HF Foods Group Q1 Earnings Insights

Strong Revenue Growth and Improved Profitability

Hf Foods Group (NASDAQ:HFFG) reported a significant increase in first-quarter revenue and improved profitability, with management attributing the success to volume growth, cost controls, and operational changes that helped counteract challenges from product mix, tariffs, and rising fuel costs.

For the quarter ended March 31, 2026, the Asian specialty food distributor achieved net revenue of $312 million, marking a 4.5% increase compared to $298.4 million in the same period the previous year. President and Chief Executive Officer Felix Lin highlighted that the revenue growth was primarily driven by higher volume. CFO Paul McGarry added that improved seafood pricing and commodity volume growth also contributed to the positive results.

Despite this, gross profit experienced a slight decline, dropping to $50.5 million from $51 million in the prior year. Gross margin fell to 16.2% from 17.1%, with management citing a higher proportion of lower-margin seafood products and increased landed costs as the primary reasons for the margin contraction.

Adjusted EBITDA rose by 3.8% to $10.1 million from $9.8 million. Net income attributable to HF Foods reached $1.2 million, compared to a net loss of $1.6 million in the same quarter of the previous year. Earnings per share improved to $0.02 from a loss of $0.03 per share, while adjusted earnings per share declined slightly to $0.06 from $0.07.

Ongoing Cost Pressures and Mitigation Strategies

Lin acknowledged that broader foodservice industry headwinds, such as tariff pressure and reduced foot traffic, continued into the first quarter. He noted that rising fuel prices further exacerbated these pressures during the period.

"Based on current trends, we do expect some short-term pressure due to increased cost of goods sold and outbound distribution costs related to rising fuel costs, which we're taking action to mitigate," Lin stated.

In response to an analyst's question about gross margin, Lin indicated that elevated costs are likely to persist for "a little while," potentially extending into the second and third quarters of 2026. He explained that HF Foods operates largely in a spot market, and year-over-year comparisons are influenced by lower-cost inventory held in the prior year due to tariffs.

To offset these cost pressures, the company is implementing measures such as reducing occupancy expenses by converting a leased facility to company ownership, lowering professional fees, and restructuring sales operations.

McGarry noted that distribution, selling, and administrative expenses decreased by $0.3 million to $49.5 million, primarily due to lower professional fees and bad debt expense. However, these savings were partially offset by higher auto and truck expenses and depreciation. As a percentage of revenue, DS&A expenses declined to 15.9% from 16.7%.

Transformation Plan Moves Toward Optimization

Management emphasized progress on HF Foods' long-term transformation plan, which includes improvements in sales operations, digital infrastructure, and facility upgrades.

Lin mentioned that the company consolidated two sales call center operations into one unified team in late December 2025. This move aims to enhance control over the sales process, customer service, and pricing consistency across the company’s network, while maintaining strong customer relationships through localized knowledge.

The ERP implementation has been completed, and the company is now focused on system and data optimization. Lin said the new system should support purchasing efficiencies by consolidating buying across distribution centers and improve operations through enhanced route optimization. The company also recategorized a significant number of SKUs as part of the ERP implementation.

The next phase of the digital transformation involves developing a customized customer portal to improve transactional visibility and efficiency.

Facility Investments Drive Cross-Selling Growth

HF Foods provided updates on several facility projects aligned with its organic growth and cross-selling strategy.

The company completed the acquisition of its previously leased Chicago facility and is expanding cooler and ambient capacity there. Lin noted that the Charlotte facility is "largely ready" but awaits final local government permits. Once operational, the Charlotte facility is expected to shorten seafood distribution routes in the Southeast.

HF Foods is also beginning phase two of its Atlanta freezer expansion plan. The project will nearly double cold storage capacity in that market from 10,000 square feet to 20,000 square feet, with readiness expected by the end of 2026.

Lin described the Chicago, Charlotte, and Atlanta upgrades as cornerstones of the company's cross-selling strategy in the Southeast and Midwest. These regions represent "several hundred million" dollars of organic growth opportunity as the company expands its capacity.

During the Q&A session, Lin noted that the Southeast historically has not had significant frozen seafood sales for HF Foods, despite frozen seafood being the company's largest product category at just over $400 million in annual revenue. He said shortened routes and improved distribution efficiency should give HF Foods leverage over smaller competitors and support better pricing power.

M&A Remains a Strategic Priority

Management reiterated that mergers and acquisitions remain a core part of HF Foods' growth strategy. Lin said the company views itself as the only scaled foodservice provider in the U.S. Asian specialty market and as a "strategic acquirer of choice" in the space.

Lin emphasized that the company is focused on acquisitions that expand its geographic footprint, capture operating synergies, broaden its customer base, and enhance product and service capabilities.

When asked whether higher fuel prices and elevated costs are affecting smaller competitors, Lin said the company has seen an increase in inbound M&A calls over the past several months. He noted that smaller players are being squeezed by elevated inventory costs and fuel-related operating costs, which could create opportunities for HF Foods.

"We remain extremely confident in our long-term growth strategy and are committed to our capital investment plans as we continue our growth momentum in 2026 and beyond," Lin said.

Foot Traffic Trends and Outlook

Lin said first-quarter foot traffic was generally consistent with the second half of 2025, with lower traffic largely limited to some larger buffet restaurants served by the company. He noted that HF Foods can pass through a portion of higher fuel costs in certain markets where it has substantial market share, such as Salt Lake, but has more limited ability to do so in more competitive markets.

Looking ahead, Lin said HF Foods remains committed to its transformation initiatives and long-term strategic objectives despite short-term uncertainty. McGarry added that the company's focus is now on turning completed transformation work into operational gains, including purchasing discipline, route and warehouse efficiency, and tighter cost control.

About Hf Foods Group (NASDAQ:HFFG)

HF Foods Group, Inc., together with its subsidiaries, manufactures, imports, and distributes a variety of ethnic and specialty food products primarily for retail and foodservice customers in the United States. The company focuses on value-added fresh and frozen offerings that cater to growing consumer interest in Hispanic and other global cuisines. Its vertically integrated operations include in-house manufacturing, procurement of specialty ingredients, and third-party distribution partnerships.

The company's product portfolio spans a broad range of categories, including fresh and frozen tamales, enchiladas, empanadas, tortillas, and quesadillas, as well as shelf-stable salsas, sauces, dips, spreads, and snack items.