Sow Good Reports 88 Percent Sales Drop

Sow Good (SOWG -14.76%), a freeze-dried snack manufacturer based in Texas, released its second-quarter results on August 14, 2025. The most important headline from the report was a steep decline in GAAP revenue and profitability, continuing the trend from recent quarters. Revenue (GAAP) was $1.9 million and diluted earnings per share (GAAP) totaled $(0.36). There were no analyst estimates for the quarter, but management’s previous suggestion that results would be “marginally better” than Q1 2025 was unmet. Instead, performance worsened, driven by increased competition and labor challenges. Overall, the results highlight a period of acute pressure with signs of operational stabilization, but underline significant financial risks as the company seeks to recover.

About Sow Good

Sow Good specializes in producing freeze-dried snacks, such as candy, using proprietary freeze-drying technology. The company operates out of Irving, Texas, and delivers products through retail, e-commerce, and distributor channels. Its facility is SQF II-certified, a food safety and quality standard. Sow Good’s main focus is on delivering innovative snack products that stand out in the market for their taste and texture.

In the past year, the company has positioned itself around key capabilities: technology-driven manufacturing, rapid product innovation, premium brand positioning, and strategic retail expansion. Its recent efforts have included diversifying product lines, growing its distribution network (now in nearly 3,000 retail locations), and upgrading packaging to boost shelf appeal. Key factors for Sow Good’s success include maintaining brand recognition, scaling production efficiently, and adapting quickly to retail and consumer shifts.

Quarter in Review: Financial, Product, and Market Developments

GAAP revenue experienced a significant decline, down nearly 88% from the prior-year period. Net income (GAAP) shifted from a $3.3 million profit in Q2 2024 to a $4.2 million loss in Q2 2025. Gross margin (GAAP) declined from 58% in Q2 2024 to (7%) in Q2 2025, illustrating the challenges Sow Good faced in covering its basic operating costs.

The company attributed these drops to two main factors: increased competition and production hurdles. Large consumer packaged goods (CPG) companies entered the freeze-dried candy space, crowding store shelves and impacting Sow Good’s retail presence. Management also noted “temporary labor shortages” that disrupted production schedules, leading to delayed shipments and reduced recognized revenue.

Despite these setbacks, Sow Good highlighted several operational improvements. The company reported that operational stability was returning as labor pressures eased and store demand began to pick up. During the quarter and into July, it successfully completed Halloween shipments and expanded its product assortment at key accounts such as Five Below (discount retail) and Albertsons (supermarket). Other consistent performers included Ace Hardware and Orgill (hardware distributors), where recurring orders supported baseline sales.

Product innovation remained a focus. There is early excitement surrounding freeze-dried yogurt snacks and caramel offerings. International expansion also advanced, with a launch in the United Arab Emirates (UAE) reportedly exceeding internal expectations and setting the groundwork for further global sales. The company’s use of in-house proprietary freeze-drying technology, after phasing out overseas production, continues to position its snacks as differentiated in terms of quality and taste, trying to set them apart from competitors and low-cost imports.

Financial Position, One-Time Impacts, and Key Metrics

The company’s financial position weakened further in the period. Cash reserves (GAAP) dropped to $1.0 million as of June 30, 2025, compared to $1.6 million at the end of the prior quarter and $3.7 million six months earlier. Operating cash flow (GAAP) was sharply negative for the six months ended June 30, 2025 and there were no injections of new capital in the quarter through debt or equity. Management made moves to preserve cash by converting parts of executive pay to stock and negotiating extended note maturities, but the rapid depletion of cash highlights a serious short-term liquidity concern.

Inventory (GAAP) was $20.8 million as of June 30, 2025, far above GAAP revenue of $4.3 million for the trailing six months. This indicates that a significant amount of product will need to be sold or discounted to convert stock into cash. Management acknowledged “plenty of inventory” needs to be worked through and that converting it to sales is essential for liquidity. No material one-time write-downs were reported, but inventory buildup continues to represent a risk. No dividend was announced or paid during the period. SOWG does not currently pay a dividend.

Looking Forward: Management Outlook and Investor Focus

Management maintained that the second half of FY2025 could see broad improvement, but did not issue quantified guidance for revenue, margin, or profit. The company emphasized that retail demand is improving as stability returns, noting, “With a stable supply chain and strengthening retail demand, we believe we’re well-positioned to reaccelerate growth.” However, there was no clear commitment to specific financial targets.

With no formal guidance provided, investors will likely focus on key areas in the coming quarters: the ability to stabilize or grow sales, improvements in cash flow, and progress on working down inventory. Other priorities include updates on retail partnerships, international sales performance, and the impact of new product categories such as yogurt snacks and jerky. Access to outside capital, if needed, will also be closely watched, given the low cash reserves of $1.0 million (GAAP) as of June 30, 2025, and the ongoing need to support operations and product launches.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.