Freshpet (NASDAQ:FRPT) reported third-quarter 2026 net sales of $317.8 million, up 10% from a year earlier, as volume growth across channels and improved manufacturing performance supported higher profitability. The company raised its full-year sales-growth outlook to 12% to 13% and lifted the low end of its adjusted EBITDA guidance.
Chief Executive Officer Billy Cyr said the company’s results reflected the durability of its business model despite a challenging consumer environment and greater competition in fresh pet food. He pointed to product quality, manufacturing capabilities, a broad range of product formats and price points, expanding retail distribution, and e-commerce growth as key advantages.
“We are now projecting to grow 12%-13% this year in the face of the most significant amount of new competition we have ever had and a tough economic backdrop, all while increasing margins and cash flow,” Cyr said.
Sales Growth Driven by Volume, Distribution and Digital
The company said third-quarter sales growth was entirely volume-driven. Nielsen-measured dollar sales growth across total U.S. pet retail and Costco was 12.7%, while unmeasured channels contributed an estimated additional one to two percentage points of growth.
Chief Financial Officer John O’Connor said the difference between measured consumption growth and reported sales growth was largely attributable to a major club customer’s expansion and associated changes in ordering around the July 4 holiday, which affected third-quarter reported growth by more than two percentage points. He also cited a major customer that increased sales faster than inventory, creating an estimated one- to two-point headwind when comparing consumption with net sales.
Freshpet increased its store count 5% to more than 31,000 stores, while total distribution points rose 14%, supported by larger and multiple-fridge placements. About 25% of its stores now have more than one fridge, and management expects that proportion to rise over time.
Digital sales rose 35% year over year and represented 16.9% of total business during the quarter. The company said approximately 82% of digital orders were fulfilled through its retail fridge network, including omni-retail and last-mile delivery services, with the remaining volume coming from pure-play online retailers and direct-to-consumer sales.
Cyr said Freshpet continues to have room for online expansion, noting that more than 35% of dog food category sales occur online, compared with Freshpet’s 16.9% digital mix. President and Chief Operating Officer Nicki Baty said the company sees subscription capabilities as an important opportunity, particularly for its most loyal consumers.
Margins Improve as Manufacturing Performance Advances
Freshpet posted adjusted gross margin of 50.0% in the third quarter, compared with 46.0% in the prior-year period. The result was the company’s highest adjusted gross margin in more than seven years, according to Cyr.
O’Connor said the 400-basis-point year-over-year improvement reflected leverage on plant expenses, lower quality costs and reduced input costs as a percentage of revenue, along with some benefit from new bag technology. The company now expects the technology to contribute about 35 basis points of improvement in 2026, up from an earlier estimate of roughly 25 basis points.
Management expects to capture a substantial portion of the technology’s annualized 100-basis-point gross-margin benefit in 2027. The technology has been used in the Fresh From the Kitchen line, where Cyr said consumer feedback and volume trends improved following the conversion.
Freshpet expects adjusted gross margin to improve by approximately 150 basis points in 2026 at the midpoint of its sales outlook. However, the company expects margins to step down sequentially in the fourth quarter as it schedules downtime for maintenance, reliability and productivity investments and adds staffing for the fast-growing Homestyle Creations line.
Adjusted selling, general and administrative expenses were 29.6% of sales, compared with 27.1% a year earlier. Logistics costs rose to 7.1% of sales from 5.5%, primarily due to higher fuel costs and trucking-market capacity pressures. O’Connor said roughly one-third of the logistics increase year to date was related to fuel, while about two-thirds was related to linehaul costs.
Profit, Cash Flow and Capital Spending
Third-quarter net income was $27.9 million, down from $101.7 million a year earlier. Freshpet said the decline primarily reflected a $77.9 million deferred tax benefit recognized in the prior-year period following the release of most of a valuation allowance, as well as higher SG&A expenses.
Adjusted EBITDA rose about 18% to $64.5 million, and adjusted EBITDA margin expanded to 20.3% from 18.9% a year earlier. Operating cash flow was $60.8 million, while capital expenditures totaled $22.9 million, resulting in free cash flow of $37.8 million.
As of the end of September, Freshpet had repurchased 1.8 million shares for $102.3 million under its $150 million repurchase authorization and held $345.9 million in cash.
Outlook Raised; Selective 2027 Pricing Planned
Freshpet raised its 2026 net sales growth forecast to 12% to 13%, from 10% to 12% previously. It now expects adjusted EBITDA of $215 million to $220 million, compared with prior guidance of $210 million to $220 million.
- Media spending is expected to remain about 12.5% of net sales for 2026.
- Capital expenditures are now projected at $125 million to $150 million, down from approximately $150 million.
- The company expects logistics costs to remain elevated, with an estimated $10 million to $12 million more in costs than initially expected for the year.
- Freshpet reiterated its target of at least 49% adjusted gross margin in 2027.
Management said inflationary pressure is emerging in beef, other ingredients and packaging. Freshpet plans selective price increases in 2027 for certain products where it sees structural cost inflation or strong product performance. Baty said the company intends to take a “surgical approach” to pricing in an effort to preserve volume growth.
The company also said it plans to transition from a third-party distribution center in Allentown, Pennsylvania, to a leased, dedicated distribution center in Bethlehem, Pennsylvania, in early 2027. Cyr said the facility will expand capacity, place distribution closer to Freshpet’s Bethlehem kitchen and support longer-term efficiency and automation.
About Freshpet (NASDAQ:FRPT)
Freshpet, Inc (NASDAQ: FRPT) is a pet food company that develops, manufactures and markets refrigerated, fresh food and treats for dogs and cats. Its products are made with animal proteins, vegetables and other ingredients and are designed to be stored in the refrigerator rather than on a conventional shelf.
The company sells its products under the Freshpet brand and related product lines, including Freshpet Select and Vital. Its offerings include refrigerated meals, rolls, recipes and treats formulated for different pet sizes, ages and dietary needs.
