Americold Q3 2025 Earnings Call: Contradictions Emerge on Demand, Occupancy, and Pricing Strategies Amid Tariff Pressures

Date of Call: November 6, 2025

Financials Results

• EPS: AFFO per share $0.35, in line with expectations

Guidance:

• Reiterating guidance for the remainder of 2025; Q3 AFFO/share = $0.35 (in line).
• Expect pricing headwind of ~100–200 bps in 2026 across storage and services.
• Anticipate economic occupancy decline of ~200–300 bps in 2026.
• Seasonal occupancy lift of ~100 bps next quarter driven by harvest.
• Maintain dividend and investment-grade profile; net debt / pro forma core EBITDA ~6.7x with ~$800M liquidity.
• Development pipeline ≈ $1B; maintain 10–12% ROI hurdle for projects.

Business Commentary:

* Challenges in Demand and Supply Side Pressures: - Americold's same-store economic occupancy was 75.5%, down year-over-year, and same-store throughput increased slightly sequentially but was still below expectations. - The decline in demand, particularly among lower-income consumers, and excess capacity due to speculative development in the 4 distribution node were the primary reasons for these pressures.

• Renewal Pressures and Pricing Strategy:
• Rent and storage revenue per economic pallet increased sequentially and year-over-year, but fixed commitment renewal levels and rates were under pressure, especially in the 4 distribution node.

• The company is balancing pricing and occupancy strategies to maintain market share while faced with industry-wide headwinds from lower demand and increased supply.

• Focus on Core Strategic Growth:

• Americold emphasized growth in production attached and retail distribution facilities, leveraging long-term fixed commitments and strategic partnerships to offset industry pressures.

• This strategy is aimed at capitalizing on the unique value proposition of its mission-critical infrastructure and customer relationships.

• Portfolio Management and Cost Control:

• Americold exited 3 facilities during the quarter and plans additional closures to reduce occupancy costs, aiding in maintaining margins despite the challenging environment.
• These actions are part of a broader portfolio management initiative focused on strategically reducing costs and improving operational efficiency.

Sentiment Analysis:

Overall Tone: Neutral

• Management: "AFFO per share of $0.35," "we are reiterating guidance for the remainder of the year," cautioned that they "anticipate pricing headwind of about 100 to 200 basis points next year" and "economic occupancy could decrease by approximately 200 to 300 basis points next year," while emphasizing long-term confidence in the business and portfolio.

Q&A:

• Question from Samir Khanal (BofA Securities): How should we think about throughput over the next 12 months and what are you seeing on the ground recently?
  Response: Throughput remains challenged due to weak consumer demand; seasonal Thanksgiving/Christmas lift is muted and throughput is expected to be pressured into next year.

• Question from Samir Khanal (BofA Securities): Interest expense came down — why didn't AFFO increase?
  Response: A reclassification shifted amounts from other income into interest expense, offsetting the interest benefit, so AFFO did not materially change.

• Question from Greg McGinniss (Scotiabank): What are you doing to control costs given margin pressure and expectations going forward?
  Response: We've matched direct labor to throughput, driven handling margins above 12%, advanced Project Orion and productivity targets, and are exiting low-occupancy sites to remove costs.

• Question from Greg McGinniss (Scotiabank): Will Americold need to adjust fixed-commitment pricing down on renewals because of new supply?
  Response: We evaluate renewals case-by-case balancing price, volume and term; fixed commitments have been maintained at ~60% but some tightening is occurring in pressured markets.

• Question from Michael Carroll (RBC Capital Markets): Is the sizable sales pipeline still intact or has it pulled back?
  Response: Pipeline remains a bright spot and will produce a record year for new business wins, but wins are slower to materialize and often come in at lower volumes than originally contracted.

• Question from Michael Carroll (RBC Capital Markets): Are fixed-commitment renewals seasonal or spread throughout the year?
  Response: Renewals are spread throughout the year and are driven by contract-year timing rather than calendar quarters.

• Question from Michael Griffin (Evercore ISI): Would you concede pricing to secure longer-term fixed commits?
  Response: We balance price, volume, contract length and network business per deal; there's no one-size-fits-all approach.

• Question from Michael Griffin (Evercore ISI): For facilities taken offline, how are costs treated and what's the ultimate plan?
  Response: Mostly leased facilities at end of lease; costs are minimal and largely capitalized then moved below the line briefly; customers are often migrated to nearby owned assets.

• Question from Blaine Heck (Wells Fargo): What did customers tell you about cost pressures and inventory planning?
  Response: Customers are hesitant to build inventory, trying to manage seasonal spikes with existing stock; they are debating timing to rebuild, new SKU introductions and promotional strategies.

• Question from Blaine Heck (Wells Fargo): When might weaker new entrants exit and will that create acquisition opportunities?
  Response: Exits may accelerate over time and could become opportunistic, but not yet; Americold will focus on running its business and evaluate opportunities as they arise.

• Question from Michael Goldsmith (UBS): What assumptions lead you to conclude excess capacity will take a couple of years to absorb and how will you position yourselves?
  Response: Estimated industry incremental capacity ~15%; absorption tied to GDP/population growth and market share gains; Americold will pursue retail, QSR, triple-net and strategic partnerships to capture demand.

• Question from Michael Goldsmith (UBS): How does pricing vary for low-occupancy facilities that might become fuller?
  Response: Pricing outcomes vary by market and contract terms; greatest pressure is in multi-tenant 4 distribution nodes where speculative supply was concentrated.

