Flowers Foods Inc (FLO) Q2 2025 Earnings Call Highlights: Navigating Market Shifts with ...

Release Date: August 15, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Flowers Foods Inc (NYSE:FLO) is aggressively transitioning its portfolio to align with current consumer demand, which is expected to drive long-term growth. The company has seen success with its differentiated products, such as Dave's Killer Bread and Canyon Bakehouse, which are performing well in the market. Flowers Foods Inc (NYSE:FLO) is actively innovating, with new products like small loaves and keto offerings showing promising growth. The company is experiencing substantial space gains in mass channels for its organic products, particularly Dave's Killer Bread, indicating strong market acceptance. Despite challenges, Flowers Foods Inc (NYSE:FLO) maintains a strong market share performance, particularly in premium and differentiated product segments.

Negative Points

The company is facing increased competitive pressure, particularly from new lower-priced bread products affecting traditional loaf sales. There is ongoing weakness in the away-from-home food service business, impacting overall performance. Flowers Foods Inc (NYSE:FLO) has reduced its EPS guidance, narrowing the gap between dividend commitments and current EPS run rate. The transition to align with shifting consumer trends is expected to take time, requiring patience from stakeholders. The company is experiencing negative fixed cost leverage due to lower volumes, impacting gross margins.

Q & A Highlights

Warning! GuruFocus has detected 6 Warning Sign with FLO.

Q: Ryals, can you provide more details on the competitive environment and the impact of new lower-priced bread products? A: The promotional environment is elevated but stable. We've increased promotions, especially for differentiated products like Dave's Killer Bread (DKB), which performed well. Lower-priced entrants are affecting traditional loaf areas, but we're addressing this with our own small loaves. The market remains bifurcated, with good performance in premium and value segments, particularly in mass and club channels. We're also seeing continued weakness in the away-from-home food service business.

Q: Steve, regarding the updated tariff outlook, have previous tariff costs been delayed or structurally updated? Also, how does the reduction in EPS guidance affect capital allocation, especially concerning dividends? A: The tariff update is structural, with expectations for tariffs to decrease based on current observations. Regarding capital allocation, we maintain a balanced approach, and the board evaluates performance, cash flow, and liquidity quarterly. We don't have a stated target payout ratio, but on a cash basis, it's different due to depreciation and amortization being above CapEx.

Story Continues

Q: Are we returning to a highly competitive environment similar to years ago, with aggressive pricing strategies? A: The category is transitioning due to shifting consumer trends, such as health and wellness and ultra-processed food concerns. We're committed to innovation to navigate this transition. Traditional loaf products are most affected, but we're seeing success with differentiated products like DKB and Canyon Bakehouse. We have plans to address traditional loaf weaknesses, but I won't disclose details for competitive reasons.

Q: Can you comment on the performance of Wonder and its impact on Tastykake? A: Wonder's launch has exceeded expectations without cannibalizing Tastykake, likely due to geographic strengths. Wonder is a national brand, while Tastykake is strong in the mid-Atlantic. We're pleased with Wonder's performance and have more innovation planned.

Q: How long will the transition take, and are there near-term solutions to speed it up? A: The transition will take time, but I won't specify a duration. The category will stabilize eventually, driven by consumer behavior shifts and the pandemic's final effects. Our focus is on innovation to replace declines in traditional loaf sales. We have the number one brand and SKU, and we'll continue investing in brands like Nature Zone to mitigate losses.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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