position in fresh and frozen pet food. That concludes our review. We will now be glad to answer your questions. As a reminder, we ask that you please focus your questions on the quarter, guidance and the company's operations. Operator? Operator: [Operator Instructions] And our first question comes from Robert Moskow from TD Cowen. Robert Moskow: I guess my first question is about the commentary on household penetration slowing. Your chart shows that it still grew 5%. I think that's a year-to-date number. Billy, maybe you could just tell us like did I get this right that are you still expecting -- are you expecting household penetration to continue to grow at 5%? Or does the guidance assume that it kind of flattens out here and that the growth comes from the higher usage rates in the MVP? William Cyr: Yes, Rob, and Nicki might add to this. But let me just start with the comment that's in the prepared remarks was referring to a sequential growth rate in household penetration. You're right, it's a year-on-year, not year-to-date. It's a year-over-year on a 52-week basis, they were up 5%. And then buying rate is up 7%. And what we said in the commentary is that depending on the macro, you might see more buying rate than household penetration or more penetration than buying rate. It just depends on what the macro is doing. But the low end of our guidance makes the assumption that on a sequential basis, we're roughly in the place that we are today from a household penetration perspective, and anything beyond that moves us up in the guidance range. Nicki, if you want to add anything to that? Nicola Baty: Yes. Thanks, Billy. What I would say, Rob, is that we're very much focused on moving away a little bit from being a churn model to a much more durable consumer franchise. So you will start to see that rebalance between buy rate and household acquisition. But in saying that despite the macro environment, we actually were the fastest-growing brand in terms of household acquisition over the last quarter. So we still remain really pleased with the number of households that are coming in, and we're bringing in much higher quality households than what we've historically done. Robert Moskow: Okay. So if let's say, household penetration kind of stabilizes, how does that relate to like the 7% to 10% kind of algorithm that you've put out there? Like -- do you need -- can you still hit 7% to 10% through that higher usage rate? And I guess, maybe just a worst-case scenario where household penetration kind of stays the same. William Cyr: Yes, absolutely, Rob. I mean you saw we went up 7% on buy rate in the most recent data, and we'd expect to see that grow even higher if you saw the household penetration gains weren't as robust as they have been. But again, we feel very good about the model in total. We think the model is working. It does give us some optionality in terms of how much you get from penetration, how much you get from buy rate. And what we're seeing right now is that the market is giving us more by rate than penetration, but both of them are for us. Operator: Our next question comes from Peter Benedict from Baird. Peter Benedict: First, maybe, Billy, an update on the fridge island test. I know you've got 33 out there. It sounds like '27 would be more of the time we would see some expansion in those if that happens. Just an update on kind of the performance there and what the decision tree is for getting more of those in market. William Cyr: Yes, I'll let Nicki take that one. Nicola Baty: So we're really encouraged by the performance of the Island units. As we said all along, this is a trial. And what I would link it to is it's a much stronger signal of retailers now seeing us going from proving out that a category exists and there's demand for it to now leading a category. So we will continue to get learnings from those island units, but we're not banking only on island units being the unlock for future distribution and capacity. We're in many different discussions at the moment, surrounding multiples expansion bringing in new assortment, expanding capacity to make sure that we don't have out of stock in particular on our best-selling items. So I see island units as being a vehicle that will help enable a certain amount of growth that fits certain retail footprints, but I see broader opportunities than that for us to gain distribution. Peter Benedict: That's helpful. And then my follow-up would be just around the gap between sales growth and the scanner growth. I know it was a couple of hundred basis points here in the last quarter. Part of that was some timing stuff from a year ago. But can you expand on the unmeasured channel growth a little bit further? What's driving that? And how durable you think that is as you look over the balance of the year and longer term? William Cyr: Yes, Peter. We think that the gap between the scanner growth and the reported net sales is about 100 basis points of that was related to last year's soft quarter. The remainder is what we would put under unmeasured. And included in that unmeasured is everything from some of the e-commerce pure-play e-commerce guys who may not be fully represented to our DTC business as well as places like Tractor Supply, which are not included in that. So that's the composition of it. How much of that is going to be continued as we go on throughout the year. We're very bullish about our e-commerce business. We feel very good about it. We'd expect to see strong performance there. As you heard in our commentary, the business that we've got in the rural lifestyle retailer is doing well and going to be expanded. So that will do well. So we feel good about the unmeasured part, how big it will be in total remains to be seen, but we feel about it in the absolute. Operator: Our next question comes from Rupesh Parikh from Oppenheimer. Rupesh Parikh: So just on advertising. So to the extent that you see upside in the business on the EBITDA side for the balance of the year, would you consider ramping advertising to help sales growth for next year. So just curious how you guys are thinking about potential increases in investments. William Cyr: Let me frame it broadly and then Nicki will make some comments. We are always looking at opportunities to invest in the advertising, and there's obviously a lot of complications as we think about both capacity as well as the profitability that we want to deliver and the cash generation. But we feel like we're in a really good spot right now. We feel like we've got a strong balance sheet. We've got a lot of momentum. Our supply network is running really well. So if we see good opportunities to get good returns, we would certainly consider them. We're obviously going to take into account the time of the year and what the competitive environment looks like. but we would not hesitate to make investments that we thought we would get a good return on the investment. I don't know, Nicki, if you want to add anything to that? Nicola Baty: Only that we continue to be very pleased with the results that we see from media. It's the main growth driver we have. As we always say, we don't promote price promote our product. So media is the biggest demand generation activity. We've got -- we're very encouraged with how we're starting to work our advertising to continue to focus on broad awareness but also getting increasingly better about targeting those higher-value MVP households. And that's really coming through in the sales growth. It's coming through in the Millennial and Gen Z growth that we are seeing. And we will be moving forward with how we measure advertising to make sure we continue to get a very strong return on investment. Rupesh Parikh: Great. And then my follow-up question, just on the FY '27 targets. So as we look at the adjusted EBITDA targets of 20% to 22%, what type of sales growth would you need to achieve the low end of that range? William Cyr: John, do you want to take that? John OConnor: Sure. Yes. Thanks, Rupesh. So consistent with what we said before, if we were in the kind of high single-digit type range in terms of sales growth. We think that positions us among some other factors to be in the lower end of that range. And as we got into kind of low to mid-double-digit kind of teens range, that would help position us to get to the high end. But as I outlined in my commentary, there's a number of other factors that we're working on just relying on sales growth to get us as far into that range as possible. Operator: And our next question comes from Tom Palmer from JPMorgan. Thomas Palmer: Maybe just first to follow up on the gross margin and EBITDA outlook for next year. You took it up by 100 basis points gross margin. How much of that is related to the new lines versus other items? I know they're kind of still ramping as we move into next year and the ultimate impact is kind of 100 basis points. So I'm just trying to figure out like if the 100 is entirely the new lines versus maybe some other considerations. John OConnor: Yes. Thanks, Tom. It's actually the inverse of that. It's very little of the new technology that is contributing to our updated view on