Reed’s Inc. (AMEX:REED) shares gained 6.88% in premarket trading on Wednesday despite the beverage company reporting second-quarter revenue and adjusted earnings below Wall Street expectations, as investors focused on improving margins and lower operating costs.
Revenue fell 21% year on year to $7.5 million from $9.5 million, missing the analyst consensus estimate of $9.62 million.
The company reported an adjusted loss of $0.36 per share, wider than the $0.17 loss expected by analysts.
Gross margin improves sharply
Despite weaker sales, Reed’s delivered a substantial improvement in gross margin, which increased to 24% from 8% in the corresponding period last year.
The improvement was primarily driven by a significant reduction in inventory write-offs, which fell to $0.1 million from $1.6 million a year earlier.
Selling, general and administrative expenses also decreased 6% to $4.7 million, helping the company reduce its quarterly net loss by 29% to $4.3 million from $6.0 million in the prior-year period.
“We are seeing early traction from the corrective actions we took earlier this year, with sequential improvement in net sales, gross margin and overall operating performance,” said Neal Cohane, Reed’s interim CEO.
Cohane said the company has focused on reconnecting with important retail and distribution partners, recovering shelf space and restoring its traditional glass bottle packaging.
Sequential sales increase as logistics costs fall
Reed’s reported some signs of improving momentum compared with the beginning of the year, with net sales rising 5% sequentially from the first quarter of 2026.
Delivery and handling expenses declined to $2.54 per case from $2.95 per case a year earlier, reflecting greater efficiency across the company’s logistics operations.
Inventory was reduced to $7.0 million during the quarter, helping Reed’s improve its cash conversion cycle.
Operating cash use improves
Cash used in operating activities declined to $2.2 million from $5.0 million in the corresponding period last year, providing another indication of improving cost control.
Reed’s held $2.4 million in cash as of June 30, 2026, down from $10.4 million at the end of 2025. Total debt stood at $9.2 million.
The company said it is evaluating financing alternatives to provide additional support for the business as it continues implementing its operational improvement strategy.
The positive premarket reaction suggested investors were placing greater emphasis on stronger margins, reduced expenses and improving cash usage than on the weaker-than-expected quarterly revenue and earnings figures.