Freshpet Raises 2026 Sales Outlook as Q3 Margin Expands

Freshpet Inc. (FRPT) increased its full-year 2026 sales-growth outlook after third-quarter revenue rose 10% and adjusted gross margin expanded by 400 basis points, reflecting volume growth and operational improvements. The fresh pet food company also raised the lower end of its adjusted EBITDA forecast while narrowing its expected capital-spending range.

Freshpet now expects 2026 net sales growth of 12% to 13%, compared with its previous range of 10% to 12%. Adjusted EBITDA is projected at $215 million to $220 million, versus $210 million to $220 million previously. The company expects capital expenditures of $125 million to $150 million, compared with an earlier estimate of about $150 million.

Volume drives revenue growth

Third-quarter net sales increased to $317.8 million from $288.8 million a year earlier. The presentation attributed the entire 10% increase to volume, with no contribution from price and mix.

Consumption increased across all measured channels. Growth was 13% for total U.S. pet retail plus Costco, 10% for total U.S. pet retail, 9% for the broader food channel and 5% in pet specialty. Overall consumption volume rose 14% in the quarter.

Freshpet’s retail presence also continued to expand. Store count increased 5%, cubic feet of refrigerated space rose 5%, and total distribution points grew 14%. E-commerce accounted for 16.9% of sales, while 82% of delivered sales moved through the company’s in-store refrigerator network. Freshpet ended September with 40,523 refrigerators across 29,547 stores in the U.S. and Canada.

The company reported an 8% increase in penetration among its “Most Valuable Pet Parent,” or MVP, households. Total household penetration rose 1%, while the overall buy rate increased 9%. MVP customers represented 72% of Freshpet sales, with their annual buy rate reaching $522, up from $492 in the prior-year period.

Margins expand despite higher logistics costs

Adjusted gross profit rose to $158.8 million from $132.8 million, lifting adjusted gross margin to 50.0% from 46.0%. GAAP gross margin increased to 44.5% from 39.5%.

Adjusted EBITDA increased by $9.9 million to $64.5 million, and adjusted EBITDA margin expanded to 20.3% from 18.9%. Logistics costs rose by 170 basis points to 7.1% of net sales, while input costs declined by 20 basis points to 28.9% and quality costs fell by 50 basis points to 1.6%.

GAAP net income declined to $29.7 million from $101.7 million. Freshpet said the decrease primarily reflected a $77.9 million deferred income-tax benefit recorded in the prior-year quarter following the release of most of a valuation allowance.

Operating cash flow was $60.8 million for the quarter, down $6 million, while free cash flow increased by $6.3 million to $37.8 million. For the first nine months of 2026, operating cash flow rose to $145.5 million from $105.5 million, and free cash flow increased to $65.3 million from $10.3 million. Freshpet had $345.9 million of cash as of September 30.

The company spent $80.3 million on capital projects during the first nine months. It also repurchased 1.8 million shares for $102.3 million under the authorization announced in May.

Capacity and technology investment remain priorities

Freshpet said operating efficiencies added more than $100 million of manufacturing capacity this year, an amount it described as equivalent to a new production line. The company currently operates 16 lines and projects more than 24 across its Bethlehem, Kitchen South and Ennis facilities.

Three bag-production lines are using new technology, including one full implementation and two lighter versions. Freshpet expects the technology, once fully optimized, to improve adjusted gross margin by about 100 basis points on an annualized companywide basis, based on lines expected to be installed by the end of 2027. Management also expects the system to increase output, improve yields and product quality, lower quality costs and support additional product formats.

For 2026, Freshpet expects adjusted gross margin to improve by about 150 basis points year over year at the midpoint of its sales guidance, primarily because of operational improvements. The company anticipates higher logistics, packaging and ingredient costs, while media spending as a percentage of sales is expected to remain in line with 2025. Full-year free cash flow is expected to exceed the 2025 level.

Freshpet’s 2027 targets include adjusted gross margin above 49%, adjusted EBITDA margin of 20% to 22%, and net sales growth well above the category growth rate. Its operating priorities include expanding household penetration and buy rates, increasing product velocity and availability, adding capacity and using scale to improve efficiency.

The outlook remains subject to uncertainty around consumer sentiment, pet acquisition rates, inflation, tariffs and fuel, energy and ingredient costs. Freshpet also identified risks related to the timing, cost and effectiveness of its new manufacturing technology, as well as the performance of media campaigns, new refrigerators and distribution channels.