[FLO] Summary of Flowers Foods 2023 1Q Earnings Call Transcript

FLO participants

J. T. Rieck - Executive Vice President, Finance, and Investor Relations
Ryals McMullian - President and Chief Executive Officer
Steve Kinsey - Chief Financial Officer

Business Highlights

1. Record Quarterly Sales:

Flowers Foods reported record quarterly sales in the first quarter of 2023, driven by the company's leading brands and the dedication of its team.

2. Investment in Innovation:

The company is investing in innovation, including the nationwide launch of the DKB snack bars and digital and supply chain initiatives, to enhance its competitive position.

Financial Status:

1. Revenue Growth:

The company's revenue growth was affected by private label share gains, which started to come down towards the end of the quarter. The company's branded retail units turned flat to positive in several of the last weeks of the quarter.

2. Profit Trend:

The company's profit trend was affected by the temporary imbalance between capacity and production as a result of the softer start. The company's gross margin was down in Q1, and the EBITDA step down was expected. The company expects inflation throughout the whole year, and the first half is definitely its toughest comp because it had pretty favorable hedges coming into the year last year. The company expects better and easier comps in the back half.

Overall, Flowers Foods faced challenges in the first quarter of 2023 due to private label share gains and inflation pressure in consumer demand and input costs. However, the company remains focused on long-term success and is investing in innovation to enhance its competitive position. The company's leading brands and dedicated team were instrumental in driving record quarterly sales, and the company believes the current challenging macroeconomic environment is temporary.

Question and Answer

Flowers Foods, a packaged bakery food products company, reported a soft start to the year in its 2023 1Q Earnings Call Transcript. The company's revenue growth was affected by private label share gains, which started to come down towards the end of the quarter. The company's branded retail units turned flat to positive in several of the last weeks of the quarter. However, the company is being conservative with its guidance due to the soft start to the year. The company's profit trend was affected by the temporary imbalance between capacity and production as a result of the softer start. The company is transparent with its investors and provides a complete picture of what's going on with the company. The company's portfolio strategy includes business exits where it has elected to exit certain lines of business that were marginally profitable and really didn't have a chance to ever really meet its profitability thresholds through pricing or efficiencies or whatever. The company's gross margin was down in Q1, and the EBITDA step down was expected. The company expects inflation throughout the whole year, and the first half is definitely its toughest comp because it had pretty favorable hedges coming into the year last year. The company expects better and easier comps in the back half. The company believes that the inflationary environment is transitory and temporary. The company is keeping up its brand investments, market activity, and investing in the business and its team. The company believes that the premiumization of the category is a long-term trend, and people will come back to differentiation and its top brands. The company is well-positioned to take advantage of it when it does.Flowers Foods, a packaged bakery food products company, reported its 2023 1Q earnings call transcript. The company's presenters included J.T. Rieck, Ryals McMullian, and Steve Kinsey. The company's main focus was on mitigating the pressures of inflation and the overall macro environment. The company is on track for its cost savings activities of $20 million to $30 million for this year. The company is making investments in bakeries from a digital standpoint, which is starting to show some nice returns. The company struggled in the bakeries last year, but this year, it is expected to be a good comp for the company. The company is also in great shape from a supply chain standpoint.

The company's grocery performance has far exceeded its performance in mass for a couple of reasons. One, there has been a channel shift, and two, people across the income spectrum, including higher-income shoppers, are looking for bargains. The company's unit share in grocery was up, and it was up across the board in every subcategory. The company's Canyon brand is doing quite well, and it is one of the most inelastic brands that the company has. The company is still really excited about Canyon, and it has some really nice opportunities to innovate both inside and outside the core with Canyon as well.

The company's levers to bring back consumers to branded products include marketing, promotion, display execution, minimal out-of-stocks, and minimizing new picks for e-commerce purposes. The company is better positioned now with the data that it has, and when it runs promotions, it is getting a good ROI on that promotion. The company's DKB bar launch is doing well, and it is both existing DKB buyers that are expanding their buy rate and taking it into new categories, and incremental buyers that maybe aren't a DKB bread buyer that will buy the bar and then cross-pollinate that into the traditional brand category.

Overall, the company is doing well in grocery, but the pressure is coming from the mass channel. The company is taking specific steps in the short-term to mitigate some of these pressures, and it is on track for its cost savings activities. The company is making investments in bakeries from a digital standpoint, which is starting to show some nice returns. The company's Canyon brand is doing quite well, and it has some really nice opportunities to innovate both inside and outside the core with Canyon as well. The company's levers to bring back consumers to branded products include marketing, promotion, display execution, minimal out-of-stocks, and minimizing new picks for e-commerce purposes. The company's DKB bar launch is doing well, and it is both existing DKB buyers that are expanding their buy rate and taking it into new categories, and incremental buyers that maybe aren't a DKB bread buyer that will buy the bar and then cross-pollinate that into the traditional brand category.