Karat Packaging Inc. (KRT) · Nov 5, 2026 · Earnings
Miss — Diluted EPS $0.22 vs ~$0.41 consensus; revenue $134.7M vs ~$140.3M consensus
Karat Packaging earnings missed on both sales and EPS as freight, resin and online costs compressed margins despite strong e-commerce growth.
Karat Packaging is expanding an omnichannel foodservice-distribution business, leaning into e-commerce, new national chain accounts, broader sourcing and a new Florida distribution center. Its prior outlook called for low-double-digit Q3 sales growth, 35–37% gross margin and 9–11% adjusted EBITDA margin; the filing shows the operating environment was materially tougher than that plan.
The quarter missed on both demand and profitability. Revenue rose 8.2% to $134.7 million, below the published consensus of roughly $140.3 million, while diluted EPS was $0.22 versus roughly $0.41 expected. The company itself said results were below expectations.
| Q3 2026 | Q3 2025 | Consensus / prior guide | |
|---|---|---|---|
| Net sales (Financial Highlights) | $134.7M (+8.2%) | $124.5M | ~$140.3M |
| Diluted EPS (Income Statement) | $0.22 | $0.36 | ~$0.41 |
| Gross margin (Financial Highlights) | 33.5% | 34.5% | 35–37% |
| Adjusted EBITDA margin (Adjusted EBITDA reconciliation) | 6.6% | 10.5% | 9–11% |
The core problem was cost absorption, not a collapse in customer demand. Volume and product mix added $10.7 million to sales, and online revenue grew nearly 38%, but product costs, ocean freight and domestic shipping rose faster than revenue. Gross margin fell to 33.5%, and operating expenses grew 17.2%—more than twice the sales growth rate.
The headline nine-month improvement overstates the underlying run rate. Nine-month adjusted EBITDA rose to $63.0 million from $42.7 million, but $25.8 million came from IEEPA tariff refunds. That benefit is largely absent from Q3, leaving quarterly adjusted EBITDA down to $8.9 million from $13.1 million and margin down nearly four percentage points.
Management has identified plausible fixes, but they are not yet proven. Karat is diversifying sourcing toward Indonesia, Malaysia and South America, implementing price increases in November 2026 and January 2027, and opening the Florida distribution center. Those actions could help recover margins, while the new chain-account wins and e-commerce growth support future volume; however, this quarter shows that growth is currently arriving with worse operating leverage rather than better.
Bottom line: This was a clear execution miss, not merely a noisy comparison. Karat is still gaining customers and online volume, but the current story has shifted from growth with improving profitability to growth that is being consumed by freight, resin and fulfillment costs.tez
Bottom line: Karat is still gaining customers and online volume, but this quarter shows growth is being consumed by freight, resin and fulfillment costs. The business remains expandable, yet the near-term execution story weakened materially.
Florida distribution center opening, November 2026
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