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Calavo Growers Earnings: Strong Prepared Growth Offsets Fresh Segment Pressure

  • Writer: Hardik Shah
    Hardik Shah
  • Sep 9
  • 3 min read
Calavo Growers Healthy Products
Source: Calavo Growers Sustainability Report

TLDR


  • Revenue Strength: Net sales held steady at $178.8M; Prepared segment up 40% YoY.

  • Margin Trends: Gross margin compressed by inventory write-downs linked to FDA detention hold.

  • Forward Outlook: Management confident in long-term sourcing strategies despite regulatory and trade risks.


Business Overview


Calavo Growers, Inc. is a global leader in sourcing, packing, and distributing avocados, tomatoes, and papayas, as well as processing guacamole and other avocado-based products. The company serves retail grocers, club and mass merchants, foodservice, and wholesale channels worldwide. Its operations are organized into two segments: Fresh (avocados, tomatoes, papayas) and Prepared (guacamole and avocado pulp). Calavo sources heavily from California and Mexico, giving it a strong but exposed global footprint.


Calavo Growers Earnings


Revenue

  • Q3 FY2025 Net Sales: $178.8M, down less than 1% YoY ($179.6M in Q3 FY2024).

    • Fresh Segment: $155.9M, down 5% YoY, due to 5% lower avocado carton volume despite 2% higher pricing.

    • Prepared Segment: $23.0M, up 40% YoY, driven by higher guacamole sales volumes.

  • Nine Months FY2025: $523.8M, up 7% YoY. Growth came from higher avocado pricing and Prepared volume increases.


Margins & Profitability


  • Gross Profit: $18.2M vs. $20.1M prior year; margin pressure from $4.2M FDA-related costs and inventory write-downs.

  • Operating Income: $8.7M, down from $9.4M in Q3 FY2024.

  • Net Income: $4.7M ($0.26 per diluted share) vs. a net loss of $0.7M last year (which included discontinued Fresh Cut operations).

  • Nine Months Net Income: $16.1M, significantly higher than a $0.9M loss in 2024.


Forward Guidance


Management highlighted resilience in sourcing strategies and demand for avocados and guacamole. They expect cost pressures from inflation and trade policy uncertainty to persist into FY2026, but believe proactive sourcing and pricing measures will mitigate impacts.


“While the temporary FDA detention hold created near-term costs, our strong Prepared performance and disciplined sourcing demonstrate Calavo’s ability to navigate volatility.”

Risks & Opportunities


  • Risks: U.S.–Mexico trade tensions, tomato anti-dumping duties, currency fluctuations, and supply chain disruptions from pests or regulatory holds.

  • Opportunities: Expanding Prepared sales, recovering Mexican VAT (IVA) balances, and improved consumer demand for avocado-based products.


Operational Performance


  • FDA Detention Hold: A July 2025 hold on Mexican avocados introduced ~$4.2M in incremental costs; resolved by September 2025. An insurance claim is pending.

  • Supply Chain: Earlier in FY2025, a weevil detection temporarily paused a Mexican facility, but enhanced monitoring has prevented further outbreaks.

  • Segment Snapshot (Q3):

    • Fresh: $155.9M sales, $12.4M gross profit.

    • Prepared: $23.0M sales, $5.8M gross profit.


Market Insights


  • Inflationary Pressures: Higher packaging, labor, and logistics costs.

  • Trade Policy: Brief 25% tariffs on Mexican imports earlier in 2025 and termination of the U.S.–Mexico Tomato Suspension Agreement pose ongoing risks.

  • Industry Dynamics: Prepared products show resilience with consumers continuing to pay for convenience-driven guacamole.


Consumer Behavior & Sentiment


Calavo notes resilient consumer demand for avocados and guacamole, even amid inflation. Shoppers remain loyal to avocado-based products, reflecting category stickiness and a health-forward consumer mindset.


“Our Prepared segment’s 40% year-over-year growth underscores the strength of consumer demand for convenient, healthy products—even in a challenging macro environment.”

Strategic Initiatives


  • Portfolio Optimization: Sale of Fresh Cut business in 2024 sharpened focus on avocados and guacamole.

  • Global Sourcing: Diversification beyond Mexico remains a long-term strategy.

  • Regulatory & Tax Matters: Positive legal rulings in Mexico strengthen efforts to recover ~$54M in IVA receivables.


Capital Allocation


  • Dividends: Quarterly dividend of $0.20/share; $10.7M paid year-to-date, with another payout scheduled for October 31, 2025.

  • Debt & Liquidity: Cash balance of $63.8M; no material new financing activity in Q3.

  • Buybacks: No repurchase activity noted.


The Bottom Line


Calavo Growers delivered stable Q3 2025 results despite regulatory headwinds. Prepared segment growth is a clear bright spot, while Fresh remains pressured by volume declines and external disruptions.

For investors, key watchpoints include:

  1. Recovery of Mexican IVA receivables.

  2. Potential tariff or trade policy shifts affecting Mexican produce.

  3. Insurance recovery tied to FDA detention costs.


Investor Insight: Calavo’s strong Prepared momentum positions it well for long-term growth, but volatility in Mexico-related operations remains the central risk.


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