Flowers Foods Q2 Earnings Call Highlights

Key Points

• Second-quarter performance weakened: Net sales fell 4% and volume declined 5.8% as budget pressure, trade-down activity and competition weighed on fresh packaged bread demand. Adjusted EBITDA dropped 19% to $111 million, while adjusted EPS declined to $0.21 from $0.30.
• Flowers lowered its 2026 outlook to $5.07 billion–$5.142 billion in net sales, $453 million–$481 million in adjusted EBITDA and $0.75–$0.85 in adjusted EPS. The company expects $9 million in savings during the remainder of 2026 and approximately $20 million in annualized savings once cost actions are fully implemented.
• Some brands showed resilience: Nature’s Own Perfectly Crafted, Wonder, Canyon Bakehouse and Simple Mills posted share or sales gains, while traditional loaves and Dave’s Killer Bread remained under pressure. Flowers is also advancing a major Nature’s Own relaunch and adjusting pack sizes and pricing to better match consumer demand.

Flowers Foods NYSE: FLO reported lower second-quarter results as pressure on household budgets, changing consumer purchasing patterns and heightened competition weighed on demand in the fresh packaged bread category. The company said net sales declined 4% from the prior-year period, while volume fell 5.8%.

Chairman and CEO Ryals McMullian said the operating environment became more difficult than the company anticipated during the quarter. He pointed to greater consumer price sensitivity and trade-down activity, as well as demand shifting toward formats, package sizes and product attributes where Flowers is still building scale.

“Together, these factors pressured volume and contributed to a 4% decline in sales,” McMullian said. The company said competitive pricing and promotional intensity also affected its performance.

Second-Quarter Financial Results

CFO Anthony Scaglione said branded retail sales decreased 3.8%, driven by lower volume that was partly offset by favorable price mix. Other net sales fell 4.4%, reflecting lower volume and store-branded retail sales.

Gross margin, excluding depreciation and amortization, was 48.4% of sales, down 40 basis points year over year. Scaglione attributed the decline to lower operating leverage from reduced volumes and increased outside purchases, partly offset by lower ingredient costs related to Simple Mills.

Adjusted selling, distribution and administrative expenses rose 140 basis points as a percentage of sales, primarily due to lower sales combined with relatively higher marketing, labor and logistics costs. Flowers said lower distributor discounts and continued cost discipline partially offset those pressures.

• Adjusted EBITDA declined 19% to $111 million, or 9.3% of net sales.
• GAAP diluted earnings per share were $0.19, down $0.09 from the prior-year quarter.
• Adjusted diluted earnings per share were $0.21, compared with $0.30 a year earlier.

Flowers generated $242 million in year-to-date operating cash flow, invested $44 million in capital expenditures and returned $81 million to shareholders through dividends. The company also said it paid down approximately $70 million in debt year to date and secured a new $400 million delayed-draw facility to fund bonds maturing in October 2026.

Portfolio Performance and Brand Initiatives

McMullian said Flowers saw pockets of strength in premium and specialty loaves, buns and rolls, breakfast, cake and better-for-you snacking, though those areas did not fully offset continued weakness in traditional loaf products.

Nature’s Own Perfectly Crafted increased sales by more than 8% and gained dollar and unit share, aided by sourdough and Italian herb varieties. In sandwich buns and rolls, Nature’s Own gained 30 basis points of dollar share and 20 basis points of unit share. The company said its July 4 performance included stable unit share and higher dollar share.

Flowers is also progressing with the relaunch of its Nature’s Own flagship brand, its first major launch for the brand in more than a decade. McMullian said early customer feedback has been positive, with the company highlighting the brand’s better-for-you positioning, simpler ingredients and non-GMO project verified offering. The company is focused on building consumer awareness, securing displays and improving shelf communication as the relaunch develops.

Elsewhere, Dave’s Killer Bread faced pressure in organic products, with declines in both unit and dollar share. Flowers said it had pulled back on planned marketing investment, while consumer price sensitivity, competition and changing preferences added pressure. Canyon Bakehouse, its gluten-free brand, gained both unit and dollar share, while Nature’s Own Keto gained dollar share.

In breakfast, Wonder gained 20 basis points in both unit and dollar share, supported by expanded distribution that drove nearly 100% growth in units and dollars from the prior year. Wonder Cake gained 60 basis points of unit share and also increased dollar share.

Better-for-you snacking remained a relative bright spot. Simple Mills retail sales increased 13%, led by 39% growth in cookies and 8% growth in crackers. McMullian said distribution gains, e-commerce performance and core product velocities in food and mass channels supported the results. He added that recent innovation launches exceeded distribution goals and could support accelerating growth through the remainder of 2026.

Updated 2026 Outlook and Cost Actions

Flowers lowered its full-year 2026 outlook following its first-half performance and the current category environment. The company now expects:

• Net sales of $5.07 billion to $5.142 billion.
• Adjusted EBITDA of $453 million to $481 million.
• Adjusted diluted EPS of $0.75 to $0.85.

Scaglione said the outlook assumes macroeconomic, market and competitive conditions remain generally consistent for the rest of the year. It also incorporates contributions from new customer wins, the Nature’s Own relaunch, cost controls, targeted brand investment, innovation and organizational changes.

The company expects approximately $9 million in savings during the remainder of 2026 and about $20 million in annualized run-rate savings once actions are fully implemented, including certain reinvestments. Flowers expects approximately $6 million in one-time costs to achieve those savings. Scaglione said the company has removed more than $200 million of costs from the business over the past several years.

Looking ahead to 2027, Flowers identified commodity ingredient exposure and fuel as increasing headwinds. The company said it is expanding hedging programs and adjusting its price-pack architecture, including smaller loaves and appropriately sized snack packs, to better align with consumer demand.

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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