Farmer Brothers Q2 Earnings Call Highlights
by Renee Jackson · The Cerbat GemFarmer Brothers (NASDAQ:FARM) reported fiscal second-quarter 2026 results that management described as “more challenging,” citing the impact of higher-cost inventory flowing through cost of goods sold (COGS) alongside ongoing micro- and macroeconomic pressures.
President and CEO John Moore said the company maintained gross margin above 35% and continued to post year-over-year improvement in selling, general and administrative expenses (SG&A), but profitability was pressured as green coffee inflation moved through results. Adjusted EBITDA for the quarter was “only slightly positive,” and management pointed to continued softness in downstream consumer behavior.
Quarterly results reflected green coffee inflation
Chief Financial Officer Vance explained that, as communicated on the prior quarter’s call, the company began to “more fully realize the impact of green coffee inflation” on COGS during the second quarter. Adjusted EBITDA totaled $484,000, down from $5.9 million in the prior-year period.
Net sales fell 1% year over year to $88.9 million, compared with $90.0 million in the prior-year quarter. Moore said total coffee pounds decreased just under 3% year over year.
Gross margin was 36.3%, representing a 680 basis point decline compared with the prior-year period. Vance noted the company had expected gross margin declines during the year “due to the rising green coffee costs and our decision to hold on further pricing actions.” Year-to-date gross margin was 38%, which he said was in line with expectations.
On the bottom line, the company recorded a net loss of $4.9 million for the quarter, compared with net income of $200,000 in the second quarter of fiscal 2025.
Costs declined year over year, driven by personnel savings
Despite the margin compression, management highlighted operating expense improvements. Operating costs decreased $1.4 million to $36.4 million, or 40.9% of net sales, compared with $37.8 million, or 42.0% of net sales, in the prior-year period.
- Selling expenses declined by $100,000.
- General and administrative expenses declined by $700,000, primarily due to reduced personnel-related costs.
Moore said the company “effectively managed our cost structure in a difficult operating environment,” while Vance emphasized that gross margins are expected to remain pressured and average in the high 30% range for the fiscal year.
Consumer pressure remained a theme
Moore pointed to broader consumer trends as a headwind for the industry. He cited a January Conference Board report indicating U.S. consumer confidence had slumped to its lowest level since May 2014. He also referenced January survey commentary indicating consumers continue to feel pressure on purchasing power, with national sentiment more than 20% lower than it was a year earlier.
Against that backdrop, management said the company remains focused on reversing coffee pound and customer degradation and driving top-line growth.
Strategy: DSD execution and white-label growth
Moore said Farmer Brothers intends to “unlock the full power and potential” of its direct-store-delivery (DSD) network to increase product penetration with existing customers and add new accounts. He also emphasized leveraging the company’s “core coffee capability” to grow its white-label customer portfolio and better utilize its Portland roasting facility, which he described as “world-class,” SQF certified and Silver LEED certified.
Commodity, tariff, liquidity, and shareholder value updates
Management noted some signs of potential relief on costs. Moore said the company is encouraged by “recent reductions in tariff rates in several countries where we source coffee” and recent declines in both Arabica and Robusta commodity markets. If those trends continue, he said the company expects to begin seeing improvement in gross margins starting in the fourth quarter of fiscal 2026, with additional benefits in fiscal 2027.
On liquidity, Vance reported that as of December 31, 2025, Farmer Brothers had $4.2 million of unrestricted cash and cash equivalents and $24.6 million available under its revolving credit facility.
Moore also reiterated that the company continues to evaluate avenues to maximize shareholder value. He referenced the strategic committee formed in July of the prior year, saying it “remains actively engaged in assessing potential opportunities,” with additional updates to be provided “when appropriate.”
Looking ahead, Moore said the company remains confident it is “on the right path” and will focus on growing net sales, coffee pounds, and customer counts in the back half of fiscal 2026 and beyond.
About Farmer Brothers (NASDAQ:FARM)
Farmer Brothers Company (NASDAQ: FARM) is a specialty coffee roaster and distributor that serves the foodservice, hospitality and office coffee markets across the United States. The company produces and delivers coffee, tea, single-serve products and beverage equipment, supporting its customers with supply chain solutions, equipment maintenance and barista training services. Its operations are organized to serve commercial accounts ranging from national restaurant chains and convenience stores to independent coffee shops and corporate offices.
Founded in 1912 in Texas, Farmer Brothers has grown from a regional roaster into a national supplier with a network of manufacturing and distribution facilities.