Avery Dennison has reported a strong second quarter for 2026, posting adjusted earnings per share of $2.89, a 19% jump over the prior year, as the materials science and digital identification giant continues to expand its RFID footprint across retail, food and logistics.
Net sales for the quarter reached $2.5 billion, up 10.9% year-over-year, with organic sales growth of 7.6%. The results comfortably beat analyst expectations, driven by volume growth across the company’s labeling, packaging and RFID businesses.
“We delivered very strong second quarter results, marked by stronger-than-anticipated sales growth, solid margin expansion and adjusted EPS of $2.89, reflecting the strength of our portfolio and our team’s execution excellence,” said CEO Deon Stander.
Intelligent Labels: Apparel Surges, Food Rollout on the Horizon
Avery Dennison’s Intelligent Labels division, which encompasses its RAIN RFID inlays, tags and related software, posted low single-digit organic sales growth in Q2, in line with company guidance. But the headline number masks a mixed picture across verticals.
Apparel and general retail RFID sales jumped approximately 10%, fuelled by new program expansions with major retailers and a recovery in general retail demand. The apparel segment remains the largest and most mature market for RAIN RFID item-level tagging, and Avery Dennison continues to win new deployments as brands move beyond inventory accuracy into loss prevention, omnichannel fulfilment and customer experience use cases.
Food and logistics told a different story. Food RFID revenues were down double digits in the quarter, largely due to soft demand from logistics customers and tough comparisons against outsized share gains in 2025. However, the outlook for the second half of 2026 is considerably brighter. Avery Dennison confirmed that the largest U.S. grocery retailer is set to begin its RFID rollout in the back half of the year, a milestone the industry has been watching closely. The company expects this to drive meaningful acceleration in its food category revenues.
Logistics RFID is lapping a period of unusually strong growth but the company said it is expanding pilot programmes with new customers, positioning the segment for a return to growth as comparables normalise.
Materials Group Powers Top-Line Growth
The Materials Group, Avery Dennison’s largest segment, reported sales of $1.8 billion, up 15.9% on a reported basis and 9.7% organically. Volume and mix contributed high single-digit growth while pricing added low single digits. High-value categories, which include specialty and sustainable label materials, grew mid-single digits, while base label categories surged by low double digits. Adjusted operating margin expanded 20 basis points to 15.8%.
The Solutions Group, which houses the Intelligent Labels business alongside industrial and healthcare materials, posted reported sales of $667 million, roughly flat year-over-year but up 2.6% organically. Adjusted operating margin improved by a notable 150 basis points to 11.5%, reflecting operational efficiencies and restructuring savings.
Outlook and Guidance
Management raised confidence in its full-year outlook, guiding for adjusted EPS of $10.00 to $10.30 on reported sales growth of 5-6% and organic growth of 3-4%. The company expects over $60 million in incremental savings from restructuring actions and is targeting approximately 100% adjusted free cash flow conversion.
Customer inventory stocking contributed roughly half of the quarter’s organic sales growth and around $0.25 of EPS. The company expects some of that benefit to reverse as customer destocking plays out, predominantly in Q3.
Avery Dennison returned $347 million to shareholders in the first half of 2026 through share repurchases and dividends, while maintaining a net debt to adjusted EBITDA ratio of 2.3x. Adjusted free cash flow nearly doubled to $365 million from $189 million in the prior-year period.
For the RFID industry, the key takeaway from Avery Dennison’s Q2 is that programme-level adoption in apparel continues to accelerate, and the long-anticipated expansion of RAIN RFID into grocery and fresh food is now on the doorstep. With the largest U.S. grocery chain preparing to roll out RFID tagging in the second half of 2026, the addressable market for UHF inlays and tags is poised for a step change.
Avery Dennison employs approximately 35,000 people across more than 50 countries and reported full-year 2025 sales of $8.9 billion.