Flowers Meals upbeat regardless of intensifying inflation

THOMASVILLE, GA. — After enduring a “12 months of distinctive challenges,” Flowers Meals, Inc. is poised for stable top-line progress in 2022 along with flat to reasonably rising earnings, the corporate stated whereas saying outcomes for 2021. Inflationary pressures are anticipated to accentuate within the new 12 months.

Flowers Meals web revenue within the 12 months ended Jan. 1 was $206.2 million, equal to 97¢ per share on the frequent inventory, up 35% from $152.3 million, or 72¢ per share, in 2020. Web gross sales have been $4.33 billion, down 1.3% from $4.39 billion the 12 months earlier than. Flowers stated adjusted web revenue was down 5% for the 12 months. Adjusted EBITDA was down 6%. The corporate’s EBITDA margins have been 11.3%, down 60 foundation factors from a 12 months earlier.

Within the fourth quarter, Flowers earnings have been $39.3 million, or 18¢ per share, down 30% from $55.8 million, or 26¢. Web gross sales have been $983.5 million, down 3.9% from $1.02 billion.

Within the fourth quarter, the three.9% drop principally was due to a 53rd week within the prior 12 months, which shaved 7.7% from gross sales. Pricing and blend have been a optimistic 6.2% contributor to gross sales whereas quantity was down 2.4%.

Branded retail gross sales at Flowers in 2021 have been $2.88 billion, down 1.3% from a 12 months earlier. Retailer model gross sales fell 12%, to $535 million. Non-retail and different gross sales have been $921 million, down up 6.3%.

Within the fourth quarter, branded retail gross sales have been $650 million, down 4% from a 12 months earlier. Retailer branded retail gross sales have been $117 million, down 15% and non-retail and different gross sales have been $217 million, up 4%.

In a name pre-recorded Feb. 11 for funding analysts, R. Steven Kinsey, chief monetary officer and chief administrative officer, emphasised that the largest cause gross sales have been down within the fourth quarter was due to the additional week a 12 months earlier. The distinction obscured quite a few positives within the firm’s outcomes.

“Regardless of the troublesome prior 12 months comparisons, Flowers recent packaged bread gained 10 foundation factors of market share in tracked channels,” he stated. “Excluding the additional week within the prior-year interval, gross sales of Nature’s Personal elevated 4%, and Dave’s Killer Bread and Canyon Bakehouse every rose 15%.”

A. Ryals McMullian, president and chief government officer, additionally recognized optimistic gross sales traits.

“Our family penetration grew considerably during the last two years,” he stated. “Importantly, we’ve held onto lots of these new clients and additional elevated penetration of our main manufacturers in 2021. Since 2019, our family penetration has elevated 300 foundation factors, with Nature’s Personal up 460 foundation factors, Dave’s Killer Bread up 350 foundation factors and Canyon Bakehouse up 70 foundation factors. And shoppers are additionally growing the variety of instances they purchase our merchandise, with repeat charges up 270 foundation factors since 2019. These improved metrics are driving gross sales and market share positive factors.”

Mr. McMullian additionally highlighted progress the corporate had made round quite a few initiatives, together with the corporate’s digital transformation and new product introductions. Within the latter class, was the current introduction of snack bars underneath the Dave’s Killer Bread model.

“The bars, which are available in three flavors, provide the identical killer style, texture and diet that DKB followers have come to like with the benefit of a grab-and-go product,” Mr. McMullian stated.

For the complete 12 months of 2022, Flower stated gross sales would vary from $4.66 billion to $4.695 billion, up 7.6% to eight.4% from 20201. Adjusted earnings per share have been forecast by the corporate at $1.25 to $1.35, versus $1.24 in adjusted diluted earnings per share in 2021.

Mr. McMullian stated Flowers has been profitable in securing increased costs in response to inflation, including that the strikes don’t seem to have price the corporate enterprise.

“Up to now, we’ve not seen a significant discount in demand as a result of our two worth will increase, and we’re listening to related commentary from different corporations within the client items area,” he stated. “The early indications this 12 months are that models are holding up properly and our commerce promotion charge stays low. I’ve seen some analysis that recommend shoppers are starting to search for worth as costs rise, however to date, that dynamic has been much less obvious within the bread class. In truth, a lot of the class softness has been confined to lower-priced, less-differentiated merchandise. Premium gadgets akin to Nature’s Personal Completely Crafted, Dave’s Killer Bread and Canyon proceed to generate progress in {dollars} and models. That product combine provides us confidence that 2022 has the potential to be one other very robust 12 months. Nonetheless, if shoppers start to commerce right down to lower-priced merchandise, that might put some momentary stress on margins till the present inflationary atmosphere subsides.”

Actions the corporate is taking to reinforce profitability will yield extra advantages within the second half of 2022 than within the first, Mr. Kinsey stated.

“Whereas our January pricing initiatives will affect the complete 12 months, the advantages of lots of our progress and effectivity initiatives are anticipated to happen within the again half of 2022,” he stated. “A few of the components we thought of when setting steerage — together with inflationary pressures, our capacity to take further pricing and the ensuing demand elasticity. Variations amongst these components might drive our precise outcomes to the highest and backside of the ranges supplied.”

A level of uncertainty at all times surrounds monetary steerage early in a 12 months, however Mr. McMullian elaborated on particular components he stated might drive the place outcomes fall throughout the vary supplied by the corporate.

“The primary is demand elasticity, and the second is the timing of our effectivity initiatives,” he stated. “As we stated, our early evaluation suggests that customers are absorbing the value will increase properly, however we might want to get a bit of bit additional into the 12 months for a extra full image. Additionally, given the success of our portfolio optimization initiative, which generated $60 million in financial savings during the last two years, I’m assured in our capacity to ship incremental worth. Nonetheless, a timing shift in these initiatives might affect total outcomes this 12 months. So client trade-down to lower-priced merchandise and a timing shift in our financial savings initiatives might transfer outcomes towards the decrease finish of the vary, however continued robust demand for our premium manufacturers and well timed supply of financial savings would assist drive outcomes towards the higher finish of the vary.”

Mr. Kinsey stated inflation is increased in 2022 than in 2021, partially as a result of a number of hedges established in 2021 earlier than price hikes have ended.

“In complete, we expect excessive single-digit price will increase (in 2022),” he stated. “Costs for commodities akin to flour, fat and oils; and packaging have risen considerably. And we’re doing the whole lot in our energy to offset these increased prices. Our hedging technique, through which we try and lock in commodity costs 6 to 12 months out, gives visibility into future inflation. Roughly 70% of our key uncooked supplies are coated for 2022.”