adjusted gross margin for 2027. And look at our performance year-to-date, we've delivered 150 basis points of adjusted gross margin improvement, and that is entirely from our operating performance with limited to no benefit so far from the new technology. So as we get through the rest of the year, we expect about 25 basis points for 2026 and that's the amount that we rolled forward into 2027. But remember, the way we've structured guidance for 2027 at this point is that as a floor for our gross margin next year at greater than 49%. So Continued improvement in our operating performance will tell us how much further above that 49% we can go. And then in addition, when we get to that full realization of that annualized 100 basis points of margin improvement from the new technology that will also help push us even higher above that 49% floor. Thomas Palmer: Great. Then next, just on the input cost environment, there was a comment in the prepared remarks about addressing higher input costs and fuel costs, mainly network efficiencies and product reformulations. I think later in the call, there was reference to potential pricing. I guess how are you thinking about kind of the decision-making process here around pricing? And when does maybe the input cost environment matter enough to really consider that more seriously. William Cyr: Yes. Let me take a shot at that and John and Nicki might have something to add to it. But I would just start with have to recall that our business model is different than most other CPG companies where we don't do promotion. So as a result, we don't have the ability to move up and down on pricing as readily as others. So when do we make a move to take a higher price it sticks, and it becomes, in essence, permanent. So we want to see that the cost structure has permanently moved upward. As you can all see that oil prices have gone all over the place up and down in the last, call it, 6 months. And so we want to get a good handle on where our logistics costs are, for example, or other input costs are, for example, before we make a decision that would be fairly permanent. But we are not afraid to take pricing if we think we need to because we believe we have pricing power. We think we're in a position where our products are high-value products that consumers enjoy. And if we need to take pricing because there's broad scale inflation, we would not hesitate to do that. I don't know if you guys want to add anything to that? John OConnor: No. Nicola Baty: No. Operator: Our next question comes from Jon Andersen from William Blair. Jon Andersen: I had 2 questions. Allow them both in right now. One is just related to competition. You've talked about some of the main competitors. I'm kind of curious what you're seeing, if anything, new from customers or channels as it relates to some of these offerings like freeze-dried, air-dried products or Kibbles Plus, if that's something you see as viable formats that are also winning share against traditional Kibble? And then the second question I had is there have been quite a few leadership changes at the company for the past couple of years. And I'm just trying to get a sense for where you kind of feel things are in terms of the team and that process and anything we should be kind of thinking about going forward? William Cyr: Yes. Let me make a comment on the competition and Nicki might add to it, and then I'll touch on the talent as well. Actually, let me start with the talent. As you can imagine, we're a growing company. So we're constantly adding new talent. One of the benefits of the added scale that we've created that we can get a higher and higher level of expertise and specialization in areas where we may not have had it before. And we've done quite a bit of that, and we'd expect to continue to do that. the skills that are required to run the company of a scale that we are different than the skills that were required to run the company that we were 5 or 10 years ago. And we're taking advantage of the opportunities to add talent where we need to. It's going to be an evolution. You're going to see it. As we're going to continue to add talent as you go, and you should expect to see that. On the competition question, let me frame it and he can talk about -- more about the specifics, but we feel really good about what the results in the market are telling us about the strength of our business. We've seen a wide range of people trying to compete with us with a variety of frozen forms, drive forms. They've tried to do it in different channels like D2C. They're now trying to do it through the vet channel, trying to go through mainstream channels. And despite all those different efforts, we still end up being 1 of the larger players in this space, and we don't think people are able to touch the quality or the cost structure that we've got and leaves us in a very strong position. We think we have preferred products, the ability to produce preferred products. We built an incredibly strong brand around it. We have an omnichannel capability that allows us to reach channels that others cannot reach. so people are much more singularly focused on channels. And our cost structure, we believe, continues to get increasingly more competitive and is in a strong advantage position today. So no matter who all these innovations are, where they're coming from, we feel good about our ability in pet over the long haul. But you should also know, going back to the talent question, we're going to continue to invest in more talent to extend that advantage as much as we possibly can. I don't know, Nicki, do you want to add anything to the competitive environment? Nicola Baty: Sure. Thanks, Billy. What I would say, John, is that as we continue to see consumers move away from more traditional food. We continue to see that correlate with less and less distribution and space available in traditional retail -- and we're starting to see that we're really becoming a bit more the beneficiary of that. As you can see from the distribution point gains that we're making and why we strongly believe that our big opportunity is much more around expansion in existing retail formats. Operator: And the next question comes from Eric Serotta from Morgan Stanley. Eric Serotta: I wanted to come back to the competition side back in early June. You should have some helpful data in terms of your performance and velocity at a large club retailer since some competition came in. Any update you can provide sort of for the past 8 weeks or so? And then maybe it's a little bit early, but any initial read or forward thoughts in terms of competition in a specialty pet channel and just broader competition in grocery mass from Blue Buffalo, which, I guess, we're coming on 9 months now. William Cyr: Yes, Nicki will answer that. Nicola Baty: Great. Thanks, Eric. So look, I think in terms of I take a step back and think a little bit about where our runway is for growth. We're only 4.3% market share at the moment within the category. So despite maybe competition coming into fresh and frozen, we still believe there's an incredibly big opportunity ahead for us. In terms of what we're seeing, as we just posted in our Q2 results, we've had very, very strong sales performance despite a number of competitive entries coming in. And we remain very convinced and encouraged by the model that we're following at the moment. So we've not really seen much by way of impact to Freshpet's growth trajectory. We've not seen anything by way of holding back on distribution gains with competition coming in. And as I said before, we're seeing more and more retailers start to reimagine what the category looks like and opening up space for some of these new formats. So as competition comes into our space, we do see it as more of a validation of really where the long-term consumer demand is going. William Cyr: Let me just add, in the specific in your question, Eric, I think in June, we updated the market and said that our business in that club retailer is up more than 40% over the last however many weeks we were quoting them. it continues to be above 40%. It's -- we're continuing at that rate, and we have an over 80% share of the fresh market in that retailer. So we feel really good about the position that we've gotten and how well insulated we are. Eric Serotta: Great. And in terms of additional or sort of velocities on some of the new distribution that you've added, can you come back to sort of your expectations for velocities of the rural lifestyle retailer versus the overall business? William Cyr: Nicki, you'll take that. Nicola Baty: Sure. Thanks, Eric. It takes time, I think, to really build awareness that we're present now in a number of those stores, and that's what we've been working hard on. We're very encouraged with the results that we're seeing week on week with the growth coming through. As obviously, is our partner in this space, which is why they've chosen to accelerate really the rollout into more stores. We're learning together the number of pieces within the assortment that do particularly well with the shopper profile in that environment. And we do see it as a nice