Vital Farms Downgraded as Q1 Gross Margin Plummets to 28.3%
Vital Farms saw its profit margin drop to 28.3% in Q1 from 38.5% year-over-year, resulting in a $0.03 per share loss despite 15.4% net revenue growth to $187.2 million. Telsey Advisory cut its rating to Market Perform and set a $11.00 price target.
1. Rating Downgrade and Price Target
Telsey Advisory lowered Vital Farms’ rating from Outperform to Market Perform, assigning a $11.00 price target that implies roughly 15.55% upside from its then $9.52 share price.
2. Q1 Financial Results
In Q1, Vital Farms’ net revenue rose 15.4% to $187.2 million but gross margin fell to 28.3% from 38.5% year-over-year, driving a $0.03 per share loss compared to a $0.37 profit in the prior year period.
3. Pricing Pressures and Margin Impact
Unexpected industry pricing changes and promotions for outdoor access eggs eroded margins more than anticipated, prompting CEO Russell Diez-Canseco to acknowledge the shortfall and highlight challenges in recovering price controls.