In a significant financial update, Flowers Foods, a prominent US bakery group, has revised its sales and earnings forecasts downward after reporting lower-than-anticipated sales in the second quarter of the fiscal year.
Ryals McMullian, the chairman and CEO of Flowers Foods, highlighted the challenges faced by the company. He noted the “softness in traditional loaf sales and a more-intense competitive environment, which we expect to persist throughout the year.” This reflects broader market trends affecting the baked goods sector.
The parent company of well-known brands such as Nature’s Own and Dave’s Killer Bread has adjusted its expectations for full-year net sales. The revised forecast now places net sales in the range of $5.23 billion to $5.3 billion, representing a modest increase of 2.7% to 4% year on year.
This adjustment marks a downgrade from the company’s earlier outlook, which had projected net sales between $5.29 billion and $5.39 billion, indicating a growth potential of 3.8% to 5.7%.
In an attempt to expand its market presence, Flowers Foods bolstered its snacks portfolio earlier in the year through the acquisition of Simple Mills for $795 million.
Excluding the impact of this acquisition, sales are anticipated to range between $5.02 billion and $5.08 billion, which indicates a decline of 1.6% to 0.4% compared to the previous year.
Previously, the forecast—also excluding Simple Mills—indicated sales of $5.07 billion to $5.17 billion, which would represent a decline of 0.5% to a potential growth of 1.3%.
Management reiterated that the acquisition of Simple Mills is expected to contribute between $218 million and $225 million in revenue, consistent with prior estimates.
The guidance for adjusted EBITDA has also experienced a reduction, now expected to fall between $512 million and $538 million, down from the previous range of $534 million to $562 million.
On a standalone basis, excluding the Simple Mills acquisition, adjusted EBITDA projections are pegged between $482 million and $505 million, a decrease from the earlier range of $504 million to $529 million.
Furthermore, adjusted diluted earnings per share (EPS) is now forecasted to be between $1.00 and $1.10, a slight reduction from the previous estimate of $1.05 to $1.15.
When excluding Simple Mills, the adjusted EPS forecast stands at $1.08 to $1.17, compared to the former estimate of $1.13 to $1.22.
In his comments, McMullian emphasized the company’s commitment to innovation, stating: “We are proactively investing in innovation and M&A to transform our portfolio and align it with consumer demand for better-for-you and value-oriented products.”
During the second quarter, Flowers Foods recorded a 1.5% increase in net sales, reaching $1.24 billion. Notably, Simple Mills contributed an impressive 5.1 percentage points to this growth. However, volume sales experienced a decline of 2.4% in the same period.
The company’s net income fell by 12.8%, totaling $58.4 million, which represents 4.7% of sales and reflects an 80-basis-point contraction.
Diluted EPS also experienced a downturn, decreasing $0.04 to $0.28. Additionally, adjusted EBITDA for the quarter decreased by 4.0%, amounting to $137.7 million, or 11.1% of sales, with a 60-basis-point reduction.
Simple Mills’ performance included $61.4 million in sales and $10.9 million in adjusted EBITDA. However, the brand incurred a net loss of $2.1 million and contributed to a $0.01 reduction in diluted EPS for Flowers Foods.
