Vital Farms (NASDAQ:VITL) reported second-quarter 2026 net revenue of $166 million, down 10.1% from a year earlier, as the company worked through an industry oversupply of eggs, pricing gaps with branded competitors and elevated costs tied to managing excess supply.
Chief Executive Officer Russell Diez-Canseco said the second quarter represented the company’s expected financial low point for the year. He said management’s operational plan—focused on narrowing retail price gaps, adjusting supply through farmer contract amendments and reducing overhead—was progressing as intended.
Revenue Decline and Supply Costs Weighed on Results
Chief Financial Officer Thilo Wrede said the revenue decline was primarily driven by a $19.8 million volume-driven decline in retail-channel sales, excluding excess breaker and wholesale sales. That decline was partly offset by a $1.1 million price-mix benefit.
Excess sales to breaker and wholesale channels contributed only $0.1 million to net revenue growth, as higher volumes in those channels were almost entirely offset by lower prices. Breaker sales refer to eggs sent for processing rather than sold through the company’s retail channels.
Gross profit totaled $10.9 million, or 6.6% of net revenue. The result included:
- $19.5 million impact from excess breaker sales;
- $800,000 from amortization of farmer contract amendments; and
- $7.8 million in costs associated with winding down the company’s butter business.
Wrede said these supply-management and other discrete expenses totaled $28.1 million. Shipping and distribution costs rose to 6.4% of revenue from 4.9% a year earlier, including $1.5 million for shipping excess eggs to breaker plants.
Adjusted EBITDA was a loss of $26.6 million for the quarter. Wrede said the result reflected $21.8 million in peak supply-management costs as well as $3 million in one-time professional-services costs tied to a cost-savings program. SG&A expense was $40.4 million and included $3.3 million in restructuring and severance costs and $3 million in one-time professional-services costs.
Pricing and Distribution Efforts Show Early Progress
Management said it has been reducing the company’s retail price gap versus branded competitors. The average gap narrowed to approximately $2.36 in the second quarter from $2.51 in the first quarter. Diez-Canseco said Vital Farms views a gap of roughly $1 to $2 as the most effective range.
In markets where price gaps narrowed, the company saw improved velocity and household acquisition, according to Diez-Canseco. At one of its top 10 retailers, he said velocity and incremental new households improved 27% since mid-April where price gaps were adjusted to an appropriate level.
Vital Farms also recorded a more than 200-basis-point year-over-year gain in retail dollar share of the shell egg category in MULO+ during the quarter, according to Circana data cited by management. By mid-July, shell-egg units per store per week per item had increased 12.5% since the company’s first-quarter call and reached their highest level since February.
Diez-Canseco said the company expects the recovery to be volume-driven in the second half as pricing actions and new distribution placements take effect. He noted that most distribution gains involve placing the company’s “core four” products in existing retail doors, though Vital Farms has also introduced a 24-count package at Whole Foods and additional retailers.
The company expects average total distribution points of 150 to 160 during 2026, compared with 130 in 2025. It reported 148.7 year-to-date total distribution points in MULO+ through the end of the second quarter and expects to reach 170 to 175 points in the fourth quarter, supported by commitments for new placements. Wrede said distribution gains are expected across channels, with the largest opportunity in mass retail.
Supply Actions Shift Away From Breaker Channel
Vital Farms said its farmer contract amendments are now in place, giving it greater flexibility to reduce egg production amid the temporary supply-demand imbalance. Management said it believes oversupply peaked in the second quarter.
Rather than relying primarily on sales to the lower-revenue breaker channel, the company expects to manage supply by reducing the number of eggs entering its cold-storage facilities. Wrede said breaker expenses may continue in the third quarter and potentially the fourth quarter, but at much lower levels than in the second quarter and potentially below the first-quarter level.
The company now models full-year supply-management costs in the mid-$30 million range, compared with an initial estimate of $32 million. Wrede attributed the increase to somewhat lighter second-quarter sales, which resulted in more surplus eggs, and a deliberate decision to retain supply flexibility should retail demand recover faster than expected.
Vital Farms also changed the planned execution of its butter exit. Instead of converting its remaining bulk butter inventory into retail product, the company plans to sell the inventory to a melter after determining that the conversion approach would be uneconomical because of operational constraints and elevated costs.
Cost Reductions, Financing and Outlook
The company completed planned staffing changes at Egg Central Station and conducted further organizational streamlining in mid-July. Management expects those actions to reduce its annualized SG&A run rate by approximately $6 million to $7 million.
Vital Farms is also pausing construction on its Vital Crossroads facility by the end of 2026, while completing the exterior to protect the building from winter weather. Wrede said the company expects another $80 million to $90 million of spending would be needed after construction resumes, and that it will restart the project only when demand signals indicate the capacity is necessary. Once the facility is completed, management expects capital expenditures to return to a historical range of roughly $10 million to $15 million annually.
At quarter-end, Vital Farms had $21.2 million in cash and had drawn $30 million on its prior revolving credit line. After the quarter closed, the company entered into a new $125 million term loan and a $60 million asset-based lending facility, both with three-year terms, replacing the prior revolver. The company drew the full term loan and repaid the previous revolving facility.
Wrede said the new financing provides $185 million of debt capacity and greater flexibility to manage through the oversupply period. The company also disclosed that its board terminated the 2026 share-repurchase plan after quarter-end, consistent with the terms of the new lending facilities. Vital Farms had repurchased $50 million of shares at an average price of $13.29 per share at the beginning of the second quarter.
Management reaffirmed its full-year outlook for net revenue of $775 million to $800 million and adjusted EBITDA of $0 to $10 million. Vital Farms expects sequential improvement in net revenue and adjusted EBITDA in the third quarter, followed by greater operational leverage in the fourth quarter as distribution gains, lower breaker volumes and reduced overhead flow through results.
About Vital Farms (NASDAQ:VITL)
Vital Farms, traded on the NASDAQ under the symbol VITL, is a U.S.-based food company specializing in pasture-raised egg and dairy products. The company partners with a network of family farms across the United States to produce eggs, butter and related items under a certified humane, pasture-centric farming model. Vital Farms’ supply chain emphasizes animal welfare, environmental stewardship and transparent sourcing, appealing to consumers seeking ethically produced, high-quality ingredients.
Founded in 2007 and headquartered in Austin, Texas, Vital Farms began by marketing pasture-raised eggs to health- and ethically minded shoppers.
