Shares of Nathan’s Famous, Inc. NATH have lost 9.9% since the company released results for the quarter ended Sept. 28, 2025, notably lagging the S&P 500 Index’s 0.8% gain over the same period. Over the past month, the stock has slipped 9.1%, while the broader index has advanced 3.6%, underscoring continued investor caution following the earnings announcement.
NATH’s Earnings Snapshot
Nathan’s Famous posted higher revenues but lower profitability in the second quarter of fiscal 2026. Quarterly revenues rose 11.1% to $45.7 million from $41.1 million a year earlier, driven primarily by growth in the Branded Product Program, but income from operations dropped 22.1% to $7.5 million from $9.6 million. Net income declined 13.8% to $5.2 million from $6 million, and diluted earnings per share fell 14.3% to $1.26 from $1.47.
Segment results reflected mixed performance. Revenues in the branded product program increased 18.4% to $29 million from $24.5 million, product licensing revenue dipped 2.8% to $9.2 million from $9.5 million, and restaurant operations revenue improved 4.9% to $6.8 million from $6.5 million. Corporate revenue was essentially flat year over year.
Nathan’s Famous’ Operating Metrics and Cost Pressures
NATH delivered solid top-line growth in the Branded Product Program during the quarter, but at the cost of margin compression. For the 13 weeks ended Sept. 28, 2025, branded product revenue rose 18.4% to $29 million from $24.5 million, driven by roughly a 7% increase in hot dog volume and an 11% increase in average selling price versus the prior-year quarter. However, the cost of sales in this segment climbed 26.9% to $29.6 million from $23.3 million, reflecting a 20% rise in the average cost per pound of hot dogs due to higher beef and beef-trimmings prices. As a result, the Branded Product Program swung to an operating loss of $1.1 million against an operating income of $0.7 million a year earlier.
Company-owned restaurants fared better on profitability. Quarterly restaurant sales increased 5.2% to $5.6 million from $5.3 million, supported by a 7% traffic increase at the Coney Island locations. Restaurant cost of sales was $2.8 million, or 50% of sales, slightly improved from 51% in the prior-year quarter. Food and paper costs as a percentage of company-owned restaurant sales declined to 23.8% from 24.2%, and labor and related costs as a percentage of company-owned restaurant sales eased to 25.7% from 26.5%, helped by menu price increases and labor-efficiency efforts that more than offset New York State minimum wage hikes. Restaurant operating income improved 11.9% to $1.9 million from $1.8 million in the year-ago period.
Adjusted EBITDA for the quarter declined 20% to $8.3 million from $10.4 million, reflecting both higher input costs and lower licensing revenue.
On a year-to-date (26 weeks) basis, the same cost dynamics are evident. Branded Product Program revenue increased 14.7% to $58.1 million from $50.7 million, with hot dog volume up 3% and average selling prices 10% higher than a year earlier, but the average cost per pound of hot dogs was about 16% higher, keeping pressure on margins even as the segment remained profitable for the first half.
On a year-to-date basis, Nathan’s Famous opened 14 franchised locations, and franchise-related revenues — including royalties and fees — ticked higher. Franchise restaurant sales, which are not included in company revenues, rose 5.5% to $38.3 million from $36.3 million.
Nathan’s Famous, Inc. Price, Consensus and EPS Surprise
Nathan’s Famous, Inc. price-consensus-eps-surprise-chart | Nathan’s Famous, Inc. Quote
NATH’s Management Commentary and Market Dynamics
Management highlighted the ongoing impact of commodity inflation, particularly in beef markets, which remains a central driver of margin volatility across the business. Nathan’s Famous continues to face a cost environment where increases in beef and beef-trimming prices can outpace pricing actions, pressuring profitability even during periods of revenue growth. Leadership also pointed to broader economic factors, including inflationary trends and labor cost increases, as ongoing considerations for operational performance.
NATH underscored the importance of its licensing partnerships and franchise expansion efforts in supporting long-term growth. Results continue to be influenced by the performance of the flagship Coney Island locations, which remain key traffic drivers within the restaurant segment. Management also reiterated the broader set of risks tied to consumer demand shifts, weather-related impacts on seasonal restaurant traffic, and Nathan’s Famous’ reliance on consistent performance under its major licensing agreement.
Factors Influencing Nathan’s Famous’ Headline Results
Stronger top-line performance in the quarter stemmed primarily from the Branded Product Program, supported by higher selling prices and modest volume gains. However, Nathan’s Famous’ cost structure absorbed significant inflationary pressure, particularly in beef inputs, leading to the compression of operating margins. The product licensing segment, a historically high-margin contributor, posted slight erosion due to lower royalties, while corporate expenses increased year over year.
NATH’s Guidance
Nathan’s Famous did not issue formal financial guidance for upcoming periods. Management refrained from providing revenue, margin or earnings projections, instead maintaining a cautious stance amid ongoing cost pressures and market uncertainties. While acknowledging the variables that could influence future performance, NATH chose not to offer specific forward-looking targets at this time.
Nathan’s Famous’ Other Developments
The board of directors declared two quarterly dividends of $0.50 per share during the first half of the fiscal year and, on Nov. 6, declared another quarterly dividend and a special cash dividend of $2.50 per share, payable in December 2025. No acquisitions, divestitures or restructuring activities were disclosed in the source documents.
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Nathan’s Famous, Inc. (NATH): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).