incremental business for us, serving our MVP shopper in the new destination. Operator: The next question comes from Michael Lavery from Piper Sandler. Michael Lavery: You called out really strong e-commerce growth or digital purchases. And just was curious if you could give a sense of how incremental that is versus shifts from brick-and-mortar and how much you can develop that channel to reach new households and consumers as well? William Cyr: Nicki, do you want to take that? Nicola Baty: Sure. I think one of the parts for us that we know is very incremental is when we look at buy rate and we look at the average household consumption over the year, we see a marked step change if that pet parent is buying online versus buying in the in-store environment. So we know that when that purchase is happening repeatedly online, we're building a more durable franchise. So that's the first part that we know is very incremental overall to our business. Now as we've talked a little bit about 78% of our e-commerce business is coming out of our existing stretch network. So there is part of that business clearly where the shopper is choosing to either purchase in store or purchase online, less of that is incremental in terms of new households coming through. But as Billy mentioned earlier, there's also part of our growth that is coming through new opportunities, whether it's our direct-to-consumer business, whether it's other online retailers, and within this, we're making very big incremental gains. So we believe in our omnichannel strategy, more access overall, especially through online purchasing is absolutely delivering more spend and ultimately more sales for Freshpet. William Cyr: I would just add to that is we're seeing the biggest gains or biggest benefits for us when we are opening distribution in outlets or channels that cater towards larger purchases, meaning club retailers where the consumer is inherently buying a larger quantity, whether it's somebody who buys on a subscription from our D2C business. but places where people buy in larger quantities. And so the act of acquiring a consumer turns into much higher revenue source. That's a big gain for us, and we're getting a lot of return from that. Michael Lavery: Okay. Great. That's helpful. And just on the new technology, I want to follow up and make sure I understand how you characterized it. I know you laid out some of the benefits and quantified those in a way that you hadn't before. But it sounds like even just the throughput and efficiency is running ahead of what you expected? And did I catch it correctly that's so much so the case that you're holding off, putting more upgrades in or more new lines just because you don't need them yet. How do you think about just whether or not the pull forward, roll it out more and kind of how that unfolds. William Cyr: It's a little bit different than that. What's happening is that our existing operations are performing so well and the throughput that we're getting, and you can see that in the gross margin that we posted in the quarter is so strong that the need for incremental capacity, meaning converting more lines or adding new lines isn't as great as we at one point thought it might be. And other piece, the other factor, and we referred to this in the prepared remarks, is that we continue to innovate on this technology and find ways to make it even better. Things where you might automate a part of the process or places where you might be able to drive a little bit higher yield or higher efficiency. And so it's to our advantage to get as much out of the existing lines as we can, and we're doing that. And that allows us to push back when we actually have to lock in on the specific execution of the new technology that we would invest in because once you buy it, you own it for the next 15 years, and we'd sort of like to know that we're investing in the version that is the best possible version at the time that we need it. So that's really the balancing act that we're going through. The existing the technology that we did start up, the line that we did start up are doing well. We have the usual start-up bumps that you might see. You saw that in the quality costs that we reported in the quarter where we had a little bit more disposals than we normally would. But from where we sit right now, we're very bullish on this technology and what its potential is. And frankly, we think it's going to be a phenomenal platform for us going forward. I would add one final thought is what's underappreciated about it, I think the amount of value we're going to get on new product innovation from this technology. The things that we can produce that our existing lines cannot produce using this new technology are pretty dramatic. And you're just seeing a little glimpse of that in some of the stuff that we have in the market today, but there's a lot more that can bump from that. Operator: Our next question comes from Todd Brooks from Benchmark, StoneX. Looks like they dropped off. So our next question is from Marc Torrente from Wells Fargo. Marc Torrente: First, just building on the earlier question on club. There's increased competition in the channel, but at the same time, dedicated fridge space is expanding and you're testing new SKUs. How should we think about continued runway within club as you start to lap the launch from last year? William Cyr: Nicki, you'll take that? Nicola Baty: Yes, sure. So I think -- we think a little bit about Club in terms of the total channel, not just one specific retailer, but -- it's a good indication maybe of where the future is to come. So we have very limited assortment today across club retailers, and we still believe there is more opportunity for innovation to go into those outlets. And we believe there's more opportunities with multiple expansion in other clubs as well that we're in. So when we model out where the runway is, we still see a very big trajectory ahead for us over the coming years. Marc Torrente: Okay. And then for the 2027 EBITDA targets, you increased the gross margin target, held the EBITDA margin target. Can you help us bridge some of the expected SG&A leverage over the next year to hope you get there? And are you embedding any incremental investment in your longer-term outlook? John OConnor: Sure, Marc. So one, just a reminder, right? So the adjusted gross margin goal that we have out there for next year in '27 is a floor, right? And there was -- at the 48%, there was implied a lot of work to do in other parts of the P&L to get to that 22%. We're increasingly confident in the contribution to our ability to get into that range that's coming from adjusted gross margin. And at this stage, we were prepared to raise that floor in terms of where we see gross margin next year. In terms of SG&A, as we said, more broadly, media, Nicki talked about earlier, is the primary way in which we generate demand. We're obviously very keen to maintain that level of investment so that we can drive our sales growth, which is the most important for us. to build our franchise over time. We do expect to get some optimization of our logistics costs from where we sit today, which is higher than we had expected it to be for the year. And then as I mentioned earlier, a few times this year, we made some investments in 2025 to build the types of capabilities that are helping fuel our growth, particularly in e-commerce, in 2026, and we're annualizing those gains here in '26. We don't foresee investments of that nature to operate our business in 2027. And then on top of that, there are a number of items we're looking at from just a general cost improvement and productivity improvement lens that we think will help reduce some of the costs that it takes to operate the business today because there are opportunities here to be more efficient than we are in 2026. Operator: [Operator Instructions] And our next question comes from Yasmine Deswandhy from Bank of America. Yasmine Deswandhy: I just had a quick clarifying question off of Tom's question earlier. Just on the gross margin improvement that we're expecting from these lines, you said it's 25 bps for this year. And then is it an incremental 25 bps next year? Or is it just a 25 bp sets in the base? And I guess, if you could comment on the pace to achieving the full 100 bps, that would be great as well. John OConnor: Yes. Sure. So I'll remind folks again, right, we do not have a specific number or -- nor have we bound the upper end of the gross margin range for next year. So what we're looking at today is 150 basis points year-to-date improvement in adjusted gross margin that we have clearly delivered we have a tough comp in Q4. We had very strong adjusted gross margin in 2025, but we still see net delivering 100 to 150 basis points of adjusted gross margin improvement in '26 with only 25 basis points of that coming from the new technology. That operating performance, separate from the new technology has given us the confidence to raise the floor of our adjusted gross margin expectations for the 100 basis points that we did today. The 25 basis points that we're achieving year-to-date -- or sorry, full year