Calavo suffers a staggering 32 percent gross profit drop in its fresh segment category
Fresh produce packer and distributor Calavo reported its financial results for Q3 2025, as well as the nine-month period ended July 31, 2025.
For the third quarter of the year, the company's total net sales remained steady at $178.8 million, with a slight decline of one percent compared to 2024.
Financial results hit hard by unusual costs
Fresh segment sales also showed little variation, totaling $155.9 million, with a five percent year-over-year decrease. However, the category's gross profit was hit with a 32 percent drop, totaling $12.4 million. The impact was felt strongly in Calavo's overall gross profit numbers, which suffered a staggering nine percent decrease, totaling $18.2 million compared to the same period last year.
In a press release announcing the financial results, the company stated these drops were the direct result of approximately $4.2 million of discrete costs associated with a temporary Food and Drug Administration detention hold on certain avocado imports from Mexico.
The hold was tied to the detection of traces of Imazalil, a postharvest fungicide not approved for use on avocados, in one of the company's shipments from their Mexican facility. The situation, Calavo explained, resulted in third-party inspection and testing costs, as well as incremental logistics and handling expenses, that slowed cross-border movement.
"As of September 2, 2025, the FDA matter has been resolved," said Lee Cole, President and Chief Executive Officer of Calavo. "This was the first detention hold in the history of Calavo de Mexico since operations began in 1998, and we believe it was a non-recurring event.”
However, the problem didn't stop there, as the company says there were inventory write-downs on fruit diverted or sold at distressed prices.
Meanwhile, the prepared segment experienced a 201 percent increase from the prior year, with a gross profit of $5.8 million.
"Our third quarter results highlight both the challenges and the opportunities in our business," Cole added. "We also achieved an important legal milestone in August, when a Federal Court in Mexico formally recognized Calavo de Mexico as a maquila."
Combined with the momentum in the company's win in the prepared segment, the executive assured that Calavo is well-positioned for growth and increased shareholder value.
Other indicators in the company's Q3 financial report
- Selling, general, and administrative expenses were $9.2 million, a 12% decrease from the prior year.
- Net income from continuing operations attributable to Calavo Growers, Inc. was $4.7 million, or $0.26 per diluted share, compared to $5.4 million, or $0.30 per diluted share, in the prior year.
- Adjusted EBITDA was $15.1 million, compared to $12.9 million in the prior year.
- Adjusted net income was $10.2 million, or $0.57 per diluted share, compared to $10.0 million, or $0.56 per diluted share, in the prior year.
The company clarified that it modified the Adjusted Net Income calculation during Q3 2025 to add back stock-based compensation expense. Calavo's management, says the press release, believes this change enhances comparability with industry peers and provides a clearer representation of core operating performance.
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