Reeds (OTCMKTS:REED) reported second-quarter results that showed sequential improvement in sales, gross margin and operating costs as the beverage company continued efforts to streamline its inventory, strengthen retail execution and improve its supply chain.
Net sales for the quarter ended June 30 totaled $7.5 million, down from $9.5 million a year earlier, primarily because of lower volumes with recurring national customers. However, sales rose 5% from the first quarter of 2026, which Interim Chief Executive Officer Neal Cohane said reflected early progress from corrective actions begun earlier this year.
Margins Improve as Inventory Write-Offs Decline
Gross profit increased to $1.8 million from $0.8 million in the prior-year quarter, while gross margin expanded to 24% from 8%. Chief Financial Officer Douglas McCurdy said the improvement was primarily driven by a sharp reduction in inventory write-offs, which fell to $0.1 million from $1.6 million a year earlier.
Cohane said the company substantially completed portfolio rationalization work during the quarter, liquidating underperforming and non-strategic stock-keeping units. Reeds reduced inventory to $7 million and improved its cash conversion cycle, he said.
Delivery and handling expenses declined 30% year over year to $1.1 million, or 15% of net sales, from $1.6 million, or 17% of sales. On a per-case basis, delivery and handling costs fell to $2.54 from $2.95. McCurdy attributed the decline to logistics efficiency and freight optimization.
Selling, general and administrative expenses declined 6% to $4.7 million from $5 million. The reduction reflected lower legal settlements and continuing expense optimization, partly offset by investments in personnel and related services supporting the company’s Asia growth initiative.
Reeds reported a net loss of $4.3 million, or $0.36 per share, compared with a $6 million loss, or $0.78 per share, in the prior-year period. EBITDA loss narrowed 30% to $4 million from $5.7 million, while cash used in operations decreased to $2.2 million from $5 million.
Retail and Product Initiatives
Management said it regained shelf space and expanded distribution doors by re-engaging national and regional retailers. Cohane said the company has spoken with major customers including Food Lion, Publix, Sprouts Farmers Market, Kroger, Wegmans, Ingles Markets, Harris Teeter and Albertsons.
Reeds has also restored its heritage glass-bottle packaging in certain locations. Cohane said the previous elimination of glass bottles had negatively affected the business, including at Whole Foods, which he described as one of the company’s largest-volume-per-outlet customers. The company plans to meet with Whole Foods in October.
The company has invested in a national broker partner with more than 75 sales professionals to expand retail coverage and improve in-market execution. Cohane said commitments from retail discussions are expected to begin translating into results around the latter part of the third quarter and into the first quarter of 2027.
Reeds is preparing several product launches for the second half, including four-packs of 7.5-ounce mini cans of tonic, club and grapefruit mixers, each with a hint of ginger. The company also plans to introduce its top-selling canned ginger ale in glass bottles and is developing a premium ginger beer line in exotic flavors.
Supply Chain Changes and Margin Outlook
Chief Operating Officer Damian Warshall completed his first full quarter with Reeds during the period. His initial priorities included inventory control, supply-chain management, vendor relationships and production efficiency.
The company reviewed its contract manufacturing network and consolidated production to align products with preferred facilities and regions. Reeds also eliminated two co-manufacturers from its legacy network whose production and outbound logistics costs were above benchmarks achieved elsewhere, according to Cohane.
Management said it deployed new operations software to improve forecasting and national raw-material purchasing. Over the past two months, the company also developed an in-house sales and demand-planning tool designed to account for customer baseline demand, seasonality and expected distribution gains.
Cohane said Reeds intends to lower national inventory further in the third quarter, freeing working capital and improving production efficiency. He also said the company expects gross margins to continue improving over time into the mid-30% range, supported by better trade-spend efficiency, customer and product-mix analysis, supply-chain actions and selective price increases.
Liquidity and Financing Review
As of June 30, Reeds had $2.4 million in cash and $9.2 million of total debt, net of deferred financing fees. At Dec. 31, 2025, the company had $10.4 million in cash and the same $9.2 million debt balance.
Management said it is evaluating financing alternatives to support the business and its growth plans. Cohane said the company aims to use production relationships and lower minimum order quantities to introduce products without building excessive inventory, helping preserve cash while testing new offerings in the market.
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.
