Karat Packaging Stock Plunges 35% After Q3 Margin Squeeze and Weaker Profit

Karat Packaging Inc. (Nasdaq: KRT) fell 34.8% on Friday, Nov. 6, 2026, closing at $33.54 from a previous close of $51.44, on volume of 4.7 times normal, while the S&P 500 ETF (SPY) rose 0.31%. The drop followed a third-quarter earnings release that the company filed with an 8-K on Nov. 5, 2026.

Margins fell while sales grew

Net sales for the quarter ended Sept. 30 rose 8.2% to $134.7 million. Gross margin, however, slipped to 33.5% from 34.5% a year earlier, and net income fell to $4.7 million from $7.6 million. Adjusted EBITDA came in at $8.9 million, or 6.6% of net sales, compared with $13.1 million, or 10.5%, in the prior-year quarter.

The company blamed higher import and domestic shipping costs and elevated resin prices. Ocean freight costs rose $2.4 million, reflecting an 11.7% increase in containers imported and a 17.0% increase in the average container rate. Operating expenses rose 17.2% to $40.3 million, including $2.8 million in higher shipping and transportation costs. Chief Executive Alan Yu said the results were "below our expectations."

Guidance and pricing moves

The company guided to fourth-quarter net sales growth of 9% to 11% and a fourth-quarter gross margin of 33% to 35%. It said it is implementing price increases on select items this month and in January 2027, and is shifting sourcing toward Indonesia, Malaysia and South America.

Online growth and new accounts

Online sales rose nearly 38% from the prior-year quarter, to $26.9 million. The company also said it won four additional chain accounts in the third quarter, with shipments expected to start in the first half of 2027.

The filing did not state an analyst or investor reaction to the results, and no analyst actions were reported for the session.