Flowers Foods NYSE: FLO reported higher first-quarter fiscal 2026 sales but lower adjusted earnings, as contributions from its Simple Mills acquisition and pricing actions helped offset weaker volumes in traditional bread categories.
Chairman and CEO Ryals McMullian said the company “executed well to offset softer top-line trends and navigate challenging market dynamics,” adding that bottom-line results came in ahead of market expectations. Reported sales growth included an incremental contribution from Simple Mills, while comparable sales declined 1.2% from the prior year.
Sales Rise, But Volumes Decline
Net sales increased 1.1% year over year in the quarter. Price and mix contributed 210 basis points of growth, benefiting from pricing taken late last year, while volume declined 3.3%.
The company said the volume decline was largely tied to pressure in branded traditional loaf products, as well as store-branded cake and loaf. That weakness was partly offset by growth in snacking, branded keto products and vending.
Branded retail sales rose 3.4%, helped by positive price mix and the Simple Mills acquisition, though lower volume weighed on results. Other net sales fell 3.1% on lower store-branded retail sales volume, partially offset by improved non-retail sales.
Gross margin, excluding depreciation and amortization, was 49.4% of sales, down 50 basis points from a year earlier. The company attributed the decline to reduced operating leverage from lower volumes and increased outside product purchases tied to Simple Mills, partly offset by lower ingredient costs associated with that business.
GAAP diluted earnings per share were $0.20, down $0.05 from the prior-year quarter. Adjusted diluted EPS was $0.29, compared with $0.35 a year earlier.
Traditional Loaf Pressured as Consumers Trade Down
McMullian said the company’s strongest brands showed encouraging results in areas such as premium loaf, buns and rolls, breakfast, cake and snacks. However, he said the traditional loaf category remained soft, with Flowers underperforming in both dollars and units.
He cited shifts in marketing investment, macroeconomic pressure on consumers and “an intensely promotional pricing environment” as factors affecting market share in traditional loaf. Elevated consumer costs and promotional activity have contributed to trade-down behavior toward lower-priced offerings and value brands, he said.
“While the category remains pressured, we don’t view the current promotional environment as sustainable over the long term,” McMullian said, adding that select markets are beginning to show early signs of improvement as pricing gaps narrow.
The company is responding with a relaunch of Nature’s Own and adjusted price points in the Wonder Bread portfolio. McMullian said the Nature’s Own relaunch includes fewer and simpler ingredients, Non-GMO Project Verified products and half loaves intended to address consumer preferences around freshness, portion size and affordability.
Nature’s Own and Better-for-You Brands Take Focus
McMullian described the Nature’s Own relaunch as the brand’s first major overhaul in more than a decade. The company said Nature’s Own is now the largest Non-GMO Project Verified loaf product in the market at national scale.
Flowers is supporting the relaunch with a nationwide marketing campaign featuring actor and former WWE star John Cena as the brand’s “Breaducator.” McMullian said the campaign is designed to emphasize simpler ingredients, Non-GMO Project Verified products and other better-for-you attributes.
Other specialty brands also remained key to the company’s strategy. Dave’s Killer Bread sustained market share in organics and saw momentum in breakfast, helped by DKB Mini Bagels. Canyon Bakehouse maintained its category share position in gluten-free. Nature’s Own Keto remained the leading brand in its segment and gained 180 basis points of unit share and 250 basis points of dollar share during the quarter.
In breakfast, Flowers gained 20 basis points of unit share and 40 basis points of dollar share. In buns and rolls, Wonder’s unit share declined by about 30 basis points, but the company said gains from Nature’s Own and Dave’s Killer Bread largely offset that weakness.
Simple Mills and Cake Business Show Growth
Simple Mills delivered growth ahead of Flowers’ expectations in the quarter, according to McMullian. Retail sales for the brand increased 9%, supported by strength in cookies and crackers. Cookies grew 43%, while crackers increased 3%, with both maintaining the number two position in their respective categories.
The company said Simple Mills benefited from distribution expansion and velocity gains across food and mass channels. Recent innovation launches are performing at or above expectations, giving management confidence that growth can accelerate over the balance of 2026.
Flowers also pointed to improved performance in its cake business, driven by Wonder cake products launched last year. While overall cake category sales declined 1.4% in the quarter, Flowers’ cake sales rose 6%, with Wonder unit share up 120 basis points. McMullian said cake profitability improved meaningfully year to date, supported by disciplined pricing, a mix shift toward higher-margin branded items and operational efficiencies.
Dividend Reset Aimed at Debt Reduction
As part of a comprehensive review of its brand portfolio, supply chain and financial strategy, Flowers is resetting its dividend to an annual rate of $0.50 per share. McMullian said the move is intended to reduce leverage and interest expense, increase financial flexibility and create capacity for investments behind leading brands and capabilities.
The company said net leverage was 3.2 times adjusted EBITDA at quarter-end, with a goal of reducing leverage below 3 times on a sustainable basis. Flowers also secured a new $400 million delayed draw facility to fund bonds maturing in October 2026, which the company said “completely” de-risks that maturity.
Operating cash flow was $108 million in the first quarter, down $28 million from the prior-year period. Capital expenditures were $21 million, down $5 million, and dividends paid totaled $54 million. The company expects 2026 capital expenditures of $115 million to $125 million.
Flowers reiterated its full-year 2026 guidance and said it remains cautious about the near-term top-line outlook due to category trends and ongoing consumer pressure. Management said it is monitoring inflation, consumer behavior, tariffs and key input costs such as diesel fuel, edible oils and packaging resin, while using productivity and cost management initiatives to offset some pressures.
McMullian said the company expects the operating environment to remain challenging but believes its focus on stronger brands, better-for-you products, cost discipline and capital allocation will position Flowers for more sustainable, profitable growth over time.
About Flowers Foods NYSE: FLO
Flowers Foods, Inc is one of the largest producers of packaged bakery foods in the United States, offering a variety of fresh bread, buns, rolls, snack cakes and tortillas. Headquartered in Thomasville, Georgia, the company operates an extensive network of bakeries and distribution centers that serve retail grocery chains, convenience stores, mass merchandisers and foodservice customers nationwide. Flowers Foods markets its products under well-known brands such as Nature's Own, Wonder, Dave's Killer Bread, Mrs.
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