Flowers Foods Reports First Quarter 2018 Results

In a recent announcement from Flowers Foods—maker of Nature’s Own, Wonder, Tastykake, Dave’s Killer Bread, and other baked foods—the company shared the results of its 16-week first quarter that ended on April 21^st.

When compared with the prior year’s first quarter, the results are the following:

• Sales increased 1.6% to $1.206 billion. Excluding a 2017 divestiture of a mix manufacturing business, sales increased 1.7%
• Diluted EPS decreased $0.05 to $0.24
• Adjusted diluted EPS increased $0.05 to $0.30
• Net income decreased 15.2% to $51.2 million
• Adjusted net income increased 20.1% to $63.2 million
• Adjusted EBITDA⁽²⁾increased 0.1% to $132.9 million

"We are pleased with the solid start to the year. We achieved record sales in the first quarter and made important progress on our strategic priorities, giving us confidence in our ability to meet the objectives we've set for the year. Sales growth for the quarter was ahead of expectations, driven by the continued strength of Dave's Killer Bread and the solid performance of our Nature's Own and Wonder brands. In April, we introduced new, artisan-style products under Nature's Own, and initial consumer response has been encouraging,” Allen Shiver, President and CEO, said in a recent press release. 

According to the press, the reaffirmed outlook for Fiscal 2018 include the following:

• Expected sales in the range of approximately $3.921 billion to $3.982 billion, representing growth of approximately 0.0% to 1.6%
• Expected adjusted diluted EPS in the range of approximately $1.04 to $1.16, representing growth of approximately 16.9% to 30.3%
• Adjusted EPS guidance includes approximately $0.14 to $0.16 related to the impact of the lower effective tax rate, and excludes consulting and restructuring costs associated with Project Centennial expected to be in the range of $13 million to $16 million. Previously, the company estimated the effect of the lower tax rate to be approximately $0.15 to $0.17 and costs associated with Project Centennial to be $12 to $15 million
• This quarter included an additional $2.3 million revision to the multi-employer pension plan (MEPP) withdrawal liability, a pension settlement loss of $4.7 million, and a legal settlement of $1.4 million. These items are also excluded from adjusted EPS guidance for fiscal 2018

"The restructuring actions we began last year under Project Centennial have empowered our new teams to grow our core brands, improve productivity, and capitalize on opportunities," Shiver continued. "As we transition to our new organizational model, we are now better able to drive brand growth through new products and innovation, enhance execution in the marketplace, and streamline our supply chain. We remain intensely focused on delivering profitable growth and higher returns on invested capital, and we are moving forward with urgency to optimize our manufacturing network to drive efficiencies and lower manufacturing costs. Through these actions we intend to drive cash flows and shareholder returns."

Under the company’s Project Centennial, it will continue efforts to implement strategic priorities that it hopes will reinvigorate core business, capitalize on product adjacencies, reduce costs to fuel growth, and develop leading capabilities. In this enterprise effort, the company will streamline operations, drive efficiencies, and invest in strategic capabilities as it strengthens its competitive stance, drives profitable revenue growth, and creates shareholder value.

The company's press release also included the following highlights:

• Introduced Nature's Own Perfectly Crafted, a line of artisan-inspired, thick-sliced bakery-style breads that are Non-GMO Project Verified and have no artificial preservatives, colors or flavors or high fructose corn syrup
• Introduced Non-GMO Project Verified Nature's Own varieties in select markets
• Strengthened the consistency, quality, and store presence of Wonderbreads and buns by standardizing sizes and formulas and updating packaging
• Launched Camo for the Cause promotion to support the USO

In addition to these efforts, the company is endeavoring to reduce costs to fuel growth and develop leading capabilities, as can be seen in the following notes that were mentioned in the press release, as well:

• Continued its organizational restructuring by building teams with new capabilities, including business unit field marketing teams dedicated to capturing consumer insights in markets nationwide and sharing feedback on brand performance and campaigns
• Improved order quality and reduced stale product returns through closer partnership with independent distributors (IDP)
• Achieved a significant decrease in adjusted Selling, Distribution, and Administrative (SD&A) expenses as a percentage of sales during the quarter, due to its organizational restructuring
• Initiated supply chain optimization initiatives to improve efficiencies, lower costs, and drive enhanced gross margins

For more details on the company’s financial report, check out the press release in its entirety here.

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