Corporate Profiles - 2022 - 74

COMPANY OVERVIEW
Own Hawaiian bread is described by the company as a " soft-baked, sweet fruitforward
loaf. " The bread contains no artificial flavors, colors or preservatives and
no high-fructose corn syrup. In addition, the company extended the Nature's
Own Perfectly Crafted line with the debut of a sourdough variety.
Also during the year Flowers said it would cease production at its Holsum Bakery,
Inc. in Phoenix, effective Oct. 31. The facility is one of the oldest bakeries in Phoenix,
having opened in 1881. Flowers Foods acquired Holsum Bakery, Inc. and its two
baking plants in Arizona (Phoenix and Tolleson) in 2008 for $150 million.
On a brighter note, Flowers completed during the year the renovation of its
Lynchburg, Va., baking plant from a continuous mix Sunbeam bakery into an
organic Dave's Killer Bread production site.
In the first half of 2022 (period ended July 16), Flowers net income was
$139.27 million, equal to 65¢ per share on the common stock, up 9% from
$128.01 million, or 60¢, in the first half of 2021. Net sales were $2.57 billion,
up 11% from the year before. Pleased by the year-to-date results, Flowers after
the second quarter raised the low-side of its guidance for full-year earnings per
share to $1.25 to $1.30, up from $1.20 to $1.30.
The optimism was paired with concerns about consumer trends in the face
of persistent inflationary pressure, said Mr. McMullian.
" Lower-income consumers have tended to trade down to less expensive
products more than those with higher income, " he said in an August call with
investment analysts. " This behavior has been particularly stark in the premium
category, where higher-income consumers have actually increased purchases of
Flowers Foods, Inc. branded retail
Fiscal 2021
Net sales
$2,875
-1.3%
Flowers Foods, Inc. store branded retail
Fiscal 2021
Net sales
$535
-12%
Flowers Foods, Inc. non-retail and other
Fiscal 2021
Net sales
$921
Food service
18%
+6%
Convenience
store
3%
change from prior year
All other
5%
Mass merchandiser/
discount
33%
Supermarket/
drug stores
41%
some products, including DKB. On the other hand, we have seen lower-income
households reduce their number of purchases. We are closely monitoring these
developments and maintaining our marketing investments to keep our brands
top of mind and entice these consumers back when that economic pressure is
relieved. In short, we believe the premiumization of the category remains a
long‐term trend despite some shorter-term challenges. "
In the meantime, Mr. McMullian said Flowers has a broad product line leaving
the company " well positioned to support consumers in this unique environment. "
While profits were up year-to-date, Flowers' second-quarter adjusted
EBITDA margin was 10.6%, well below 12% and 12.5% during the second
quarters of 2021 and 2020, respectively, and slightly below 10.8% and
10.9% in the second quarters of 2019 and 2018, respectively.
Factors other than pressure from retailers may drive margins in the months
ahead, Mr. McMullian said.
" It's hard to know until you get there, exactly what the environment is going to
look like, " he said. " It would certainly be my desire to capture the increased margin
that we will have once we get through this period. I don't know whether that will
happen or not. You could get competitive pressure. You could get retailer pressure. "
Mr. McMullian also noted that for the most part, Flowers Foods was not
subject to supply disruptions that adversely affected many large consumer
packaged foods companies.
" Except for the packaging disruption that we had a little bit earlier in the
summer, our fulfillment rates have remained pretty constant, " he said. CP
Flowers Foods, Inc. sales by category
(52 weeks ended Dec. 31, 2021)
change from prior year
Store-branded
retail
12%
Non-retail and
other
21%
Branded
retail
67%
change from prior year
Flowers Foods, Inc. sales channels
(52 weeks ended Dec. 31, 2021)
74 \ November 2022
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Corporate Profiles - 2022

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