In This Article:
Release Date: May 16, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Flowers Foods Inc (NYSE:FLO) maintained unit share in a declining category, highlighting the strength of its brands.
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The company is investing in on-trend innovation and targeting growth opportunities in faster-growing categories.
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New business wins and significant space gains are expected to mitigate some of the current headwinds.
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The Wonder cake innovation is pacing ahead of expectations on the distribution front, contributing to unit share gains.
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The restructuring of the Food Service business has led to improved profitability and margins.
Negative Points
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The core packaged bread category is facing greater-than-expected declines, with no significant improvement expected until 2026.
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The company's EBITDA margin guidance has been reduced, primarily impacting the gross margin line.
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There is a broader shift towards healthier eating, which is affecting traditional loaf and white bread segments.
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Incremental tariff impacts are affecting input costs, with significant exposure to ingredients from countries with high tariffs.
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Continued weakness in overall food service sales is impacting the away-from-home business segment.
Q & A Highlights
Q: What are the prospects for stabilizing and growing the core packaged bread category, and can this happen in 2025? A: Ryals McMullian, CEO, stated that due to dynamic consumer health and economic uncertainties, significant improvement is unlikely in 2025. The focus is on mitigating headwinds through new business wins and space gains. The company aims to differentiate its traditional loaf and white bread segments to reinvigorate the business, emphasizing brand investment and innovation over promotions.
Q: How is the Wonder cake innovation performing, and is it incremental to other offerings? A: Ryals McMullian, CEO, noted that it's too early to determine the full impact, but initial results show it has more than offset other parts of the cake business. More clarity is expected by the next quarter.
Q: Has there been a change in promotional strategy, particularly for Dave's Killer Bread? A: Ryals McMullian, CEO, explained that increased promotional activity was focused on differentiated offerings like Dave's Killer Bread. The company uses promotions selectively to drive trial rather than volume, aiming to avoid devaluing brands and ensuring a good return on investment.
Q: How does the company plan to address the shift towards healthier eating and the impact of GLP-1 drugs on the bread category? A: Ryals McMullian, CEO, mentioned plans to address health and wellness trends, leveraging offerings like DKB, Canyon Bakehouse, and Keto products. The company aims to continue being an innovation leader in the category to meet evolving consumer needs.