What happened
Shares of Freshpet (FRPT +0.41%) fell on Tuesday, following the release of the premium pet food leader's first-quarter financial results.
As of 1:55 p.m. ET today, Freshpet's stock was down more than 10%.
NASDAQ: FRPT
Key Data Points
So what
Net sales jumped 41.5% year over year to $132.2 million. The gains were driven by new products and price hikes, as well as the company's newly improved production and distribution capabilities.
"The investments we made in our workforce and buffer capacity enabled us to overcome the challenges from omicron, industrywide supply chain disruptions, and our ERP [enterprise resource planning] conversion -- and still deliver the strongest quarterly net sales growth rate since Freshpet went public in 2014," CEO Billy Cyr said.
Image source: Getty Images.
However, those investments are weighing on profit margins. Its adjusted gross margin declined to 41.9% from 46.7% in the year-ago quarter, as the company boosted employee wages at its factories and expanded capacity. Higher ingredient costs and other inflationary pressures also took a toll.
All told, Freshpet's net loss widened to $17.5 million from $10.9 million in the prior-year period.
Now what
Management repeated its full-year 2022 forecast for net sales of more than $575 million and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of over $55 million. That would represent year-over-year growth of roughly 35% and 28%, respectively.
Freshpet also said that it would realign its manufacturing operations to create efficiencies, strengthen its ability to innovate, and support its long-term sales growth. As part of that plan, the company announced its intentions to build a new state-of-the-art innovation center in Pennsylvania.
To help finance these initiatives, Freshpet plans to raise $350 million via a stock sale. Investors' apprehension about the potentially dilutive effects of the offering likely contributed to the stock's poor performance on Tuesday.
