Vital Farms: Egg Capacity Expansion ‘On Track’; Tariffs Will Cause Price Hikes for Retailers

Though avian flu cases have steadily declined over the past few months, there’s still no relief in sight for egg prices. Vital Farms, the largest U.S. producer of pasture-raised eggs, announced upcoming price increases in its Q1 2025 earnings report yesterday.

“Just like everyone in our industry, we expect to be affected by the recently announced tariffs,” said Russell Diez-Canseco, CEO, on a call with analysts and investors. “While we believe our consumer to be very loyal and resilient, we’re anticipating cost impacts on our business. To offset this anticipated impact and provide us with operating flexibility, we’ve announced to our retailers a modest-to-low double-digit percentage increase for our shell egg products.”

In the quarter ending March 30, the company’s net revenue climbed 9.6% to $162.2 million, with volume-related revenue growth of $1.9 million. This growth was attributable to demand for existing products, new offerings and retail distribution gains with new and existing customers.

Gross profit was $62.5 million, or 38.5% of revenue, in the first quarter, up from $58.9 million in the prior year period. Growth was driven by higher net revenue, scale and price/mix benefits and favorable conventional commodity and diesel costs.

Net income was $16.9 million, compared to $19 million in Q1 2024, driven by higher crew member investments, partially offset by higher sales and gross profit.

Vital Farms, like many companies, is still grappling with shell egg shortages, but its capacity expansion plans remain “on track,” according to Diez-Canseco. During Q1, the company increased hens under contract by adding new family farms to its network, which now exceeds 450 farmers.

Though demand for Vital Farms’ egg products has been “consistently strong,” it has been unable to keep up with increased orders due to supply chain constraints. However, the company expects these pressures to ease as the additional family farms ramp up production.

Additionally, the construction of the company’s additional egg-washing and packing line at its Missouri Egg Central Station is slated for completion in Q4, as planned.

“We entered the first quarter with significantly lower egg inventory relative to the same period last year, which pressured our year-over-year growth rate. We believe the volume growth headwinds we experience in Q1 will ease beginning this quarter, setting the stage for net revenue growth to reaccelerate as the year progresses,” said Diez-Canseco.

Despite many shoppers pulling back on spending due to inflationary pressures, Vital Farms is confident that demand for its egg products will continue to grow based on two factors: strong relationships with consumers built on shared values and secular trends supporting cleaner label products. The company’s aided brand awareness continues to improve, reaching 31% by the end of Q1.

Vital Farms is doubling down on efforts to boost U.S. household penetration from its current level of 11.3%. According to Diez-Canseco, Vital Farms’ consumers become more loyal even when inflation in the U.S. has outpaced wage growth.

Looking ahead, the company has reaffirmed its full-year outlook and continues to expect net revenue of at least $740 million, adjusted EBITDA of at least $100 million and capital expenditures in the range of $50 million to $60 million, reflecting investments in its new egg washing and packing line.

“We remain confident in our view that the strategic investment we are making to build our brand and expand our supply chain will enable us to deliver our long-term vision and reach our $1 billion net revenue target by 2027,” said Thilo Wrede, CFO, in a statement.

Analysts at William Blair called Vital Farms’ Q1 earnings report “an encouraging start to the year,” and were impressed by its status as one of the few companies growing organic sales at a double-digit rate with projected acceleration through the year.