Temperature-controlled warehouse operator Lineage Inc. said high food prices and tariff uncertainty are weighing on customer inventories. The combination pushed occupancy lower at its facilities during the second quarter. With “demand bouncing along the bottom” the Novi, Michigan-based company lowered its full-year outlook.
Lineage (NASDAQ: LINE) reported a headline net loss of $7 million for the second quarter on Wednesday before the market opened. Adjusted funds from operations (AFFO), which excludes depreciation, acquisition and restructuring costs, of 81 cents per share was 6 cents higher year over year.
The company reported a 1% y/y increase in consolidated net revenue to $1.35 billion. On a same-warehouse comparison, pallets processed through its facilities declined 3% y/y, with storage revenue per pallet up just slightly. Physical occupancy was 74.6% in the quarter, which was 230 basis points lower y/y and 190 bps worse than the first quarter.
Table: Lineage’s key performance indicators
“We saw muted seasonal inventory levels late in the second quarter and early into the third and are therefore lowering our outlook for the year,” said Lineage President and CEO Greg Lehmkuhl in a news release. “While we expect continued sequential improvement in both same warehouse and total NOI in the second half, we are taking a more measured view of the balance of the year.”
The company lowered full-year 2025 AFFO guidance by 20 cents per share to a new range of $3.20 to $3.40 per share, a 6% reduction at the midpoint of the range. Adjusted earnings before interest, taxes, depreciation and amortization guidance of $1.29 billion to $1.34 billion was reduced by 4% at the midpoint.
On a Wednesday conference call with analysts, management said it has seen some seasonal improvement in demand in recent weeks, but the uptick has occurred later and at a more gradual pace than in past years. Lineage’s new forecast calls for inventories to build throughout the rest of the year, pushing occupancy higher across the network, albeit at a lower rate than previously contemplated.
Management said the pricing environment is “competitive but stable,” pointing to a 5% sequential increase in revenue per pallet during the quarter.
“Our focus remains on revenue growth, optimizing labor productivity, and controlling the controllables, setting the stage for strong operating leverage when our industry rebounds,” Lehmkuhl said.
Lineage manages 485 facilities with 3.1 billion cubic feet of space across North America, Europe and the Asia-Pacific region. It also provides freight forwarding, customs brokerage, drayage and truck transportation.