Karat Packaging Inc (KRT) Q3 2026 Earnings Report

The call presented strong top-line momentum, rapidly growing e-commerce sales, geographic expansion, new chain-account wins, planned distribution capacity, and solid cash generation. However, these positives were offset by significant margin and earnings deterioration caused by higher resin, product, ocean freight, domestic shipping, and operating costs, as well as supply shortages and a retail-channel decline. Management is taking pricing and sourcing actions and provided growth-oriented guidance, resulting in a balanced overall tone.

For the 2026 fourth quarter, management expects net sales to grow by 9% to 11% from the prior year quarter, gross margin to be within 33% to 35%, and adjusted EBITDA margin to be in the high single digits; for the full year of 2026, it expects net sales to grow by 9% to 11% over the prior year, gross margin to be between 39% to 41%, and adjusted EBITDA margin to be in the mid teens, with both margin expectations including the iEPR tariff refunds recorded during the first half of 26. Management also expects the new 47 thousand square foot distribution center in Orlando, Florida to be fully operational in November 2026, shipments to certain new chain accounts to begin in early 2027, fiber paper growth to be as much as double in 2027, and a 3% to 13% price increase on January 1, 2027.