Flowers Foods NYSE: FLO said its second-quarter results fell short of expectations as the fresh packaged bread category remained pressured by household budget constraints, changing consumer preferences and sustained competition.
Chairman and Chief Executive Officer Ryals McMullian said the company is accelerating efforts to better align its product portfolio and resources with market demand. Those efforts include innovation in smaller-format loaves, sourdough and protein offerings; improved in-store execution; pursuit of new business; and continued investment in its brands.
“We have work to do, but we remain confident in our strategy, our brands, and the actions that we are taking,” McMullian said during the company’s second-quarter 2026 earnings call.
Second-Half Outlook Supported by New Business and Cost Actions
Responding to questions about the company’s outlook for the second half of 2026, McMullian identified three principal factors expected to support performance: significant new business wins, additional cost-saving measures and an expanding innovation pipeline.
He said the company has removed roughly $200 million in costs from the business over the past several years, with further actions expected to benefit the back half of the year. Chief Financial Officer Anthony Scaglione said the outlook is somewhat uneven by quarter, with the company expecting year-over-year declines in the third quarter before a more normalized fourth quarter.
Scaglione attributed the anticipated fourth-quarter stabilization to new business wins, lower pricing elasticities as the company laps prior-year pricing, and continued benefits from marketing investments behind Nature’s Own.
Management said opportunities are split between its away-from-home operations and retail branded business, with wins expected across the portfolio and with timing spread between the third and fourth quarters.
Flowers recently began a Nature’s Own relaunch campaign. McMullian said the initiative had been underway for only a couple of months and was too early to assess fully, but he cited favorable customer and social-media feedback as early indicators. He said the company expects to need more time before results from the campaign are reflected in performance.
Product Gaps and Consumer Shifts Drive Strategy
McMullian said the company’s review of pricing and promotional strategy is ongoing, but he emphasized that price is not the only factor influencing demand. He pointed to consumer movement toward products with specific attributes, including half loaves, sourdough, protein and fiber.
According to McMullian, Flowers has been under-penetrated in several of those segments, and the pace of changing preferences outstripped the company’s innovation pipeline. New products intended to address those gaps are expected in the second half of 2026 and into spring 2027.
He also said some consumers have traded down to private-label and lower-priced products. However, he described portfolio gaps in higher-growth product formats and functional offerings as a more significant factor in the company’s performance relative to the broader category.
In discussing Dave’s Killer Bread, McMullian said sourdough has become an important category trend, describing it as a $1.3 billion subcategory. Dave’s Killer Bread currently offers sourdough only on the West Coast, he said, though Flowers has products in development intended to address that gap. He added that price sensitivity may be affecting some Dave’s Killer Bread consumers, alongside the need for products that match evolving preferences.
Inflation and 2027 Planning Remain in Focus
Scaglione said most of Flowers’ commodity needs for the remainder of 2026 are fully hedged. The company has exposure to oil and diesel, as well as indirect exposure to resin used in packaging, but he said commodity pressure has not changed materially from the assumptions incorporated into first-quarter guidance.
For 2027, Scaglione said Flowers remains in the middle of its planning process and could not provide detailed guidance. He said inflation has increased across many categories from a pricing-index perspective, requiring the company to consider multiple factors beyond pricing, including product mix, price-pack architecture and innovation.
Management also highlighted productivity efforts as an offset to cost pressure. Scaglione said actions taken after the first quarter are expected to provide about a $20 million tailwind entering 2027. The company continues to pursue efficiency improvements in its bakeries and distribution network, though he acknowledged such efforts become more difficult when volumes decline.
McMullian said Flowers has completed its formal comprehensive review and has begun implementing its findings. He said the company’s focus on innovation, execution and portfolio priorities reflects the outcome of that review, while continuous improvement remains an ongoing process.
Separately, McMullian said a reduction in Dave’s Killer Bread marketing support was temporary and reflected the planned timing of promotional spending. The company had emphasized the brand’s “Rock Your Reset” campaign early in the year and shifted attention toward the back-to-school period, he said. Flowers expects more normalized marketing and promotional spending for Dave’s Killer Bread during the remainder of the year.
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.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Continue following MarketBeat
Add MarketBeat as your preferred source on Google to see our latest stories in your feed.
Before you consider Flowers Foods, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Flowers Foods wasn't on the list.
While Flowers Foods currently has a Reduce rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
The space race is growing fast, and you don’t have to have gotten in early on SpaceX to profit. This report shows seven space stocks you can buy today that may grow as rockets, satellites, defense, space internet, and new space technology become more important.
Get This Free Report
