Hf Foods Group (NASDAQ:HFFG) reported higher first-quarter revenue and improved profitability as management said volume growth, cost controls and operational changes helped offset pressure from product mix, tariffs and rising fuel costs.
The Asian specialty food distributor posted net revenue of $312 million for the quarter ended March 31, 2026, up 4.5% from $298.4 million in the prior-year period. President and Chief Executive Officer Felix Lin said the increase was driven by higher volume, while Chief Financial Officer Paul McGarry said improved seafood pricing and commodity volume growth also contributed.
Gross profit declined slightly to $50.5 million from $51 million a year earlier, while gross margin fell to 16.2% from 17.1%. Management attributed the margin decline primarily to a higher mix of lower-margin seafood products and increased landed costs.
Adjusted EBITDA rose 3.8% to $10.1 million from $9.8 million. Net income attributable to HF Foods was $1.2 million, compared with a net loss of $1.6 million in the year-ago quarter. Earnings per share improved to $0.02 from a loss of $0.03 per share. Adjusted earnings per share declined to $0.06 from $0.07.
Cost pressures persist as company seeks efficiency gains
Lin said broader foodservice industry headwinds that emerged in 2025, including tariff pressure and lower foot traffic, continued into the first quarter. He said rising fuel prices added pressure 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 said.
In response to an analyst question about gross margin, Lin said elevated costs are likely to continue for “a little while,” including into the second quarter and possibly the third quarter of 2026. He noted that HF Foods operates largely in a spot market and said year-over-year comparisons are affected by lower-cost inventory the company held in the prior year as tariffs were implemented.
Lin said the company is working to offset cost pressure through measures including lower occupancy expense from converting a leased facility to company ownership, reduced professional fees and changes to sales operations.
McGarry said distribution, selling and administrative expenses decreased by $0.3 million to $49.5 million, primarily due to lower professional fees and bad debt expense, partially offset by higher auto and truck expenses and depreciation. DS&A expenses declined as a percentage of revenue to 15.9% from 16.7%.
Transformation plan moves from implementation to optimization
Management highlighted progress on HF Foods’ long-term transformation plan, including sales operations, digital infrastructure and facility upgrades.
Lin said the company consolidated two sales call center operations into one unified team in late December 2025. He said the move is designed to improve control over the sales process, customer service and pricing consistency across the company’s network, while still preserving customer relationships through knowledge of customer businesses, language and product needs.
Lin said the company is already seeing efficiency benefits from lower sales commission-related SG&A spending as the new team adapts.
With the company’s ERP implementation completed, Lin said HF Foods is now focused on system and data optimization. He 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.
Lin said the next stage of the company’s digital transformation is the development of a customized customer portal intended to improve transactional visibility and efficiency.
Facility investments target cross-selling growth
HF Foods also provided updates on several facility projects tied to 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 said the Charlotte facility is “largely ready” but still awaiting final local government permits. The company expects Charlotte to be fully operational in late second quarter or early third quarter of 2026, which Lin said would shorten seafood distribution routes in the Southeast.
HF Foods is also beginning phase two of its Atlanta freezer expansion plan. Lin said 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. He said those regions represent “several hundred million” dollars of organic growth opportunity as the company expands capacity.
During the question-and-answer session, Lin said the Southeast historically has not had significant frozen seafood sales for HF Foods, despite frozen seafood representing 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.
Lin said the Atlanta facility has already opened “a couple” dedicated seafood routes to serve existing customers, while Charlotte is expected to benefit the company in the second half of the year once permits are finalized.
M&A remains a focus as smaller operators face pressure
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 said HF Foods is focused on acquisitions that expand its geographic footprint, capture operating synergies, broaden its customer base and enhance product and service capabilities.
Asked whether higher fuel prices and elevated costs are affecting smaller competitors, Lin said the company has seen inbound M&A calls increase over the past several months. He said smaller players are being squeezed by elevated inventory costs and fuel-related operating costs, which could create opportunities for HF Foods.
“Over time, we do see that as an advantage,” Lin said, comparing the environment to the pandemic period, when pressure on family-owned businesses led some to seek exits.
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 said 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 said 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.
“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.
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.
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