Vital Farms NASDAQ: VITL executives said the company’s first-quarter results and early second-quarter scanner data fell short of expectations as retail price gaps widened beyond levels the brand could sustain, prompting a reset of 2026 guidance and a series of cost and cash management actions.
Executive Chairperson, President and Chief Executive Officer Russell Diez-Canseco said the company believes it is moving quickly to adapt by reducing price gaps, addressing its cost structure and managing cash. He emphasized that management views the changes as “a reset of our expectations for 2026, but not a reset of our ambitions.”
“To be clear, we believe our brand will support a price premium, just not as much as we’ve seen over the past few months,” Diez-Canseco said.
First-Quarter Revenue Rose, But Profitability Fell
Chief Financial Officer Thilo Wrede said net revenue for the first quarter of 2026 was $187.2 million, up 15.4% from the prior-year period. The increase was driven by $34.7 million of volume-related growth, partially offset by a $9.7 million price mix decline.
Wrede said the price mix decline was primarily due to a higher-than-anticipated contribution from the breaker channel as the company managed an oversupply of eggs. Breaker prices were as low as $0.10 per dozen during the quarter.
Gross profit was $53 million, or 28.3% of net revenue, compared with $62.5 million, or 38.5% of net revenue, a year earlier. Wrede attributed the margin decline mainly to unfavorable volume mix from breaker sales, elevated costs tied to supply management actions and increased promotional activity. Excess breaker sales reduced gross profit by about $4.9 million.
SG&A expenses rose to $44.2 million, or 23.6% of net revenue, from $31.9 million, or 19.7% of net revenue, a year earlier. Wrede said the increase reflected a planned doubling of marketing expenses from a low base, along with higher headcount and employee-related costs. Shipping and distribution expenses increased to $11 million from $8.8 million.
The company reported a net loss of $1.5 million, or $0.03 per diluted share, compared with net income of $16.9 million, or $0.37 per diluted share, in the prior-year period. Adjusted EBITDA fell to $5 million, or 2.7% of net revenue, from $27.5 million, or 16.9% of net revenue.
Pricing Gaps Weighed on New Household Trial
Diez-Canseco said Vital Farms had expected commodity egg prices to fall as avian influenza pressures eased and flocks were rebuilt. The company entered the year planning to increase promotional investment to levels appropriate for a better-supplied market, but he said first-quarter promotions were not enough as pricing across the category fell more sharply than fundamentals suggested.
The CEO said the wider gaps hurt the company’s ability to attract new households, even as existing customers remained loyal. In 2024 and 2025, more than 55% of Vital Farms consumers were households that had not previously bought the brand. That figure fell to 50% in the first quarter of 2026.
At the same time, Diez-Canseco said retained households continued to buy the brand, with units per retained household 2% above the average for the prior eight quarters.
“We haven’t given consumers a reason to trade down so much as we haven’t given them enough of a reason to trade up to us,” he said during the question-and-answer session.
Management said it is now narrowing price gaps in a targeted way by geography and retailer. Diez-Canseco cited an example at a top 10 customer where Vital Farms reduced its price gap versus competing premium-branded outdoor access eggs from about 35% to about 25%, after which volumes increased 18% over two weeks compared with the prior four weeks.
Guidance Cut as Company Manages Oversupply
Vital Farms lowered its full-year 2026 outlook. The company now expects net sales of $775 million to $800 million and adjusted EBITDA of $0 to $10 million. The adjusted EBITDA outlook includes an estimated $32 million negative impact from supply management costs.
Wrede said the guidance assumes outdoor access egg retail prices and breaker prices remain at current levels through year-end. He said if outdoor access retail prices erode further and the company must invest more to reduce price gaps, revenue and profit would be reduced further.
The company expects high volume to breaker and other low- or no-revenue channels in the second quarter as it manages excess supply. Wrede said the second quarter is expected to produce negative adjusted EBITDA, with mid- to high-teens millions of dollars on the negative side, including roughly low-$20 million of supply management costs.
Management expects an inflection beginning in the third quarter as pricing actions show results, supply management costs slow and retail distribution gains take effect. Wrede said the fourth quarter should improve sequentially due to holiday seasonality, stronger consumer demand, the full benefit of distribution gains and cost structure adjustments.
The company expects gross margin to return to 30% by late in the fourth quarter and said it is targeting a return to double-digit underlying adjusted EBITDA margin in 2027, assuming no change from the new price levels being targeted.
Cost Actions Include Labor Cuts, CapEx Reduction and Butter Exit
Diez-Canseco outlined several actions aimed at improving economics and preserving cash:
- Working with some farmer partners on voluntary contract amendments to cease production from existing flocks or delay placement of future flocks.
- Adjusting staffing at Egg Central Station to better match labor costs with processing volume, which the company expects to eliminate about $4 million of costs for the year.
- Targeting broader cost of goods sold reductions, including feed costs, which totaled roughly $125 million last year.
- Eliminating roles representing about 10% of remote or non-Egg Central Station headcount.
- Reducing projected 2026 capital expenditures by about $75 million by slowing construction of the planned Vital Crossroads facility in Seymour, Indiana, and pausing construction of additional accelerator farms.
- Exiting the butter business, with shipments ending toward the end of the year.
Diez-Canseco said the butter exit is expected to free up $25 million in cash this year, reduce 2026 sales by an estimated $14 million and improve gross margin by 150 to 200 basis points starting in 2027. He said the complexity of an international supply chain and an uncertain global trade backdrop contributed to the decision.
Wrede said capital expenditures are now expected to be $70 million to $75 million. He added that the company still expects negative free cash flow this year because of oversupply management costs, but currently anticipates funding the needs with its existing cash and investment position and its credit facility.
As of March 29, 2026, Vital Farms had $51.4 million in cash equivalents and marketable securities and no debt outstanding. Wrede also said the company repurchased more than 1 million shares for $20 million during the quarter, with $80 million remaining authorized under its repurchase program.
Distribution Gains Remain a Bright Spot
Despite the pricing and supply challenges, executives said distribution momentum remains strong. Diez-Canseco said Vital Farms secured at least a 50% TDP increase with a top three customer, negotiated direct distribution instead of using a distributor with a top 10 customer and was assigned the category captain role for eggs with a banner of another top three customer.
The company expects to add 20 to 30 TDPs, or 15% to 25%, over the course of 2026. Diez-Canseco said Vital Farms expects its strongest annual TDP gain since going public, as measured in Circana MULO+ for shell eggs.
Diez-Canseco also said the outdoor access egg category continues to expand, growing from 8% of category volume in 2023 to 15% so far in 2026. Year to date, he said outdoor access eggs have grown 32% in volume versus the prior year, compared with 4% growth for mainstream eggs.
In response to an analyst question about recent social media criticism of the brand, Diez-Canseco said survey work and continued buying by existing households suggest the impact has been limited. He said the company’s response is to continue emphasizing transparency and trust.
“We are what we say,” Diez-Canseco said. “We do what we say, we say what we do.”
About Vital Farms NASDAQ: VITL
Vital Farms, traded on the NASDAQ under the symbol VITL, is a U.S.-based food company specializing in pasture-raised egg and dairy products. The company partners with a network of family farms across the United States to produce eggs, butter and related items under a certified humane, pasture-centric farming model. Vital Farms' supply chain emphasizes animal welfare, environmental stewardship and transparent sourcing, appealing to consumers seeking ethically produced, high-quality ingredients.
Founded in 2007 and headquartered in Austin, Texas, Vital Farms began by marketing pasture-raised eggs to health- and ethically minded shoppers.
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