Ethan Huntley

Ethan Huntley from Goldman Sachs, on for Bonnie Herzog, questioned the decision to maintain full-year sales guidance after a strong Q2, noting it implies a weaker Q4. He also sought clarity on the expected impact of tariffs on gross margins.

Answer

CFO Girish Satya explained the cautious outlook is due to the uncertain macro environment and, more importantly, lapping a substantial Walmart pipeline fill from the prior year's Q4. He confirmed tariffs are expected to have a 200 basis point impact on gross margin, with the effect becoming material in Q3, but noted that incremental cost savings should offset this pressure in 2026.

Ethan Huntley of Goldman Sachs inquired about The Vita Coco Company's strategy for mitigating tariffs, including whether they front-loaded inventory, and asked for the rationale behind raising the SG&A growth guidance.

Answer

CEO Martin Roper explained that tariff mitigation involves leveraging their healthy inventory position, ongoing cost-saving initiatives, supplier negotiations, and planned pricing actions to offset the 10% baseline tariff. CFO Corey Baker clarified that the updated SG&A guidance reflects a wider range of potential spending outcomes for the year and noted that while marketing ROI is hard to calculate precisely, they continually adjust spending based on performance metrics.

Ethan Huntley inquired about the growth outlook for the coconut water category, Vita Coco's market share strategy given its mid-teens growth target, and specific initiatives to increase household penetration. He also asked about distribution upside by channel and potential shelf space gains from upcoming resets.

Answer

CEO Martin Roper stated that long-term category growth is expected in the high-single to low-double digits in North America, with faster growth internationally. He noted a recent acceleration to the low-20s. Roper explained that growth initiatives focus on education, trial, and retail execution. He identified significant distribution opportunities in convenience stores and for multipacks in food and mass channels, while also addressing a recent Walmart shelf reset which is expected to be a long-term positive despite a short-term drag on scan data.