“The cold storage market is slowly adjusting to over-capacity and we are beginning to see more stability in customer inventory levels.” But the improvement is patchy with some customers still operating with lower stock levels.

The Novi, Michigan-based company said Tuesday on its third quarter earnings call that it was still taking underutilized facilities out of service. The strategy seeks to improve the match of available capacity to demand, enhance financial performance and reduce debt leverage.

The capacity adjustment isn’t limited to only Lineage. The company and Americold, the two largest operators of cold storage facilities, have collectively cut their footprint by 4% over the past two years, it said. That's about 9 million square feet of capacity.

Lineage alone has idled 16 facilities since the beginning of 2025, taking 2.6 million square feet and 212,000 pallet positions out of active operation.

The changes in operations are coming as the company continues to see pressure on its financial performance.

Lower food container volumes impact Q1 revenue

Lineage reported a net loss of $173 million, or 68 cents per share, for the third quarter. Adjusted funds from operations (“AFFO”) were 73 cents per share, a decrease of 12 cents from the same period last year.

AFFO excludes depreciation, acquisition costs, restructuring and other non-recurring items.

Consolidated net revenue was down 1% to $1.36 billion, compared with the prior year. The figure also fell just shy of the $1.37 billion consensus among market analysts.

The weaker performance was largely a result of an 8% year-on-year drop in food-related container volumes.

Lineage specifically pointed out challenges in the seafood industry, where rising fuel costs have caused fishermen to take fewer trips. This has impacted the volumes passing through the temperature controlled supply chain.

Operating performance came under further pressure from higher expenses for third-party transportation as diesel prices rose during the quarter.

Despite these challenges, Lineage reported improved occupancy across its warehouse network, indicating that the market correction is starting to take effect.

Warehouse occupancy improves for a second consecutive quarter

Lineage

Q3/26

Q3/25

Y/Y Gross Change

Y/Y % Change

Physical Occupancy %

76.2%

75.1%

110 bps

1.5%

Economic Occupancy %

82.5%

82.2%

30 bps

0.4%

Throughput Pallets

12,334,000

12,467,000

-133,000

-1.1%

Storage Revenue/Pallet (physical)

$67.90

$69.43

-$1.53

-2.2%

Total Net Revenue

$1,361

$1,377

-$16

-1.2%

Global Warehousing Revenue

$1,009

$1,013

-$4

-0.4%

Global Integrated Solutions Revenue

$352

$364

-$12

-3.3%

Total NOI

$417

$449

-$32

-7.1%

Adjusted EBITDA

$317

$341

-$24

-7.0%

Adjusted EBITDA Margin %

23.3%

24.8%

-147 bps

-5.9%

AFFO

$188

$221

-$33

-14.9%

AFFO per Share

$0.73

$0.85

-$0.12

-14.1%

Table: Lineage’s key performance indicators.

On a same-warehouse basis, physical occupancy reached 76.2% during the third quarter. This was an improvement of 110 basis points year over year and 40 basis points compared with the second quarter. In the first quarter, the same indicator stood at 76.4%.

Other operating metrics remained weaker. Pallet throughput declined 1% compared with the previous year, while storage revenue per pallet fell 2%. Both indicators nevertheless recorded sequential improvements of less than 1%.

Greg Lehmkuhl, Lineage's president and CEO, said the company's underlying business trends continued to stabilize during the quarter.

In a news release, he pointed to the second consecutive quarter of year-over-year growth in same-store occupancy as further evidence that customer inventory levels were returning to more normalized conditions.

The improvement in warehouse utilization is an encouraging development for the company, although it has yet to translate into stronger profitability.

Lineage lowers full-year forecast as adjusted EBITDA falls

Third quarter adjusted EBITDA was $317 million, down 7% year-over-year. Adjusted EBITDA margin also contracted 150 basis points to 23.3%.

In response to the operating environment, Lineage lowered its full year adjusted EBITDA guidance by 1% at the mid-point. The revised guidance is now between $1.25 billion and $1.27 billion.

The company also is taking on extra costs from a fire at one of its California facilities. The incident is expected to be a $20 million headwind.

For context, Lineage reported adjusted EBITDA of $1.3 billion in 2025.

It also lowered the range for its AFFO guidance, now expecting between $2.86 and $2.98 a share.

Net operating income expected to increase $141 million with projects under construction

Lineage remains focused on investing in its development pipeline while trimming capacity at underutilized sites.

17 facilities are being built by the company now. When operational, the projects are projected to produce $141 million in net operating income.

Of that total, $11 million has already been realized.

“The investment program is a reflection of the company’s efforts to adapt its existing network to ensure it can support future business opportunities.

Paying down debt is still a priority

Lineage ended the third quarter with net debt at 6.4 times its adjusted EBITDA for the trailing 12 months.

The company expects to reduce this ratio using proceeds from asset disposals and insurance recoveries. We expect those sources of cash to help us delever toward our target of 5 to 5.5 times adjusted EBITDA.

Management expects substantial progress toward this goal in the first half of 2027.

The company currently operates 497 facilities with a combined capacity of 3.1 billion cubic feet in North America, Europe and the Asia-Pacific region.

Its activities cover freight forwarding, customs brokerage, drayage and truck transportation and temperature controlled warehousing.

Shares tumble nearly 10% on Q3 results

The quarterly report did not impress investors. Shares of Lineage (NASDAQ: LINE) were down 9.6% in early Tuesday trading, far underperforming the S&P 500 index, which was down 0.6% during the same period.

The company’s performance has ramifications beyond its own financial position. Lineage is one of only two publicly traded cold storage providers, and its quarterly results are a bellwether for broader trends in temperature-controlled warehousing and transportation.

Its latest numbers offer a glimpse into customer inventory trends, warehouse utilization, food-related freight volumes and the cost pressures affecting operators across the sector.

The increase in occupancy suggests that the cold storage market is gradually absorbing its excess capacity, but weak container volumes, shrinking margins and high debt remain key issues for Lineage.

Why it matters: Lineage is one of two publicly traded cold storage operators in the industry and serves as a key benchmark for the health of temperature-controlled logistics markets. Its results help to demonstrate how inventory normalization and capacity reductions are impacting warehouse demand, transportation activity and profitability.