Farmer Bros (FARM) Q2 2026 Earnings Call Highlights
Farmer Bros Co (NASDAQ:FARM) showcased resilience in its recent earnings call, revealing a solid gross margin maintained above 35% with expectations for this trend to continue throughout fiscal 2026.
The company noted year-over-year improvements in selling, general, and administrative costs, alongside favorable changes in tariff rates from key coffee-sourcing nations. Additionally, recent declines in both Arabica and Robusta commodity markets are anticipated to bolster gross margins starting in the fourth quarter of fiscal 2026.
Positive Developments
Farmer Bros is leveraging its core coffee capabilities to expand its white label customer portfolio, while a dedicated strategic committee remains actively engaged in exploring opportunities to maximize shareholder value.
Challenges Faced
However, the quarter wasn't without its difficulties. Adjusted EBITDA was slightly positive at approximately $0.5 million, which marks a significant drop from $5.9 million in the same quarter last year. Net sales decreased by 1%, totaling $88.9 million compared to $90 million in the previous year.
Furthermore, the volume of coffee pounds sold decreased by just under 3%, contributing to a decline in gross margin of 680 basis points from the prior year, primarily influenced by green coffee inflation. The company reported a net loss of $4.9 million in the second quarter, a stark contrast to the $200,000 net income recorded in the same period of fiscal '25.
Q & A Highlights
During the Q&A session, Vance Fisher, Chief Financial Officer, elaborated on the significant impact of green coffee inflation on financial results, leading to the decline in adjusted EBITDA. He explained that higher costs flowing through the cost of goods sold also resulted in the noted drop in gross margins.
On the topic of net sales performance, Fisher confirmed the 1% drop, attributing it to a strategic decision to delay further pricing actions despite escalating green coffee costs.
John Moore, President and CEO, discussed ongoing measures to navigate the current economic challenges, including unlocking the potential of their direct store delivery (DSD) network to enhance product penetration and grow their customer base.
Looking ahead, Moore indicated expectations for improved gross margins starting in the fourth quarter of fiscal 2026, thanks to recent commodity market trends and reduced tariff rates. He also provided an update on the strategic committee's initiatives to enhance shareholder value, reassuring stakeholders that the committee remains actively engaged in assessing potential opportunities.
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