on the new technology helps us be there for sure, but we also expect further gains from operating performance and the potential to reach some of that 100 basis points of annualized gains from the new technology at some point in 2027. We're still ramping up out of the optimization phase, as Billy mentioned, the lines are running well. It's still a little early to pinpoint exactly when we get to that full rate and start achieving that annualized 100 basis point rate. Yasmine Deswandhy: Okay. Great. And then at the fully optimized 100 basis points of gross margin improvement based on the 3 lines that you guys have installed, I'm pretty sure the 3 lines were 2 light versions and 1 full. And so I'm not sure if it's a little bit too early, but should we assume that the gross margin improvement that you're seeing from the full upgrade is double that of the light lines? And going forward, with the with the look of these upgrades look similar to that ratio of 2:1 of where it's double light upgrades versus the full upgrades? William Cyr: Yes. It's a little bit more complicated than that because the benefits that we get from the 2 technologies, while they may be reported as similar things, in terms of yield throughput and whatnot. The reality is they are very different depending on what products that we're producing on those lines. And from a simplistic perspective, going forward, what you should expect is we will use the full version of the technology more for innovation for new products that will probably have embedded in them a much higher quality of product and visual appeal probably a higher price that goes with that and probably very good margins that come with it. The existing lines, which would be converted using the light version technology, more likely be our existing products in our lineup. And so the return there would be a financial return, meaning higher throughput that you might get. So it's going to be a little bit of a mixed bag going forward. we aren't going to just add lines and add capacity when we don't have the need for it. We're going to add them as we need them. So the ratio between the new lines and the light lines will vary over time depending on how many incremental lines we need to add. Operator: The next question comes from Todd Brooks from The Benchmark Company. Todd Brooks: Sorry for the hang up earlier. Just following up on that last comment, Billy, on the new bag technology and was it unlocks. As you're looking out longer term, are they kind of game changing product capabilities that we should be thinking about from a almost category redefinition standpoint? Or how people think about Freshpet bagged product? Or is it that improved quality, better visual appeal. Just I'm just trying to figure out how big the moat is that you see it coming out of this new production technology. William Cyr: Yes, I would frame it this way is the light version of technology allows us some product inhibition capability, but much more will be focused on converting our existing doing it more efficiently and making them higher quality, better visual appeal. The full version of this technology has tremendous innovation capabilities, and it will take us to a level of performance in terms of the aesthetic the ingredients that we can use, the types of ingredients that we can use, the aroma that we can deliver, the visual appeal, all those things will be a level well beyond what we can currently produce and what we believe anybody else can produce. And so that should open up levels of premiumness, ranges of ingredients and product forms. For example, you'll see in some of our materials, we talk about using -- having a beef version of one of the products that we currently only can do a chicken. That kind of thing is possible as new technology. More to be determined as we go forward. But suffice it to say, that is a major unlock for us from a product flexibility perspective. Todd Brooks: Okay. Great. And then the other question I want to ask a little bit more strategic, but the continued category leadership, the first cut showing from a growth rate standpoint, when you're talking to customers, what are you hearing about how they want to grow in the fresh category? Do they want to commit to the proven leader in this type of environment? Or are they more willing to hold on new entrants and form factors? Or do they want to take the current brand winner and say, okay, this is the way to address growth in the category with a proven partner. William Cyr: Nicki, you will take that. Nicola Baty: So look, we're not fully inside the head of what retailers are going to do in terms of the balance of where we sit versus maybe some competition. The one thing I think that really stands in our favor is the impact that we have for a retailer on the most loyal consumers that come into their store. So typically, the MVP consumer that we bring in is one that is very, very valuable to that retailer. They're already shopping a very high propensity of fresh foods. They're already going in on a much higher frequency basis. So we believe we're very well placed. We have a really strong proven track record. We have the broadest assortment with the deepest tiering of pricing that there is. So we believe that we provide really the best all-around solution that is out there today. But clearly, different retailers are going to look to absolutely double down and expand on this category. Our focus is less about competition in the same segment as our focus is much more on the runway that we have ahead of us given we're only just over 4 percentage points of share of market today. William Cyr: I would just add to that, that if you look historically, retailers have tried everything from go all in on us to the alternative strategy of try to enable other competition or private label in this space. And the results have shown at least to date, is that the guy who bets on Freshpet tends to get a better return than the person who bets on alternative competitors or on doing private label in this space. And our goal going forward is to make it so that our products and our manufacturing capability is so much better than what they can get from anybody else that the guy who chooses to bet on our business ultimately is the winner because our products are that much better and they're at affordable prices. So if we can continue to invest in our capability -- our manufacturing capability and deliver that superior consumer experience, it will make it increasingly difficult for someone to compete with us. That's our goal. Operator: That concludes our question-and-answer session. I'd like to turn the conference back over to management for any closing remarks. William Cyr: Thank you very much for your interest. I'll end with a quote from an unknown source. Home is where the dog runs to greet you, to which I would add, don't feel so special though, if your dog is like mine, she's waiting to show you where the fridge is. Thank you very much. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Before you buy stock in Freshpet, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Freshpet wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $411,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,335,252!* Now, it’s worth noting Stock Advisor’s total average return is 965% — a market-crushing outperformance compared to 215% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 12, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Freshpet. The Motley Fool has a disclosure policy. Freshpet (FRPT) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Get insights on thousands of stocks from the global community of over 7 million individual investors at Simply Wall St. Freshpet (FRPT) is back on investor radar after its 5 August 2026 earnings release, which featured updated guidance, detailed results for the second quarter, and a completed share repurchase tranche. See our latest analysis for Freshpet. Freshpet’s recent earnings beat and raised 2026 sales guidance appear to have reset expectations, with a 30 day share price return of 24.79% and a 90 day share price return of 34.79%. This contrasts with a 5 year total shareholder return that is down 49.13%. If Freshpet’s move has you thinking about where else momentum and quality might be lining up, it could be a good moment to scan for other companies using our 19 top founder-led companies Freshpet now has stronger reported results, higher sales guidance, and a sharp recent share price move. The business looks healthier. The question is whether the stock price already reflects that in full. Freshpet’s most followed valuation narrative puts fair value at $81.94 compared with the latest close at $66.91, which sets up a clear gap investors are trying to explain. Read the complete narrative. Want to see why this margin story supports a higher fair value for Freshpet? The narrative hinges on specific revenue growth, earnings compression, and a richer future earnings multiple that are all baked into that $81.94 estimate. Result: Fair Value of $81.94 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, Freshpet’s narrative still depends on pet owners trading up to premium food and on category growth holding up, while higher operating costs and capital needs remain a key watchpoint. Find out about the key risks to this Freshpet narrative. If the mixed sentiment around Freshpet has you weighing the upside against the concerns, use this as a prompt to act quickly and test the story against the data yourself. One helpful way to frame that view is to look at both sides side by side using the 3 key rewards and 2 important warning signs. If Freshpet has sharpened your focus, do not stop here. Broaden your watchlist with other stocks that match your style before the next move passes you. Target resilient income by scanning for companies that look like potential yield workhorses using our 8 dividend fortresses Spot potential value opportunities early by checking the 52 high quality undervalued stocks before other investors catch on. Prioritise stability and fundamentals by reviewing stocks highlighted in the solid balance sheet and fundamentals stocks screener (48 results) This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include FRPT. