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Expanded distribution and lower costs are driving Freshpet's profits higher.
Management expects to achieve positive free cash flow in 2025.
Shares of Freshpet (NASDAQ: FRPT) popped on Monday after the premium pet food provider's third-quarter profits exceeded investors' expectations.
As of 1:21 p.m. ET, Freshpet's stock price was up more than 12%.
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Freshpet's net sales climbed 14% year over year to $288.8 million. The cat and dog food maker has worked hard to expand the availability of its offerings, particularly in value-focused retail locations. Freshpet increased the number of stores that sell its products by 7% -- and overall distribution points by 13% -- compared to the third quarter of 2024.
"We continue to outperform the U.S. dog food category, we are building market share across every channel, and we are winning a disproportionate share of new pet parents," CEO Billy Cyr said in his earnings call remarks.
At the same time, cost-control initiatives are bolstering Freshpet's profitability. The company was able to reduce its raw material and logistics costs over the past year. That helped to drive Freshpet's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) higher by nearly 26% to $54.6 million.
Still, Cyr noted that today's challenging economic environment was slowing Freshpet's gains. The company now expects full-year net sales growth of 13% in 2025, compared to a previous forecast of 13% to 16% growth. Freshpet also reduced its adjusted EBITDA guidance to $190 million to $195 million, down from $190 million to $210 million.
Freshpet is scaling back its expansion-related spending to $140 million from $175 million to account for these macroeconomic factors. In turn, the premium pet food leader expects to generate positive free cash flow in 2025, which is one year ahead of management's target.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Freshpet. The Motley Fool has a disclosure policy.
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