Farmer Bros. Achieves 45% Gross Margin Increase in Q4

September 11, 2025 — 06:04 pm EDT

Written by Gate Markets Team for Gate Financial Insights

Highlights

• Q4 FY2025 saw gross margin climb to 44.9%, a 6.1 percentage point increase from the same quarter in fiscal 2024.
• Adjusted EBITDA turned positive, reaching $5.8 million in Q4 FY2025, marking a year-over-year improvement.
• Revenue growth remained modest, with a 1% increase compared to the prior year period.

Farmer Bros. (NASDAQ:FARM), a prominent U.S. supplier of coffee, tea, and culinary products to foodservice and retail sectors, unveiled its fourth quarter fiscal 2025 earnings on September 11, 2025. The report showcased significant improvements in gross margin and operating profit, despite sluggish sales growth and ongoing net losses. While the quarter demonstrated operational progress, it also raised questions about underlying demand trends and the pace of the company’s recovery efforts.

Company Overview and Strategic Focus

Farmer Bros. manages a direct-store-delivery network, providing coffee, tea, and culinary products to various foodservice establishments across the United States. Their product range spans from roast and ground coffee to frozen liquid coffee, teas, cold brew, and ready-to-drink beverages.

In recent years, the company has concentrated on enhancing operational efficiency, streamlining its product portfolio, and reducing costs. These efforts have included eliminating redundant product lines, upgrading technology infrastructure, and restructuring branch operations. Key success factors for Farmer Bros. continue to be margin management, customer retention, and adapting its product mix to evolving consumer preferences.

Quarterly Financial and Operational Performance

Gross margin reached an impressive 44.9%, up from 38.8% in the previous year. The full fiscal year saw a substantial gross margin expansion of 4.2 percentage points to 43.5%. Management attributed these gains to the completion of SKU rationalization, ongoing cost reduction initiatives, and streamlined overhead and distribution operations. General and administrative expenses also decreased compared to fiscal 2024.

The quarter marked a turnaround in operating profit metrics. Adjusted EBITDA, which excludes depreciation, one-time restructuring costs, and certain non-cash charges, improved to $5.8 million from a negative $1.6 million a year ago (non-GAAP). The full-year improvement in this metric was substantial, with adjusted EBITDA increasing by $14.3 million. Management linked this turnaround directly to improved margins and tightly managed operating costs. Net cash provided by operating activities also saw a year-over-year increase.

Revenue performance, however, remained relatively flat. Net sales increased by $745,000 to $85.1 million, representing a modest 1% year-over-year growth. Full-year net sales grew by only 0.3%. Notably, management has consistently emphasized revenue growth and increased product volume as crucial for long-term success, but these goals were not fully realized in the period. The lack of substantial growth and limited transparency regarding customer metrics raises questions about market demand and customer retention.

The bottom line was impacted by pension-related and other one-time items. Farmer Bros. reported a net loss of $4.7 million for Q4 FY2025. The company absorbed a $7.7 million pension settlement charge and $3.3 million in net losses from asset sales in FY2025. This contrasts with the previous year’s one-time gain of $16.9 million from asset disposals. The company remains unprofitable on a net basis but managed to pay down borrowings on its revolving credit facility and increase cash on the balance sheet by the end of the period.

Strategic Initiatives and Product Development

As part of its operational reset, Farmer Bros. completed a company-wide SKU rationalization, eliminating redundant coffee products, reducing complexity, and improving procurement and inventory management. The company also finalized its “brand pyramid,” a tiered product strategy designed to position it more effectively across value and specialty segments.

The period saw the introduction of Sum>One Coffee Roasters, a specialty coffee brand. This launch aligned with management’s stated intent to offer more differentiated products and cater to changing consumer tastes. However, the company did not disclose specific data on customer adoption or sales performance for this or other new offerings.

Leadership changes included the addition of Brian Miller as the new vice president of sales and the promotion of Travis Young to vice president of field operations. Technology infrastructure upgrades were implemented to enhance digital marketing, customer service, behavior tracking, and inventory management capabilities.

The company continued its branch network optimization efforts, including sales of company-owned branches and route adjustments, as Farmer Bros. sought to better align its distribution network with current demand patterns.

Forward Outlook: Areas to Monitor

Management refrained from providing formal quantitative guidance for the upcoming quarter or fiscal 2026. The company only stated that it anticipates “challenging market conditions to continue throughout fiscal 2026,” according to John Moore.

In the absence of clear sales or profit targets, investors should focus on meaningful movement in top-line growth, coffee volumes, and the pace of customer acquisition or retention. With cost controls and restructuring efforts largely complete, future improvement in results will hinge on evidence of demand recovery or successful sales execution strategies.

Financial figures presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.