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Performance beat was driven by the strongest growth rate in over a year and the highest adjusted gross margin since Q1 2020, despite a challenging macro backdrop of high gas prices and weak consumer sentiment. Management attributes growth resilience to a shift in the consumer franchise toward 'MVP' households, who spend 5x more than average and now account for 71% of total sales. The company is successfully transitioning from a 'churn model' to a durable franchise, with 7% of the 13% total growth coming from increased buying rates rather than just new household acquisition. Manufacturing scale is cited as a primary competitive moat, with new bag technology already delivering improved throughput and unit economics that competitors cannot currently emulate. Omnichannel expansion is serving as a strategic unlock, with 30,000 retail locations acting as micro-fulfillment points for a digital business that grew 41% in the quarter. Strategic positioning focuses on winning Gen Z and Millennial pet parents, who over-index in high-growth channels like e-commerce and club stores. Updated 2026 guidance assumes a cautious macro environment with little to no sequential household penetration growth, relying instead on sustained buying rates from core consumers. Management expects a 2-point growth headwind in Q3 2026 due to difficult year-over-year comparisons from a large club customer expansion in the prior period. The 2027 adjusted gross margin floor was raised to 49% based on strong operational performance and lower input costs, with the anticipated 100 basis point benefit from new bag technology expected to eventually push margins above that floor. Capital expenditure strategy has pivoted to prioritize getting more out of existing lines through operational effectiveness (OE) improvements, deferring the need for new line investments. Future innovation will utilize 'full version' technology to produce premium products with superior aesthetics and ingredients that are currently impossible to manufacture on legacy lines. Logistics costs are expected to remain elevated by approximately $8 million for the remainder of the year due to fuel volatility and trucking capacity pressures. Quality costs were slightly higher in Q2 due to disposal-related expenses incurred during the commissioning and start-up phase of new manufacturing technology. The company executed $86.5 million in share repurchases, signaling management's confidence in the long-term valuation despite macro volatility. Management flagged a potential for future pricing actions if input and fuel costs sustain current inflationary levels, though they prefer to offset costs through network efficiencies first. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management clarified that the slowdown is sequential and expected given the macro environment, but the model remains healthy due to a 7% increase in buy rates. They emphasized that the current focus is on 'quality households' (MVPs) rather than raw penetration numbers to build a more durable franchise. Freshpet maintains an 80% share of the fresh market in a major club retailer despite new entrants, with sales in that channel up over 40%. Management views new competitive entries as validation of the category rather than a threat to their distribution gains. Existing lines are performing so well that the immediate need for incremental capacity has decreased, allowing the company to refine the next generation of technology before committing capital. This approach preserves capital efficiency while ensuring future lines incorporate the latest automation and yield improvements. Digital orders are highly incremental to the 'buy rate' because online shoppers show a marked step-change in annual consumption compared to in-store shoppers. Approximately 78% of digital volume is fulfilled through the existing physical fridge network, maximizing the return on retail infrastructure.

Interested in Freshpet, Inc.? Here are five stocks we like better. Freshpet delivered strong second-quarter results: Net sales rose 15.5% to $305.6 million, adjusted EBITDA increased 18% to $52.2 million, and net income reached $19.5 million. Adjusted gross margin expanded to 48.6%. The company raised its 2026 outlook, now expecting 10%–12% sales growth and $210 million–$220 million in adjusted EBITDA, while projecting a 100–150 basis-point improvement in adjusted gross margin. Growth was supported by expanding distribution, a 41% increase in digital orders and stronger household penetration, though higher fuel and logistics costs and challenging third-quarter comparisons remain risks. Freshpet also raised its 2027 gross-margin goal to at least 49% and maintained its 20%–22% adjusted EBITDA margin target. Freshpet's Impressive Q2 Sparks Optimism Despite Market Fears Freshpet (NASDAQ:FRPT) reported second-quarter 2026 results that exceeded its annual guidance range, prompting the fresh pet food company to raise its sales and adjusted EBITDA outlook despite what management described as a volatile consumer environment. Net sales rose 15.5% year over year to $305.6 million, driven by 15.7% volume growth and partly offset by a 0.2% unfavorable price-mix effect. Adjusted EBITDA increased about 18% to $52.2 million, while adjusted EBITDA margin improved to 17.1% from 16.8% a year earlier. Net income totaled $19.5 million, compared with $16.4 million in the prior-year period. → SpaceX’s First Earnings Report Could Decide Whether Shorts or Bulls Have Control Freshpet Surges 10%: Fresh Highs to Come for This Pet Stock CEO Billy Cyr said the company delivered its strongest growth rate in more than a year and its highest adjusted gross margin since the first quarter of 2020. He said Freshpet’s performance came amid higher gas prices and weaker consumer sentiment, which have affected consumers’ willingness to trade up in pet food and other categories. Freshpet raised its 2026 net sales growth forecast to 10% to 12%, from a prior range of 8% to 11%. It also lifted projected adjusted EBITDA to $210 million to $220 million, representing year-over-year growth of 7% to 12%, compared with its earlier outlook of $205 million to $215 million. → 3 Drone Stocks That Should Soar After the Summer Slump Here’s The One Pet Stock That’s Not in the Doghouse CFO John O’Connor said the company expects a more difficult comparison in the third quarter due to a significant expansion at a large club customer and a shift in ordering around the July 4 holiday in 2025. Those factors are expected to reduce reported year-over-year growth by more than two percentage points in the third quarter. Management said the low end of its sales outlook assumes that current macroeconomic conditions remain unchanged, with little to no sequential sales or household-penetration growth. Reaching or exceeding the high end would require stronger advertising results, further omnichannel gains, additional distribution, stronger dog food category growth or a return of trade-up behavior. → The Bitcoin Comeback May Already Be Underway—2 ETFs for Exposure The company now expects adjusted gross margin to improve by approximately 100 to 150 basis points in 2026 at the midpoint of its sales guidance, up from its previous expectation of 50 to 100 basis points. Freshpet maintained its capital expenditure forecast of about $150 million for the year. Second-quarter adjusted gross margin increased 170 basis points to 48.6%, from 46.9% a year earlier. O’Connor attributed the improvement primarily to stronger leverage on plant expenses from higher sales and lower input costs. The gain was partly offset by disposal-related quality costs associated with commissioning the company’s new manufacturing technology. Adjusted selling, general and administrative expense rose to 31.4% of net sales from 30.1% in the prior-year quarter. The increase reflected higher variable compensation and higher logistics costs. Logistics represented 6.9% of sales, up from 5.7%, as fuel costs rose and trucking capacity remained constrained. Media spending declined to 