Once Upon A Farm (NYSE:OFRM) lowered its 2026 outlook after voluntarily recalling its Tractor Wheels products over a potential choking hazard, even as the company reported third-quarter sales growth of nearly 35%.
The company now expects full-year net sales of $290 million to $300 million and an adjusted EBITDA loss of $4.5 million to $7 million. It also expects to incur up to $30 million in recall-related costs during 2026, including customer returns, retailer chargebacks, legal expenses and other costs.
CEO and co-founder John Foraker said the company initiated the recall within 24 hours of receiving three reports from the Food and Drug Administration concerning a potential choking hazard. Tractor Wheels accounted for 18% of net sales in the year to date.
Recall assessment and outlook
Foraker said independent product safety experts have begun a comprehensive assessment expected to take eight to 10 weeks. The company is examining the consumer reports to identify a potential root cause or contributing factors and is considering possible reformulation and design changes.
“We will take the time necessary to complete the appropriate assessment, testing, and independent validation,” Foraker said. The company is also conducting consumer research and preparing to run tests with its co-manufacturer.
President and Chief Financial Officer Larry Waldman said the updated sales outlook assumes no Tractor Wheels sales after the recall date and includes estimates for returns and chargebacks. The company also removed planned fourth-quarter shipments intended to support new distribution and first-quarter 2027 promotions.
Waldman said the majority of the reduction to the sales outlook was directly related to the recall. Management also assumed some pressure on sales velocities across the rest of the portfolio, despite early data showing no negative impact.
Foraker said sales of products outside Tractor Wheels were flat to slightly higher in the couple of weeks after the recall compared with the preceding period. He cautioned that it was still early to draw conclusions.
The company is pursuing potential insurance recoveries but cannot yet predict their timing or amount, Waldman said. He added that Once Upon A Farm is working with its co-manufacturer on a potential return to market and believes continuing that partnership is more prudent for now than bringing production in-house.
Third-quarter sales rise
Net sales for the third quarter rose 34.9% to $89.1 million from $66 million a year earlier. Volume grew approximately 32%, with favorable product mix accounting for the balance of the increase. The recall occurred after the quarter ended and did not affect the results.
Gross margin declined 600 basis points to 36.1%, reflecting trade investment supporting a national club program, product mix and cooler placement costs. Selling, general and administrative expenses rose to $36.8 million, though they fell as a percentage of sales.
The company reported a net loss of $3.8 million, compared with $11.3 million a year earlier. Its adjusted EBITDA loss was $1 million, versus positive adjusted EBITDA of $0.9 million in the prior-year quarter.
Once Upon A Farm ended the quarter with $106.4 million in cash and no debt. Waldman said it also had up to $95 million in additional borrowing capacity under existing credit facilities, subject to their terms.
2027 framework and expansion plans
For 2027, the company outlined an initial framework calling for at least $330 million in net sales and adjusted EBITDA of at least break-even. Excluding Tractor Wheels on a like-for-like basis, it expects sales growth to exceed its long-term target of 20%.
Waldman said the framework accounts for a range of possible return dates for Tractor Wheels and potential effects on the broader portfolio. The company expects to provide formal guidance with its fourth-quarter results in March.
Foraker said commercial plans outside Tractor Wheels remain on track, including cooler expansion, new dry baby-snacking products and a launch in a new category during the first half of 2027. He said retailers have expressed support for the brand and that the company expects to recover a significant majority of Tractor Wheels distribution when the product returns, although not necessarily immediately.
The company plans to begin previously discussed supply-chain productivity and automation projects in the fourth quarter. It expects initial benefits in 2027 and a more substantial contribution beginning in 2028, while evaluating the timing and scope of projects specifically tied to Tractor Wheels.
About Once Upon A Farm (NYSE:OFRM)
Once Upon A Farm is a U.S. food company that makes organic products for babies and children. Its offerings include fruit and vegetable blends, baby meals, smoothies, snacks and oat bars, sold in refrigerated and shelf-stable formats. Founded in 2015 by Cassandra Curtis and Ari Raz, the company later brought in John Foraker as chief executive and Jennifer Garner as a co-founder. Its products are designed for families seeking convenient foods made with organic ingredients. Once Upon A Farm sells its products across the United States through grocery and other retail outlets, as well as online channels.
