Primo Brands' Direct Delivery Inflection Marks a Turnaround
Q2 2026: Direct delivery returns to growth, sales guidance raised, EBITDA held flat to fund reinvestment
PRMB · Earnings Call · 2026-08-05
Inflection in Direct Delivery
The second quarter of 2026 may well be remembered as the quarter Primo Brands proved it could fix what was broken. After more than a year of integration-related disruptions, the company's direct delivery business – the source of most of its pain – returned to growth. CEO Eric Foss opened the call with a confident tone: “We're encouraged with the accelerating momentum across the business in the second quarter with strengthening fundamentals.” — Eric Foss, Chairman and Chief Executive Officer · 2026-08-05 That momentum was tangible: Customer Direct net sales grew 0.4% year-over-year, a modest number on its surface but a significant milestone for a business that had been declining for several quarters. Even more telling, management said the return to growth came a quarter ahead of expectations.The recovery in direct delivery is not just about the top line. Operational metrics turned positive. On-time-in-full (OTIF) reached the mid-90s in June, customer quit rates fell sequentially, and call volumes dropped below pre-integration levels. These are the leading indicators that matter. As CFO David Hass noted, the company is now generating return to growth while improving the quality of new customers. “Net leverage was 3.42x at quarter end, an improvement from 3.52x in the first quarter,” — David Hass, Chief Financial Officer · 2026-08-05 reflecting better cash flow and a cleaner balance sheet.
Strength Across the Portfolio
The improved momentum wasn't confined to the direct channel. Retail delivered broad-based growth: regional spring water sales rose 4.1%, purified water increased 1.9%, and premium brands jumped 30.5%. The company gained both dollar and volume share in the bottled water category. This is the kind of balanced growth management has been chasing. Eric Foss emphasized the breadth: “Direct delivery returned to growth, up 0.4% in the quarter.” — Eric Foss, Chairman and Chief Executive Officer · 2026-08-05 Meanwhile, volume share gains were supported by new points of distribution and a more strategic approach to revenue growth management. The result was a second consecutive quarter of year-over-year growth, and the company raised its 2026 comparable net sales growth guidance to 2-4% from 1-3%, citing broadening momentum across both retail and direct delivery.Cost Environment and Guidance
But the headline numbers also reveal a deliberate trade-off. While comparable net sales grew 4.2%, adjusted EBITDA rose only 5% and the company chose to keep its full-year EBITDA guidance unchanged, despite raising the sales outlook. Management framed this as a reinvestment decision, funneling funds into brand building, technology, and the warehouse management system. David Hass explained: “We are reaffirming adjusted EBITDA guidance of $1.465 billion to $1.515 billion as we intend to continue to invest behind growth and as we manage the current dynamic macro cost environment.” — David Hass, Chief Financial Officer · 2026-08-05 The cost environment remains a headwind. Transportation costs are pressured by a tight freight market and higher spot rates, and commodity inflation is still present. The company is managing this through hedging and productivity initiatives. Notably, the industry is currently fixated on tariff refunds – a theme dominating this quarter's earnings calls across many sectors. While Primo does not explicitly highlight tariff exposure, the broader market is seeing meaningful benefits from IEEPA refunds; for example, numerous recent reporters from beverage and packaging industries have cited such refunds as a tailwind. Primo's decision to keep EBITDA flat while investing for growth suggests confidence that these cost pressures are transient and that the operating leverage will return as the top line accelerates.Leadership Simplification
Underpinning the operational improvements is a structural change designed to accelerate decision-making. The company eliminated the Chief Operating Officer role, added a President of Customer Direct and Go-to-Market, and elevated the Chief Supply Chain Officer to report directly to the CEO. As Eric Foss stated:This simplification is intended to create a more agile operating model, eliminate layers, and put the customer experience at the center of every decision. Management believes these changes, combined with the recovery in direct delivery, will fuel a growth flywheel that ultimately drives margin expansion and long-term value creation.Direct delivery returned to growth, up 0.4% in the quarter. This return to growth was one quarter ahead of our expectations and marks a significant milestone reflecting meaningful progress in stabilizing the business and improving the customer experience.
The fundamentals support the narrative of stabilization. Operating income swung back to a positive $138 million in Q1 2026, after a loss in Q4 2025, as the business stabilized and pricing actions began to land. While gross margin remains compressed at 28.6% (down 3.7 points year-over-year) due to cost inflation, the trajectory is improving, and management's disciplined approach to SG&A and supply chain should help recover lost ground as volume returns. For investors, the key takeaway is that the risk of a permanent growth impairment has been removed. Primo Brands is no longer a repair story; it is a turnaround story with a credible plan to return to its long-term algorithm of 3-5% growth and expanding margins.