Reeds (OTCMKTS:REED) reported a sharply wider first-quarter loss and lower sales for the three months ended March 31, 2026, as management said inventory actions, sales execution issues and margin pressure weighed on results.
Interim Chief Executive Officer Neal Cohane told investors that the company’s first-quarter operating performance “should not be viewed as indicative” of expected performance for the rest of the year. He said several factors that affected the quarter were transitional and that corrective actions began early in 2026.
First-quarter results decline from year-ago period
Gross profit fell to $0.7 million from $3.4 million a year earlier, while gross margin declined to 10% from 34%. McCurdy said the decrease was primarily driven by liquidation of select slow-moving product and inventory write-offs tied to product portfolio optimization.
Delivery and handling costs decreased 31% to $1.1 million from $1.6 million in the first quarter of 2025, which McCurdy attributed to continued improvements in logistics efficiency and freight optimization. Delivery and handling costs remained 16% of net sales and were $2.57 per case, compared with $3.17 per case in the prior-year quarter.
Selling, general and administrative expenses rose to $5.8 million from $3.5 million. McCurdy said the increase was primarily driven by investments in personnel, marketing and related services to support the company’s Asia growth initiative.
Reed’s reported a net loss of $6.5 million, or $0.55 per share, compared with a net loss of $2.0 million, or $0.27 per share, in the same period last year. EBITDA was negative $6.2 million, compared with negative $1.7 million in the year-ago quarter. Cash used in operations was $5.8 million, compared with cash used of $5.4 million a year earlier.
As of March 31, Reed’s had approximately $4.6 million in cash and $9.2 million of total debt net of deferred financing fees. That compared with $10.4 million in cash and $9.2 million of total debt net of deferred financing fees as of Dec. 31, 2025.
Management cites inventory, execution and margin issues
Cohane identified five factors that hurt first-quarter performance. The first was inventory liquidation and write-offs, including charges tied to underperforming, discontinued and aged SKUs, as well as excess raw material inventory. He said the company has since completed comprehensive physical inventory counts and implemented enhanced inventory controls.
The second factor was elevated SG&A spending, which Cohane said was not appropriately aligned with the size and current priorities of the business. He said Reed’s has taken action to rightsize its cost structure while working to rebuild trust with retail and distributor partners.
Cohane also pointed to sales execution challenges, including the discontinuation of heritage glass bottle packaging, execution issues in the transition from sleek cans to standard cans, limited promotional trade activity, underperformance and a shifting strategic focus behind the Virgil’s Zero platform, and missed category review windows that reduced shelf placement for certain Reed’s and Virgil’s SKUs at key retailers.
Gross margin pressure was another headwind. Cohane said margins were affected by rising input costs and wholesale selling costs on certain packages that were insufficient to optimize contribution. He also said inconsistent engagement with some distributor and retail partners weakened communication and alignment, contributing to top-line pressure in parts of the business.
Corrective actions underway
Management said it has begun a series of initiatives intended to stabilize the business and improve execution. Cohane said Reed’s has re-engaged with retail and distributor partners nationwide to strengthen relationships, secure new SKU placements and develop promotional plans for the remainder of 2026.
The company also reversed planned product discontinuations. Cohane said Reed’s canceled the planned elimination of Reed’s and Virgil’s heritage glass bottles and Virgil’s Zero Sugar cans, citing consumer and retail partner demand.
Other actions described by management included expanding retail media and e-commerce support across platforms including Instacart, walmart.com, albertsons.com and kroger.com; reducing headcount and marketing-related SG&A expenses; postponing a planned brand restage initiative; and retaining a large commission-based sales agency to represent the company’s portfolio across U.S. channels.
Cohane said the sales agency adds more than 80 sales professionals working alongside Reed’s sales management. In response to an analyst question, he said Reed’s had about 12 field sales employees when he joined the company in January, and that the company is creating key performance indicators for internal staff and the broker partner.
The company also liquidated “tens of thousands of cases” of low-margin and non-strategic inventory, exited a third-party Amazon fulfillment warehouse arrangement that Cohane said had been generating approximately $1 million of annual losses, and partnered with a leading Amazon Marketplace operator focused on profitable growth.
Executives expect sequential improvement
During the question-and-answer session, Alliance Global Partners analyst Aaron Gray asked how long remediation efforts might take and whether the company was seeing signs of improvement in the second quarter. Cohane said Reed’s addressed the issues early in the first quarter and has already reduced and restructured inventory. He said the company is seeing early margin improvement and has taken action after reviewing wholesale costs charged to customers and distributors.
McCurdy said the first quarter was a transition quarter and that the company expects to return to sequential improvement as it moves through the second quarter. He said Reed’s expects improvement in net sales, gross margin and net loss.
Asked about missed category review windows and shelf placement, Cohane said the company is returning first to accounts where it can affect change immediately. He said some retailers have fixed category review timelines, but that Reed’s is already discussing future business with them.
On inventory availability, Cohane said he is confident the company will be secure in inventory. McCurdy added that short shipments continue to be “essentially zero” and said Reed’s has the inventory to support growth.
“Obviously, Q1 was challenging, and our results reflect that,” Cohane said in closing remarks. He said the company made deliberate investments in building a stronger foundation and expects that work to benefit the business as the year progresses.
About Reeds (OTCMKTS:REED)
Reed’s, Inc is a U.S.-based beverage company specializing in the development, production and distribution of craft soft drinks, mixers and functional beverages that feature real ginger and other natural ingredients. The company’s flagship Reed’s Ginger Brew line includes Original, Extra and Stronger formulations, each brewed using fresh ginger root to deliver a balance of spicy flavor and perceived health benefits. Reed’s also markets a portfolio of craft sodas under the Virgil’s brand, offering varieties such as Root Beer, Craft Cola and Vanilla Cream Soda without artificial sweeteners or preservatives.
Founded in 1989 by Christopher J.
