Nathan's Famous (NATH) Q1 Revenue Up 5%

Key Points

• Revenue rose 5.0% to $47.00 million (GAAP) in Q1 FY2026 compared to the prior year period.

• Earnings per diluted share (GAAP) declined 4.8% to $2.16.

• The company maintained its $0.50 per share quarterly dividend despite lower GAAP net income and licensing income.

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Nathan's Famous (NASDAQ:NATH), the American hot dog brand known for its iconic Coney Island roots and nationwide distribution, reported earnings for Q1 FY2026 on August 8, 2025. The headline news was a 5.0% increase in revenue to $46,998,000 (GAAP) compared to the prior year period. However, earnings per diluted share (GAAP) fell 4.8% to $2.16 as higher costs, especially for beef, offset topline gains. There were no published analyst estimates to compare with these results. Overall, the quarter showed steady sales growth supported by the Branded Product Program and franchise expansion, but rising food costs and weaker licensing income pressured margins and profits.

Company Overview and Key Business Focuses

Nathan's Famous is a fast-food and food products company originally established in 1916 in Coney Island, New York. Its core business spans several areas: selling branded hot dogs to foodservice outlets, licensing its brand and products for retail sale, and operating both company-owned and franchised Nathan’s restaurants.

The company’s recent strategy centers on leveraging its strong brand to expand revenue streams. The Branded Product Program, which sells Nathan’s hot dogs to businesses such as stadiums and foodservice providers, is a major focus. Licensing agreements, including a large partnership with food manufacturer Smithfield Foods, are also key to the business. Other priorities include opening new franchise locations and maintaining operational efficiency, especially as food and labor costs rise.

Quarterly Performance and Segment Developments

Nathan's Famous grew total revenue by 5.0% (GAAP) in Q1 FY2026 compared to the prior year period. Revenue in this segment jumped 11.2%, helped by an approximately 8% rise in average selling price compared to the prior year period. This allowed the company to pass some of the recent increases in beef costs onto its customers. However, operating income in the Branded Product Program declined to $2.28 million from $2.50 million in the prior year period as the higher cost of beef offset sales gains. This illustrates a classic example of “margin compression” -- when costs rise faster than prices, squeezing profitability.

Product licensing, which brings in high-margin income through brand partnerships like the Smithfield Foods arrangement, fell to $12.38 million, a 4.2% decrease (GAAP) in Q1 FY2026. Royalties from Smithfield Foods itself, covering both retail and foodservice, dropped 4.5% to $11.46 million. The company remains heavily reliant on licensing partner Smithfield, which historically contributed roughly 22% of Nathan’s revenue in FY2025. The licensing segment’s dip stands out, as this has been a stable and profitable source of income in past quarters and prior fiscal years.

Company-owned restaurant sales fell by 5.1% to $3.99 million compared to the prior year period (GAAP). This drop was mainly blamed on a decrease in customer traffic at the iconic Coney Island locations, which the company directly linked to unfavorable weather. Despite this, operating profit in the restaurant segment increased slightly. Meanwhile, franchise-related revenue, which comes both from fees and royalties paid by independent operators using Nathan’s name, was up slightly, and eight new franchised restaurants opened during the period. Total franchisee restaurant sales (not consolidated by Nathan’s, but reflecting system growth) reached $18.44 million compared to $17.65 million in the prior year period, an increase of 4.5%.

Adjusted EBITDA (non-GAAP) decreased 5.3% compared to Q1 FY2025. Income from operations (GAAP) also dropped 7.0%. These declines underscore how sustained cost pressures, notably from beef and other input inflation, are eroding profit margins even as sales rise. The trend shows the importance of efficient cost management, which Nathan’s named as a business focus, but also highlights vulnerabilities inherent to food and labor-based industries.

Looking Ahead: Guidance and Dividends

Nathan’s Famous did not provide new financial guidance for the coming quarter or fiscal year in its earnings release. As a result, investors must look to underlying trends and segment momentum for signals about future performance. Cost pressures and the company’s reliance on partners, especially Smithfield, remain key issues worth monitoring. Exposure to event-related traffic patterns, as seen in Coney Island, adds uncertainty as well. Any further sustained softness in high-margin licensing could affect company-wide profitability going forward.

The quarterly dividend was maintained at $0.50 per share, declared for payment in September 2025 (Q2 FY2026). Investors can expect dividend continuity, but should keep an eye on margin trends, licensing performance, and the pace of franchise growth for future quarters.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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