Utz Brands plans logistics accounting reclassification
Snack maker to reclassify distribution costs to improve peer comparability; EBITDA and EPS unchanged
Utz Brands is preparing to reclassify significant logistics and distribution expenses from selling, general and administrative costs to cost of goods sold, a technical accounting change designed to bring the snack maker's financial reporting in line with industry peers. The reclassification, which will take effect in the fourth quarter of 2025 and be applied retrospectively to fiscal years 2023 through 2025, will shift inter-location logistics costs, direct store delivery distribution center expenses, and outbound shipping costs into the cost of goods sold line item.
The company emphasized that the accounting change will have no impact on key financial metrics including EBITDA, adjusted EBITDA, net income, or earnings per share. What will change, however, is the composition of gross profit and operating expenses, making Utz's financial statements more directly comparable to competitors in the salty snack industry.
Utz, which produces potato chips, pretzels, and cheese balls from its headquarters in Hanover, Pennsylvania, has been executing an ambitious supply chain transformation since late 2023. The company has been consolidating facilities and optimizing its distribution network to drive efficiency and reduce costs. This network optimization includes strengthening direct store delivery capabilities, which has historically been a competitive advantage for the company.
The snack maker's recent performance has shown steady growth. Preliminary full-year 2025 results indicate net sales of $1.439 billion to $1.440 billion with adjusted EBITDA of $216 million to $218 million. The company achieved nearly 4% organic net sales growth for branded salty snacks in fiscal year 2024 and recorded its ninth consecutive quarter of volume share growth in the category during the third quarter of 2025.
However, profitability metrics have been under pressure. The company currently trades at a trailing price-to-earnings ratio of 175.67, reflecting extremely thin profit margins with a net profit margin of just 0.4%. Operating margins stand at 1.01%, while quarterly earnings growth declined 47.8% year-over-year in the most recent period. These challenges underscore why management might want to present its financial results in a manner that maximizes comparability with industry peers.
Analysts maintain a generally positive outlook on the stock despite the profitability concerns. The consensus rating stands at "hold" with an average price target of $14.60, representing significant upside from the current share price of $10.67. Among the 11 analysts covering the company, eight rate it a buy or strong buy, while three recommend hold. The stock is trading below its 200-day moving average of $12.09 but above its 50-day moving average of $10.07.
The snack food industry presents particular challenges for financial comparability, as companies exercise significant judgment in allocating expenses between cost of goods sold and SG&A. Shipping costs, advertising expenditures, and distribution expenses can be classified differently across companies, making direct comparisons difficult. By moving logistics costs into cost of goods sold, Utz will align its reporting more closely with competitors like PepsiCo's Frito-Lay division and other large snack manufacturers.
For investors, the key consideration is that while this accounting change will shift expenses between line items, it does not alter the underlying economics of the business. EBITDA and earnings power remain unchanged. The reclassification should, however, make it easier to assess Utz's operational efficiency relative to peers, potentially supporting valuation arguments as management continues its supply chain transformation and geographic expansion initiatives.
The stock has a market capitalization of approximately $922 million, with institutional investors holding nearly 90% of shares. Insiders own 18.2% of the outstanding stock. The company's enterprise value-to-EBITDA ratio stands at 13.52, suggesting the market is pricing in expectations for improved operational performance from the ongoing supply chain initiatives.
Investors should watch for the actual implementation of this accounting change in the company's fourth quarter 2025 financial statements and any accompanying commentary from management about how the reclassification affects gross margin comparisons with competitors. The retrospective application to previous years will provide a clearer view of historical trends under the new reporting structure.