13.4% of net sales from 15% a year earlier. Management said media remains Freshpet’s main source of demand generation and that it would consider additional advertising investment if the company sees attractive returns. Operating cash flow rose 31% to $44.4 million, while capital spending was $29.7 million, resulting in free cash flow of $14.7 million, compared with $0.5 million a year earlier. Freshpet ended the quarter with $350.8 million in cash. Under its $150 million share repurchase authorization announced in May, the company had repurchased $86.5 million of stock, or 1.6 million shares, as of the end of July. Freshpet said its products were available in more than 30,000 stores, with about 25% of its U.S. and Canadian locations featuring multiple refrigerators. Distribution points increased 13% in the second quarter. Digital orders grew 41% and represented 16.7% of total sales, up from 16.1% in the first quarter. About 78% of e-commerce sales volume moved through the company’s refrigerator network, which management described as serving both in-store shoppers and online fulfillment needs. The company said it expects to be in at least 700 rural lifestyle retail stores by year-end and is testing a third SKU in select club stores. Freshpet has 33 “Fridge Islands” in selected mass, pet specialty and grocery locations, though management said it does not expect a material expansion of those units in 2026. Discussions for 2027 are underway. Cyr said household penetration rose 5% over the last 52 weeks, while buying rate increased 7%. Freshpet is increasingly focused on higher-value “MVP” households, which management said spend five times more annually than the average household and account for 71% of sales. COO Nicki Baty said the company is transitioning from a more trial-driven model toward a “more durable consumer franchise,” with higher-quality household acquisition and stronger repeat buying. Freshpet has three production lines using its new bag technology, including two in Bethlehem and one in Ennis. Management said the technology is improving product quality, throughput, yield and unit economics, although the lines remain in a startup and optimization phase. The company expects the installed lines, once fully optimized, to provide more than 100 basis points of gross-margin improvement across the business. Freshpet expects approximately 25 basis points of benefit from the technology in 2026, with a greater contribution anticipated in 2027. Strong performance from existing production lines has reduced the immediate need for additional capacity spending, management said. Cyr added that the technology could enable new products with different ingredients, forms and visual appeal. Freshpet has already introduced Homestyle Creations Beef and Healthy Mixers from the new lines. For 2027, Freshpet raised its adjusted gross-margin goal to at least 49%, from at least 48%, while reiterating its adjusted EBITDA margin target of 20% to 22%. O’Connor said high-single-digit sales growth would position the company toward the lower end of that EBITDA margin range, while low- to mid-double-digit growth would support the higher end, alongside gains from manufacturing, logistics and broader cost improvements. Freshpet Inc (NASDAQ: FRPT) is a leading pet food company specializing in fresh, refrigerated meals and treats for dogs and cats. The company's products are formulated with carefully selected, natural ingredients and are designed to offer a higher level of nutrition and freshness than traditional dry or canned pet foods. Freshpet's offerings include refrigerated rolls, pâtés and snacks, all of which are sold through the refrigerated section of grocery, mass-market and pet specialty stores. Freshpet's product portfolio is built around the concept of fresh, minimally processed recipes that do not require preservatives or artificial colors. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Freshpet Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Freshpet (FRPT) came out with quarterly earnings of $0.33 per share, beating the Zacks Consensus Estimate of $0.2 per share. This compares to earnings of $0.33 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +65.00%. A quarter ago, it was expected that this seller of refrigerated fresh pet food would post earnings of $0.06 per share when it actually produced earnings of $0.04, delivering a surprise of -33.33%. Over the last four quarters, the company has surpassed consensus EPS estimates three times. Freshpet, which belongs to the Zacks Food - Miscellaneous industry, posted revenues of $305.59 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 4.35%. This compares to year-ago revenues of $264.69 million. The company has topped consensus revenue estimates three times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Freshpet shares have added about 2.4% since the beginning of the year versus the S&P 500's gain of 13%. While Freshpet has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Freshpet was unfavorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.38 on $307.62 million in revenues for the coming quarter and $1.73 on $1.21 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Food - Miscellaneous is currently in the bottom 16% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, Burcon NutraScience Corp (BRCNF), has yet to report results for the quarter ended June 2026. This company is expected to post quarterly loss of $0.05 per share in its upcoming report, which represents a year-over-year change of +75%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Burcon NutraScience Corp's revenues are expected to be $1.34 million, up 436% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Freshpet, Inc. (FRPT) : Free Stock Analysis Report Burcon NutraScience Corp (BRCNF) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Release Date: August 05, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Freshpet Inc (NASDAQ:FRPT) delivered its strongest growth rate in over a year, with Q2 net sales up 15.5% year-over-year, exceeding guidance. Adjusted gross margin reached 48.6%, the highest since Q1 2020, driven by strong plant leverage and lower input costs. The company raised its 2026 sales and adjusted EBITDA guidance, reflecting confidence in its business model despite a challenging macro environment. Digital orders grew 41% in Q2, with e-commerce now representing 16.7% of total business, supported by its fridge network as micro-fulfillment points. New bag technology is performing well, with expectations of over 100 basis points of gross margin improvement once fully optimized, and it enables innovative product launches. Freshpet Inc (NASDAQ:FRPT) continues to gain market share, being the fastest-growing brand in dog food and winning with millennial and Gen Z pet parents. The company is expanding distribution, including a planned rollout to 700 rural lifestyle retail stores and testing new SKUs in club stores. Strong free cash flow of $14.7 million in Q2, up from $0.5 million a year ago, and a $150 million share repurchase program underway. Household penetration growth is slowing due to increased inflationary pressure on consumers, which could impact future sales growth. Logistics costs rose to 6.9% of net sales, up from 5.7% a year ago, due to higher fuel costs and trucking capacity pressures, with an additional $8 million in costs expected for the year. The company faces a tougher comparable in Q3 due to a large club customer's shipment timing last year, which will impact year-over-year growth by more than 2 points. Unfavorable price mix of 0.2% in Q2, indicating some trade-down behavior among consumers. Startup costs for new technology led to higher quality costs from disposals, impacting gross margin in the quarter. Adjusted SG&A increased to 31.4% of net sales from 30.1%, driven by higher variable compensation and logistics costs. The macro environment remains volatile, with higher gas prices and weaker consumer sentiment affecting trade-up behavior, and the company is not relying on sustained improvements. The company is cautious about taking pricing actions due to its no-promotion model, which limits flexibility in responding to input cost inflation. Warning! GuruFocus has detected 5 Warning Sign with FRPT. Is FRPT fairly valued? Test your thesis with our free DCF calculator. Q: Can you elaborate on the commentary regarding slowing household penetration growth? Does the guidance assume penetration flattens out, with growth coming from higher usage rates and MVPs? A: Billy Ser (CEO): The comment refers to a sequential growth rate in household penetration. On a 52-week basis, penetration is up 5% and buying rate is up 7%. The low end of our guidance assumes that on a sequential basis, we are roughly in the same place regarding household penetration, and anything beyond that moves us up in the guidance range. Nikki Beatty (COO) added that despite the macro environment, Freshpet was the fastest-growing brand in terms of household acquisition over the last quarter, bringing in higher-quality households than historically. Q: Can you provide an update on the fridge island tests? What is the decision