Karat Packaging Reports 12.9% Sales Increase to $116.9 Million in Q1 2026

Karat Packaging Inc. reported a net sales increase of 12.9% for the first quarter of 2026, reaching $116.9 million compared to $103.6 million in the same period of 2025. This growth was primarily driven by a $12.1 million increase in sales volume and product mix, alongside a favorable pricing comparison of $2.0 million. However, the company's gross profit rose only slightly to $41.5 million, reflecting a gross margin of 35.5%, down from 39.3% a year earlier, largely due to increased import costs, including tariffs and freight expenses.

The company's net income for the quarter was $7.1 million, a 4.8% increase from $6.8 million in the prior year. This growth in profitability was attributed to higher operating income, which increased to $8.5 million from $7.8 million, despite a slight decline in other income. Operating expenses remained relatively stable, increasing marginally to $33.1 million from $32.9 million, with notable increases in rent and salaries offset by decreases in online platform fees and shipping costs.

Karat Packaging has also made strategic adjustments to its supply chain, increasing domestic purchases to 18.3% of total sourcing, up from 13.8% in the previous year. The company reduced its reliance on suppliers from Taiwan and China while increasing purchases from Malaysia and Vietnam. This shift aims to enhance supply chain resilience and mitigate the impact of tariffs and geopolitical risks. The company operates multiple distribution centers across the U.S., including a significant facility in Rockwall, Texas, which serves as its new headquarters.

As of March 31, 2026, Karat Packaging's total assets were reported at $282.7 million, a decrease from $287.7 million at the end of 2025. Current liabilities increased slightly to $70.4 million, resulting in a working capital of $90.7 million. The company generated $7.2 million in net cash from operating activities during the quarter, a decrease from $7.7 million in the previous year. Looking ahead, Karat Packaging plans to continue focusing on expanding its product offerings and enhancing operational efficiencies while navigating the challenges posed by fluctuating raw material costs and evolving market conditions.