Middleby had a much aniticipated earnings call today. There was eagerness about it not just because of the usual finiancial highlights. It was also because of rumors that they are working out a deal to sell their Residential Kitchen business which includes their grill brands.

I first speculated that they could go this route about a year ago when they announced that they were performing a strategic review of their overall business. Middleby’s core business is in Commercial and the low margin profile of Residential is dragging down the overall value of the company.

With rumors swirling, Middleby wasted no time addressing the strategic review of Residential. It was the first statement in the opening remarks of their earnings call.

I’ll begin this morning with an overview of the announced strategic review of our Residential Kitchen business before discussing highlights of the third quarter and for each of our business segments.

As part of our efforts to drive long-term shareholder value, we’ve been undertaking a strategic review of our overall business portfolio. We continue to believe that our shares are significantly undervalued, and we’re taking deliberate steps to close that gap, including with the planned spin-off of our Food Processing business targeted for the completion in the second quarter of 2026 and also through our significant share repurchasing activities.

As we further continue to evaluate opportunities to unlock the value at each of our 3 industry-leading segments, we have embarked on a review of options to maximize the value of our Residential Kitchen business. This includes an evaluation of a range of options, one of which is a potential separation of our Residential Kitchen business.

During the quarter, in connection with that review, we recorded a noncash impairment charge of $709 million. This is an accounting-driven valuation adjustment and does not reflect any change in our confidence in the segment’s underlying strength. In fact, we believe our Residential business is positioned better than ever.

We have a portfolio of iconic brands. We have invested in new state-of-the-art manufacturing centers of excellence. We are introducing new products with exciting features, and we have strengthened our team across the platform. While the residential market remains challenging, our business is positioned to benefit from a recovery. We intend to pursue options that will maximize shareholder value while benefiting our customers and employees. But please note, we will not be making any further comments on the status of this strategic review on the call.

Tim FitzGerald, CEO of Middleby

The impairment charge they’re taking on the Residential business isn’t surprising. The deal they were rumored to be looking at would have valued their whole Residential business at $800 million. Middleby paid $385 million for just Masterbuilt, Char-Griller, and Kamado Joe, when they purchased them at the end of 2021.

If Middleby is selling their Residential business, one challenge they’re likely grappling with is how to respond to the tariffs. They noted that the drag on the earnings for the BU was from tariffs.

At the Residential segment, we’ve continued to make significant progress, both strategically and operationally. During the quarter, we saw healthy growth with our premium indoor brands. This growth was offset by tariff-related headwinds impacting our outdoor product sales. Additionally, we experienced temporary shipment delays tied to the consolidation of operations, actions that will ultimately drive greater efficiency and profitability across the portfolio.

Tim FitzGerald, CEO of Middleby

All grill companies that manufacture outside of the US are grappling with tariffs, but it’s a different balancing act if you’re possibly selling the business. It’s expensive and time consuming to move your supply chain, and expense isn’t something you want to incur right before a sale.

They’d be spending money in hopes of getting an add-back from it on their valuation, which isn’t always the case. That makes it harder to fully commit to the necessary actions that you’d take otherwise.

That’s not to say that they haven’t been working on mitigating tariff issues. It’s probably just a different ROI equation.

 So we did start moving some of our production from China to other parts of Asia and elsewhere. So that was something that we mentioned last quarter. So that actually is underway and being executed in the fourth quarter. So that will better position the platform going into next year. The slight reduction also kind of announced in tariffs here recently in China does help that platform as well.

So we pick up a bit on the bottom line, but it also better positions us on the top line from a pricing standpoint going forward. Part of the outdoor platform is manufactured in the U.S. as well kind of on the premium end of things with the Lynx Grills. And certainly, we’re continuing to evaluate opportunities to onshore some of the products there.

Tim FitzGerald, CEO of Middleby

New Refrigeration Facility

Another development from the Residential business unit is Middleby completed their build of the Center of Excellence for their residential refrigeration brands. It’s exciting for the added capabilities, but I was also excited about it as a Michigander.

A major milestone was the opening of our new state-of-the-art facility in Greenville, Michigan, which serves as a Center of Excellence for all our residential refrigeration brands. This facility will enable scaling of manufacturing, engineering and logistics, resulting in enhanced customer service and long-term margin benefits.

Tim FitzGerald, CEO of Middleby