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 mentioned whereas saying outcomes for 2021. Inflationary pressures are anticipated to accentuate within the new 12 months.

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

Within the fourth quarter, Flowers earnings had been $39.3 million, or 18¢ per share, down 30% from $55.8 million, or 26¢. Web gross sales had 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 had been a optimistic 6.2% contributor to gross sales whereas quantity was down 2.4%.

Branded retail gross sales at Flowers in 2021 had 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 had been $921 million, down up 6.3%.

Within the fourth quarter, branded retail gross sales had been $650 million, down 4% from a 12 months earlier. Retailer branded retail gross sales had been $117 million, down 15% and non-retail and different gross sales had 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 most important purpose gross sales had 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 tough prior 12 months comparisons, Flowers contemporary packaged bread gained 10 foundation factors of market share in tracked channels,” he mentioned. “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 mentioned. “Importantly, we’ve held onto a lot of these new prospects 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 beneficial properties.”

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 latest introduction of snack bars underneath the Dave’s Killer Bread model.

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

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

Mr. McMullian mentioned Flowers has been profitable in securing larger 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 resulting from our two worth will increase, and we’re listening to related commentary from different corporations within the client items house,” he mentioned. “The early indications this 12 months are that models are holding up nicely and our commerce promotion price stays low. I’ve seen some analysis that counsel 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, many of the class softness has been confined to lower-priced, less-differentiated merchandise. Premium objects similar 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. Nevertheless, if shoppers start to commerce all the way down to lower-priced merchandise, that might put some momentary strain on margins till the present inflationary surroundings 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 mentioned.

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

A level of uncertainty all the time surrounds monetary steerage early in a 12 months, however Mr. McMullian elaborated on particular elements he mentioned 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 mentioned. “As we mentioned, our early evaluation suggests that buyers are absorbing the worth will increase nicely, 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. Nevertheless, a timing shift in these initiatives might influence general 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 mentioned inflation is larger in 2022 than in 2021, partially as a result of a number of hedges established in 2021 earlier than price hikes have ended.

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