Lenige Reports 700M Q2 Loss, Cuts Full-Year Outlook Amid Food Price Surge

Lenige, a prominent temperature-controlled warehouse operator, has reported that soaring food prices and tariff uncertainties are significantly impacting customer inventory levels. This combination of factors has led to a decrease in the occupancy rates of its facilities during the second quarter. The company, headquartered in Novi, Michigan, has revised its full-year outlook due to what it describes as "demand at the bottom."

In its pre-market announcement on Wednesday, Lenige reported a net loss of 700 million dollars for the second quarter. Its adjusted funds from operations (AFFO), excluding depreciation, acquisition, and restructuring costs, stood at 81 cents per share, an increase of 6 cents year-over-year. The company's total revenue grew by 1% year-over-year to 13.5 billion dollars. However, the number of pallets handled through its facilities decreased by 3% year-over-year, with only a slight increase in revenue per pallet stored. The actual occupancy rate for the quarter was 74.6%, a decrease of 230 basis points year-over-year and 190 basis points from the first quarter.

The company's president and CEO noted that seasonal inventory levels were weak at the end of the second quarter and the beginning of the third quarter, leading to a downward revision of the annual outlook. While the company expects both same-store and total net operating income (NOI) to improve sequentially in the second half of the year, it remains cautious about the remainder of the year. The company has adjusted its full-year AFFO guidance to a range of 3.20 to 3.40 dollars per share, with the midpoint down 6%. The adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance is now between 12.9 billion and 13.4 billion dollars, with the midpoint down 4%.

Lenige's new forecast indicates that inventory levels will increase for the remainder of the year, driving up occupancy rates across its network, although at a lower rate than previously anticipated. During a conference call with analysts on Wednesday, management described the pricing environment as "competitive but stable," noting a 5% sequential increase in revenue per pallet for the quarter. The CEO emphasized that the company's focus remains on revenue growth, optimizing labor productivity, and controlling controllable factors to position itself for a strong operational leverage when the industry recovers.

Lenige operates 485 facilities across North America, Europe, and the Asia-Pacific region, with a total space of 31 billion cubic feet. In addition to its warehousing services, the company provides freight brokerage, customs clearance, short-haul transportation, and trucking services. The current challenges faced by Lenige reflect the broader economic pressures affecting the logistics and food distribution sectors. High food prices, driven by increased production costs, supply chain disruptions, and rising demand, have made it difficult for businesses to manage their inventory and storage needs, leading to a decrease in demand for warehouse space. This situation underscores the interconnected nature of the global economy and the need for policymakers to address the underlying issues driving up food prices and impacting the logistics sector. By taking proactive measures to stabilize food prices and support businesses, policymakers can help mitigate the negative impact on the logistics industry and ensure its continued role in the global economy.