• Question from Nicholas Thillman (Robert W. Baird): How does portfolio age and composition break down across the four nodes?
  Response: No offhand age breakdown provided; management strongly defends the quality and maintenance of its network and says asset quality supports market share gains.

• Question from Nicholas Thillman (Robert W. Baird): How do buybacks rank versus development given recent vintage returns and discounted stock?
  Response: Development remains a priority to meet customer needs and strategic partnerships; management is balancing development with maintaining the dividend and investment-grade profile, not prioritizing buybacks now.

• Question from Michael Mueller (JPMorgan): Should the 200–300 bps economic-occupancy erosion be ratable through the year, and will pricing be negative in 2026?
  Response: Management expects the cited annual impacts (pricing headwind 100–200 bps and occupancy down ~200–300 bps) across the year; some headwinds may show early but they view the figures as annual impacts rather than precise quarterly phasing.

• Question from Todd Thomas (KeyBanc): Could economic occupancy fall further beyond 2026 if demand stays weak?
  Response: Unclear beyond 2026; renewals occur each year and outcomes will depend on market conditions—improvement would be tailwind, continued weakness a continued headwind; 2026 is viewed as the key year for renewals.

• Question from Todd Thomas (KeyBanc): Will you reshape the portfolio mix or materially change capital deployment?
  Response: Will lean into production-attached and retail distribution (higher ROI and stickier demand), avoid adding speculative 4 distribution capacity, and pursue port growth aligned with strategic partners.

• Question from Brendan Lynch (Barclays): What nonfood/other food categories are you exploring?
  Response: Exploring co-located dry goods, floral, pharma, components, pet food and select nonfood categories as opportunistic avenues to drive occupancy.

• Question from Brendan Lynch (Barclays): Any power-cost risk and protections?
  Response: Multiple initiatives (solar, LED, maintenance, rapid doors) to reduce consumption and the company seeks to pass through uncontrollable power cost increases to customers where appropriate.

Contradiction Point 1

Throughput and Demand Conditions

It involves expectations regarding throughput and demand conditions, which are crucial for understanding company performance and market trends.

How should we assess throughput over the next 12 months considering current demand and customer feedback? - Samir Khanal (BofA Securities)

2025Q3: Demands remain challenged due to lower and middle-income consumers still under significant pressure. Throughput expected to remain challenged through next year. - Robert Chambers(CEO)

What factors are impacting revenue growth in the second half of the year? - Stephen Thomas Sakwa (Evercore ISI)

2025Q2: Our revenue growth expectation for this year is anchored on demand headwinds, interest rates, tariffs and inflation. It's very difficult to predict when we are going to get back to a level of demand that would give us a little bit more visibility into our customer base. - George F. Chappelle(CEO)

Contradiction Point 2

Occupancy and Seasonality Expectations

It involves expectations regarding occupancy and seasonal trends, which are critical for understanding company performance and market trends.

How are you controlling costs and managing margin declines, and how will new supply impact pricing? - Greg McGinnis (Scotiabank)

2025Q3: The second half will look similar to the first half in terms of occupancy, with no significant seasonal lift expected. We removed 200 basis points of seasonal improvement due to no observed lift in July. - George F. Chappelle(CEO)

Can you provide more context on your Q3 and Q4 occupancy expectations and clarify how much current occupancy is below prior expectations? - Greg Michael McGinniss (Scotiabank)

2025Q2: The second half will look similar to the first half in terms of occupancy, with no significant seasonal lift expected. We removed 200 basis points of seasonal improvement due to no observed lift in July. - George F. Chappelle(CEO)

Contradiction Point 3

Demand and Inventory Levels

It involves differing perspectives on the current state of demand and inventory levels, which are critical factors impacting the company's financial performance and strategic decisions.

How should we assess throughput over the next 12 months considering current demand and customer feedback? - Samir Khanal (BofA Securities, Research Division)

2025Q3: Demands remain challenged due to lower and middle-income consumers still under significant pressure. Throughput expected to remain challenged through next year. - Robert Chambers(CEO)

Are inventories being cut more than expected or at a historical low? - Michael Carroll (RBC)

2025Q1: Demand drives inventory levels. The reduction is due to tariffs and inflation fears impacting consumer confidence. - George Chappelle(CEO)

Contradiction Point 4

Impact of Tariffs and Inflation

It highlights differing views on the impact of tariffs and inflation on consumer confidence and business operations, which are crucial for understanding the company's strategic decisions and financial performance.

How should we assess throughput for the next 12 months considering current demand and customer feedback? - Samir Khanal (BofA Securities, Research Division)

2025Q3: We saw a significant slowdown in demand for the first time since the pandemic, more so in the middle market. - Robert Chambers(CEO)

Can you differentiate customer conversations before and after April 2nd? When did you first notice a slowdown in demand? - Samir Khanal (Bank of America)

2025Q1: The direct impacts of tariffs are relatively modest. However, indirect impacts, including consumer confidence, are significant. - George Chappelle(CEO)

Contradiction Point 5

Pricing Strategy and Churn

It involves differing perspectives on the company's pricing strategy and customer churn, which are crucial for understanding the company's growth and profitability.

Can you provide pricing for long-term fixed commitments and explain how P&L impacts facilities you exit? - Michael Griffin (Evercore ISI Institutional Equities, Research Division)

2025Q3: We're definitely going to hold our pricing. We think we're in a pretty good position. - Robert Chambers(CEO)

Was the pricing strategy execution due to reduced customer business or customer churn? - Ki Bin Kim (Truist Securities)

2025Q1: Customer churn stayed in line with previous levels. The decrease is due to lower demand and tariff effects, causing inventory reductions. - George Chappelle(CEO)