tree for getting more of these in the market? A: Nikki Beatty (COO): We are really encouraged by the performance of the island units. It's a much stronger signal of retailers seeing us leading the category. We will continue to get learnings from these units, but we are not banking only on island units as the unlock for future distribution. We are in many discussions regarding multiple expansion, new assortment, and expanding capacity to avoid out-of-stocks. Island units are a vehicle to enable growth in certain retail footprints, but there are other opportunities to gain distribution. Q: Can you expand on the gap between sales growth and scanner growth? What is driving the unmeasured channel growth and how durable is it? A: John O'Connor (CFO): The gap between scanner growth and reported net sales is about 100 basis points related to last year's soft quarter. The remainder is under unmeasured, which includes e-commerce players not fully represented, our D2C business, and places like Tractor Supply. We are very bullish about our e-commerce business and expect strong performance there. The rural lifestyle retailer business is doing well and will be expanded, so we feel good about the unmeasured part in absolute terms. Q: With the upside in the business on the EBITDA side, would you consider ramping advertising to help sales growth for next year? A: Billy Ser (CEO): We are always looking at opportunities to invest in advertising, considering capacity and profitability. We have a strong balance sheet and momentum, and our supply network is running well. If we see good opportunities for good returns, we would consider them. Nikki Beatty (COO) added that media is the main growth driver, and they are very encouraged with results, focusing on broad awareness and targeting higher-value MVP households, which is coming through in sales and millennial/Gen Z growth. Q: As we look at the FY27 targets of 20-22% adjusted EBITDA margin, what type of sales growth would you need to achieve the low end of that range? A: John O'Connor (CFO): Consistent with what we said before, if we were in the high single-digit type range in terms of sales growth, that positions us, among other factors, to be in the lower end of that range. As we get into low to mid double-digit (10s range), that would help position us to get to the high end. There are a number of other factors we are working on besides relying on sales growth to get us as far into that range as possible. Q: You raised the gross margin target by 100 basis points for 2027. How much of that is related to the new lines versus other items? A: John O'Connor (CFO): It's actually the inverse of that; very little of the new technology is contributing to our updated view on adjusted gross margin for 2027. Year-to-date, we've delivered 150 basis points of adjusted gross margin improvement, entirely from operating performance with limited benefit from the new technology. We expect about 25 basis points for 2026, which we rolled forward into 2027. The 49% is a floor for next year, and continued improvement in operating performance and full realization of the annualized 100 basis points from new technology will push us higher. Q: How are you thinking about the decision-making process around pricing given the input cost environment? A: Billy Ser (CEO): Our business model is different from most CPG companies as we don't do promotion, so we don't have the ability to move up and down on pricing as readily. Any price increase sticks and becomes permanent. We want to see that the cost structure has permanently moved upward before making a decision. We are not afraid to take pricing if needed because we believe we have pricing power and our products are high-value. If there is broad-scale inflation, we would not hesitate to take pricing. Q: What are you seeing from competitors with offerings like freeze-dried, air-dried, or kibble-plus products? Also, where do things stand with leadership changes? A: Billy Ser (CEO): On talent, we are constantly adding new talent as a growing company, and the skills required to run a company of our scale are different than 5 or 10 years ago. On competition, we feel good about what market results tell us. Despite various efforts from competitors in different forms and channels, we remain one of the larger players. We don't think people can touch our quality or cost structure. Nikki Beatty (COO) added that as consumers move away from kibble and wet food, we are becoming a beneficiary, as seen in distribution point gains. Q: Can you provide an update on performance and velocity at a large club retailer since competition came in, and any initial read on competition in the pet channel from Blue Buffalo? A: Nikki Beatty (COO): We are only 4.3% market share, so despite competition coming into fresh and frozen, there is a big opportunity ahead. We posted strong sales performance despite entries coming in, and we've not seen much impact to our growth trajectory or distribution gains. Competition coming into our space is more of a validation of where long-term consumer demand is going. Billy Ser (CEO) added that in the specific club retailer, our business is up more than 40% and continues at that rate, with over 80% share of the fresh market in that retailer. Q: How incremental is the strong e-commerce growth versus shifts from brick-and-mortar, and how much can that channel reach new households? A: Nikki Beatty (COO): We know it's very incremental when we look at buy rate; there For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Wall Street expects a year-over-year decline in earnings on higher revenues when Freshpet (FRPT) reports results for the quarter ended June 2026. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates. The earnings report, which is expected to be released on August 5, might help the stock move higher if these key numbers are better than expectations. On the other hand, if they miss, the stock may move lower. While management's discussion of business conditions on the earnings call will mostly determine the sustainability of the immediate price change and future earnings expectations, it's worth having a handicapping insight into the odds of a positive EPS surprise. This seller of refrigerated fresh pet food is expected to post quarterly earnings of $0.20 per share in its upcoming report, which represents a year-over-year change of -39.4%. Revenues are expected to be $292.7 million, up 10.6% from the year-ago quarter. The consensus EPS estimate for the quarter has been revised 1.35% higher over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period. Investors should keep in mind that an aggregate change may not always reflect the direction of estimate revisions by each of the covering analysts. Price, Consensus and EPS Surprise Estimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. Our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction) -- has this insight at its core. The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier. Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only. A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP. Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell). For Freshpet, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, suggesting that analysts have recently become bullish on the company's earnings prospects. This has resulted in an Earnings ESP of +7.69%. On the other hand, the stock currently carries a Zacks Rank of #4. So, this combination makes it difficult to conclusively predict that Freshpet will beat the consensus EPS estimate. While calculating estimates for a company's future earnings, analysts often consider to what extent it has been able to match past consensus estimates. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number. For the last reported quarter, it was expected that Freshpet would post earnings of $0.06 per share when it actually produced earnings of $0.04, delivering a surprise of -33.33%. Over the last four quarters, the company has beaten consensus EPS estimates three times. An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss. That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported. Freshpet doesn't appear a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release. BellRing Brands (BRBR), another stock in the Zacks Food - Miscellaneous industry, is expected to report earnings per share of $0.36 for the quarter ended June 2026. This estimate points to a year-over-year change of -34.6%. Revenues for the quarter are expected to be $556.04 million, up 1.6% from the year-ago quarter. Over the last 30 days, the consensus EPS estimate for BellRing Brands has been revised 2.3% down to the current level. Nevertheless, the company now has an Earnings ESP of +6.45%, reflecting a higher Most Accurate Estimate. This Earnings ESP, combined with its Zacks Rank #3 (Hold), suggests that BellRing Brands will most likely beat the consensus EPS estimate. Over the last four quarters, the company surpassed consensus EPS estimates two times. Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Freshpet, Inc. (FRPT) : Free Stock Analysis Report BellRing Brands Inc. (BRBR) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Tractor Supply Company? Here are five stocks we like better. Tractor Supply missed Q2 expectations as weak May sales, higher fuel costs and drought pressure hurt discretionary and big-ticket categories, leading to a 1.5% decline in comparable sales even as net sales rose about 2% to $4.5 billion. The company cut its fiscal 2026 outlook and withdrew its long-term financial framework, now guiding for 2.5% to 3.5% net sales growth, flat to down 1% comps, and adjusted EPS of $1.90 to $2.00. Tractor Supply is reallocating capital toward core growth areas, including closing about 75 underperforming Petsense stores, expanding Freshpet and VIP Petcare initiatives, and investing in remodels, relocations and Final Mile delivery. Contrarian Alert: 5 Downgraded Stocks That May Reward Long-Term Investors Tractor Supply (NASDAQ:TSCO) said its second-quarter results came in below expectations as unusually weak May trends offset positive comparable sales in April and June, prompting the rural lifestyle retailer to lower its fiscal 2026 outlook, withdraw its long-term financial framework and announce the closure of about 75 underperforming Petsense stores. Chief Executive Officer Hal Lawton said the company’s “underlying business remains healthy,” but that the quarter was pressured by a combination of higher fuel prices during the spring selling season and persistent drought in key southeastern markets. Those factors weighed on discretionary and project-oriented categories, including big-ticket items and hardlines spring goods. → Could Truth API Become Trump Media’s First Meaningful Revenue Driver? 3 Retail Winners Using Cash Flow to Stay Ahead “Performance in our big ticket categories and hard lines spring goods during May alone reduced our Q2 comp sales by approximately two percentage points,” Lawton said, adding that needs-based businesses remained resilient. Net sales increased approximately 2% to $4.5 billion, driven by new store growth and partly offset by lower comparable store sales. Comparable sales declined approximately 1.5%, reflecting lower transaction counts, modest inflation and softer discretionary demand, particularly in big-ticket categories. → 3 Photonics Companies Making Quantum Tech Possible Tractor Supply’s 10% Culling: A Bruise, Not a Break Lawton said consumable, usable and edible categories remained positive during the quarter, while big-ticket sales declined in the mid-single digits, led by softness in spring and summer categories in May. Digital sales posted double-digit growth, supported by deliver-from-store performance, higher traffic and improved conversion. Chief Financial Officer Kurt Barton said reported gross profit increased 2.6% to $1.68 billion, with gross margin expanding 11 basis points to 37.1%. On an adjusted basis, gross profit rose 3.0% to $1.69 billion, and adjusted gross margin expanded 24 basis points to 37.2% of net sales. Barton said disciplined product cost management and tariff refunds more than offset higher freight expense and investments in the company’s price-value position. → AeroVironment’s Stock Is Down, But Drone Demand Is Taking Off Reported SG&A expense increased 14.4% to $1.22 billion, including a $65.8 million charge tied to the Petsense business and $9.5 million in acquisition costs associated with VIP Petcare. Excluding those items, adjusted SG&A rose 7.3% and deleveraged by approximately 118 basis points as a percentage of sales, largely because of lower comparable sales. Adjusted operating income was $548.3 million, and adjusted diluted earnings per share were $0.81. Tractor Supply updated its fiscal 2026 guidance to reflect year-to-date performance and expectations for the remainder of the year. The company now expects: Net sales growth of approximately 2.5% to 3.5%. Comparable store sales in the range of negative 1% to flat. Adjusted operating margin of 8.5% to 8.8%. Adjusted diluted EPS of $1.90 to $2.00. Barton said the company’s base case assumes modest sequential improvement in comparable sales in the second half as recent actions take hold and comparisons ease. However, he said guidance also reflects the possibility that current pressures persist. For the second half, Barton said gross margin is expected to be below the prior year, with greater pressure in the third quarter than the fourth. Freight costs, including fuel, are expected to remain elevated, while tariff refunds are expected to provide less benefit than they did in the second quarter. The company also plans to open its 11th distribution center early in the fourth quarter, with start-up costs beginning in the third quarter and continuing into the fourth. Lawton said pet performance remains below where the company wants it to be, though trends improved sequentially from the first quarter and Tractor Supply continues to hold share. He said category resets are complete, including more localized assortments, greater exposure to premium nutrition and a stronger exclusive brand portfolio. The company’s Freshpet rollout was in approximately 250 stores at the end of the second quarter, and Tractor Supply remains on track to expand it to at least 700 stores by year-end. During the question-and-answer portion of the call, Chief Merchant Seth Estep said more than 40% of Freshpet buyers were either new pet food buyers at Tractor Supply or reactivated buyers. Tractor Supply also completed its acquisition of VIP Petcare during the quarter. Lawton said the acquisition adds relationships with about 1 million pets annually through a network of 2,500 veterinarians across 39 states and helps connect veterinary services, prescriptions and products across physical and digital channels. The company is also moving to improve its value proposition through its “unbeatable price” campaign, clearer everyday value messaging and targeted promotions. Estep said customer survey results showed a roughly 180-basis-point year-over-year improvement in customers’ price-value perception of Tractor Supply, with sequential improvement in June and stronger results in July. Tractor Supply said it will close approximately 75 underperforming Petsense stores following a review of the business. Lawton said in response to an analyst question that those locations have negative four-wall cash flow, and that closing them will allow the company to redeploy capital into the core business. Lawton said the remaining Petsense business is expected to be “strong” and profitable, while complementing the broader pet ecosystem that includes Allivet and VIP Petcare. He also said Petsense is not directly connected to the core Tractor Supply business and that the closures should not affect the company’s pet re-acceleration efforts in Tractor Supply stores. The company also said it plans to open approximately 85 to 90 new stores in 2027, compared with a previous expectation of 100 new stores. Lawton said capital will be redeployed toward Project Fusion remodels, store relocations and Final Mile delivery. Lawton described Project Fusion as one of the company’s most important initiatives to improve the existing store base, citing localization and expanded pet wash as elements contributing to performance. He also said Final Mile delivery remains a strong growth opportunity, with Tractor Supply completing as many Final Mile deliveries in the first half of 2026 as it did in all of 2025. Tractor Supply withdrew the long-term financial framework it introduced at its December 2024 Investor Day. Barton said the prior targets reflected the operating environment and assumptions at that time, but several underlying conditions have changed, including softer farm and ranch markets and pressure across key end markets. “We no longer believe it is appropriate to anchor investors to the long-term financial algorithm we previously outlined,” Barton said. The company plans to provide an updated long-term framework with its fourth-quarter 2026 earnings announcement. Despite the revised outlook, Barton said Tractor Supply remains in a strong financial position, with healthy cash flow, a strong balance sheet and financial flexibility. He said share repurchase activity is expected to be toward the high end of the company’s original guidance range of $375 million to $450 million, and that Tractor Supply remains committed to returning capital to shareholders through a growing dividend. Tractor Supply Company (NASDAQ: TSCO) is a specialty retailer focused on products for the home, farm, ranch and outdoors. The company operates a network of physical retail locations complemented by an e-commerce platform, offering a one-stop source of supplies and equipment for customers with rural and suburban lifestyles. Its merchandise assortment targets a range of needs, from animal and livestock care to maintenance, outdoor power equipment, and seasonal products. Product categories include animal feed and supplies, pet products, fencing and fencing supplies, equine equipment, lawn and garden tools, work clothing and footwear, and small agricultural and outdoor power equipment. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Tractor Supply Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.