BEDMINSTER, NJ. — Economic and consumer uncertainty have hit Freshpet, as demonstrated in the company’s first quarter 2025 financials for the period ended March 31. Though net sales and gross profit increased, the fresh pet food company experienced a net loss of $12.7 million over the quarter.

“Despite the significant economic uncertainty facing consumers today, Freshpet has continued to significantly outperform the category amongst every age and income group,” shared Billy Cyr, chief executive officer of Freshpet, during the company’s earnings call on May 5. “Freshpet remains a structurally advantaged business with a long runway for growth in a category with meaningful, long-term tailwinds.”

Net sales were reported at $263.2 million, a 17.6% increase from $223.8 million in the prior year period. Freshpet primarily attributed this to volume gains of 14.9% and favorable price/mix of 2.7%. Gross profit was $103.8 million, a 17.7% increase from $88.2 million in the prior year period. As a percentage of net sales, gross profit remained consistent at 39.4% year-over-year, which the company attributed to lower input costs and reduced quality costs offset by reduced leverage on plant expenses. Adjusted gross profit was $120.2 million (45.7% of net sales), an 18.4% increase from $101.5 million (45.3% of net sales) compared to the prior year.

Selling, general and administrative (SG&A) expenses were reported at $115.3 million, an increase from $79.7 million in the prior year period. As a percentage of net sales, SG&A expenses increased 820 basis points to 43.8%, compared to 35.6% in the prior year. Freshpet attributed this increase in SG&A to increased media spend and higher share-based compensation among other things. Adjusted SG&A was $84.7 million (32.2% of net sales), a 19.5% increase from $70.9 million (31.7% of net sales) in the prior year period.

Net loss for the first quarter was $12.7 million, compared to net income of $18.6 million in the first quarter of 2024. The company attributed this decrease to increased media spending of about $7.7 million and non-recurring charges of $16.9 million, partially offset by higher sales and reduced logistics costs. Adjusted EBITDA was $35.5 million for the first quarter, an increase from $30.6 million in the prior year period. 

The company attributed its less-than-satisfying performance to consumer uncertainty, with many consumers becoming hesitant to make the leap to more premium, expensive pet food products, like fresh formats. 

“Our analysis suggests that the slowdown in our sales growth came on very quickly as the macroeconomic climate changed a few months ago and is due, in part, to the fact that Freshpet’s consumer franchise spans all income and age groups, including consumers who are most economically insecure or uncertain today,” Cyr explained. “Freshpet’s consumer base is less defined by the income of our users and better defined by how much someone loves their dog. 

“For the last decade, Freshpet has been able to grow through all sorts of economic conditions — and we are still growing at an outsized rate versus other dog foods and CPG brands,” he added. “However, our model relies on an increasingly large number of consumers being in the position to re-consider their pet food and — ultimately — conclude that Freshpet is a better way to feed their pet. What we are seeing now is that consumer uncertainty makes them hesitant to get a new dog or replace a dog they recently lost, and it also makes them more hesitant to try a more expensive pet food until they have greater clarity on their economic fortunes.”

Cyr expects this to remain a short-term shift, not impacting long-term desire for premium pet nutrition. To battle this, the company plans to leverage its capabilities in advertising, retail availability and visibility, and product innovation to support its long-term vision. 

One of the strengths of the Freshpet model is that we have the flexibility to target high potential consumers across the age and income spectrum,” he shared. “So, from a media standpoint, we are increasing our advertising investment and tailoring our media strategies to attract more higher income consumers, via digital/social channels as well as linear TV.”

Product-wise, the company plans to launch a new price point bag product under its Complete Nutrition line, similar to a roll product it introduced two years ago during consumer inflation concerns. It also plans to expand its multi-pack offerings to provide consumers with more value and allow them to stock up as they space out shopping trips. 

Freshpet’s household penetration rose 13% over the quarter to amass 14.1 million, an approximate growth of 1.6 million households year-over-year. Buy rate rose 6% to $110. 

“Our analysis shows that higher income consumers — particularly those who tend to buy online and via subscription — are continuing to drive sales for more premium offerings, and Freshpet is amongst those winning brands as our total e-commerce business was up 43% in the quarter,” Cyr shared. “Those consumers are the least economically sensitive consumers, and they continue to get dogs and trade up their dog food.”

From a retail standpoint, Freshpet’s store count hit 28,521 during the first quarter, a 380 store increase. Seventy-seven percent of Freshpet stores have one branded fridge, whereas 23% have second or third fridges. 

“From a channel standpoint, we have expanded our small direct-to-consumer (DTC) business nationally so that we can reach more consumers who place a high value on subscription service, Cyr said. “And we are making progress on getting Freshpet into more value-oriented stores, including club outlets. I’m pleased to share that we are now in our first Sam’s Club store and the early results are encouraging. We are optimistic that this will lead to greater expansion over time.”

Despite its performance, costs continue to decrease for the fresh pet food company. Logistics costs decreased 60 basis points to represent 5.8% of first quarter net sales, input costs decreased 190 basis points to represent 29.3% of net sales, and quality costs decreased 60 basis points to represent 2.2% of net sales. 

The company provided a capacity update, revealing that its Kitchen South facility started a new bag line during the quarter and that it is planning to commission new technology for bagged products at its Bethlehem facility in the fourth quarter of this year. With these additions, the Kitchen South and Bethlehem Kitchen plants are expected to have seven full production lines, each, and the Ennis, Texas, plant is expected to have more than 10 lines. This would leave the company with at least 24 production lines across its facilities, allowing it to support growth in the coming years. 

With economic uncertainty top of mind, Freshpet updated its 2025 full-year guidance. Net sales are now expected to be between $1.12 billion and $1.15 billion, a decrease from previous guidance between $1.18 billion and $1.21 billion. Sales growth is expected between 15% and 18%, compared to previous expectations of 21% to 24%. Adjusted EBITDA is now expected between $190 million and $210 million, compared to previous expectations of more than $210 million. Capital expenditures are expected to be around $225 million, a drop from previous expectations of $250 million.

“The obvious question is how this economic uncertainty impacts our long-term net sales target of $1.8 billion by 2027,” Cyr detailed. “Given that this economic uncertainty arrived so quickly in Q1 and the drivers of the uncertainty, for example, tariffs, government downsizing and inflation have not settled, it is hard to say how long the current trends will continue. As such, we are hesitant to update our long-term target until we have greater clarity on the magnitude of the impact and the duration, particularly since the underlying category and brand tailwinds have proven to be incredibly sustainable for such a long period of time and through so many economic challenges.

“As we have done over-and-over-again throughout our company’s history, we will be nimble and adjust to this new macro environment — and we still expect to deliver outsized performance against a challenging backdrop,” he added. “It just might not be the same magnitude of performance we have delivered over the past few years until there is greater economic certainty amongst the prospective consumers we are targeting to join the Freshpet franchise.”

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