UTZ Q2 Deep Dive: Distribution Gains and Margin Pressures Define Quarter

Snack food company Utz Brands (NYSE:UTZ) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 3% year on year to $366.7 million. Its non-GAAP profit of $0.17 per share was 5.6% below analysts’ consensus estimates.

Is now the time to buy UTZ? Find out in our full research report (it’s free).

StockStory’s Take

Utz’s second quarter results were met with a negative market reaction, as investors focused on margin pressures despite solid revenue growth. Management attributed the top-line gains to increased distribution, especially in expansion geographies, and improvements in volume and value share for core brands. CEO Howard Friedman noted, “We are not solely dependent on the category in order to be able to drive our growth,” emphasizing broad-based distribution gains and infrastructure investments. However, operating margins declined year over year, and commentary highlighted the impact of higher investments in sales and marketing, as well as the effect of accelerated capital spending.

Looking forward, Utz’s outlook is shaped by expectations for continued productivity savings, an improved sales mix, and further infrastructure investments. Management believes that recent capital expenditures and supply chain optimizations will yield gross margin benefits as the year progresses. CFO Bill Kelly acknowledged, “2025 will be the peak of our CapEx spending,” suggesting that margin expansion should resume as these projects are completed. The company also aims to leverage brand strength and increased household penetration, but remains cautious on category growth, with a focus on innovation and targeted marketing to drive future gains.

Key Insights from Management’s Remarks

Management credited second quarter revenue momentum to distribution gains, brand expansion, and targeted marketing, while highlighting the challenges posed by increased investment and shifting product mix.

• Distribution gains across geographies: Utz expanded its presence in both core and new markets, with CEO Howard Friedman citing significant growth in expansion geographies supported by investments in infrastructure and retailer partnerships, including national chains and various retail channels.
• Brand performance mixed by segment: The company’s Power 4 brands, especially Boulder Canyon and Utz, performed well, driving both volume and value share gains. However, pretzel and tortilla chip segments were mixed, with some brands underperforming due to softer trends and lapping prior promotions.
• Supply chain and automation investments: Utz continued optimizing its supply chain by closing the Grand Rapids facility and activating automation projects, including new potato chip and pretzel lines. Management expects these investments to enhance productivity and support future gross margin improvement.
• Increased marketing spend: Marketing investments rose significantly, with a 44% year-over-year increase in Q2. The focus was on supporting expansion geographies, digital and retail media, and driving consumer engagement for brands like Boulder Canyon and Zapp’s.
• SG&A and productivity tradeoffs: Higher SG&A spending was targeted at supporting sales infrastructure and westward expansion, as well as absorbing some inflation. Management emphasized that these investments are expected to generate top-line growth and margin expansion over time, though they pressured current-quarter margins.

Drivers of Future Performance

Utz expects productivity initiatives, supply chain optimization, and continued brand investment to shape performance, while monitoring category trends and promotional intensity.

• Productivity and margin recovery: Management anticipates that recent automation and plant rationalization will drive gross margin and EBITDA improvement in the second half, supported by portfolio mix benefits as premium brands like Boulder Canyon expand.
• Ongoing investment in distribution: Utz will continue investing in sales infrastructure and marketing to build on distribution gains, particularly in western and expansion markets. These expenditures are expected to support revenue growth but may keep SG&A elevated in the near term.
• Category and promotional backdrop: The company remains cautious about overall snack category growth, expecting only modest improvement. Management does not foresee a significant rebound and is planning for a stable yet competitive promotional environment, which could influence volume trends and pricing power.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely track (1) the realization of expected margin improvement from supply chain investments and automation, (2) the pace of distribution gains, particularly in expansion geographies and core retail channels, and (3) the impact of increased marketing and SG&A on both top-line growth and profitability. Ongoing innovation in product assortment and the ability to adapt to changing consumer preferences will also be important factors to monitor.

Utz currently trades at $13, down from $13.95 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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