Shiver says record quarter gives Flowers momentum

by Josh Sosland
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Both of Flowers' largest snack cake brands — Tastykake and Mrs. Freshley’s — enjoyed growth in the quarter.

THOMASVILLE, GA. — “Looking ahead, we have significant momentum,” said Allen L. Shiver, president and chief executive officer of Flowers Foods, Inc. Mr. Shiver was upbeat about the company’s outlook after announcing record earnings per share and EBITDA for the second quarter ended July 18.

Flowers’ net income in the quarter was $51,760,000, equal to 24c per share on the common stock, up 23% from $42,064,000, or 20c per share, in the second quarter of 2014. Net sales were $888,795,000, up 1.8% from $872,791,000.

The higher sales during the quarter were attributed in equal parts to volume gains (up 0.9%) and improved mix (also a 0.9% benefit). Sales in new Flowers markets accounted for 1.1% of overall sales in the quarter.

EBITDA in the quarter was $111 million, up 16% from the same quarter last year.

Allen L. Shiver, president and c.e.o. of Flowers Foods.

“In our core markets, new products combined with our enhanced brand strategy brought consumers to our brands and improved our margins,” Mr. Shiver said. “In our expansion markets, we continue to gain share with Wonder, Nature’s Own and our other proven brands.”

He said both of the company’s largest snack cake brands — Tastykake and Mrs. Freshley’s — enjoyed growth in the quarter, driven by new product introductions and expanded distribution.

Also during the quarter, Flowers executed a “very smooth” startup of the company’s Lenexa, Kas., baking plant. The facility was among assets acquired by Flowers in 2013 when it purchased most of the bread baking assets of Hostess Brands.

“Kansas City and other Midwestern expansion markets are key to our growth strategy, and with capacity closer to these markets, we can better serve our independent distributors and consumers,” Mr. Shiver said.

EBIT in the company’s Direct-Store-Delivery segment was $78,071,000, up 25% from $62,413,000 the second quarter last year. Sales were $751,969,000, up 2.1% from $746,364,000.

Lower ingredient costs, improved manufacturing efficiencies and cost-saving initiatives helped lift profitability, Flowers said. Distribution costs were higher though.

D.S.D. volume was up 1.4% while pricing/mix lifted sales by 0.7%.

“The increase in branded retail sales was partially offset by decreases in store branded retail due to exiting certain store branded business in the second half of fiscal 2014,” Flowers said. “The non-retail and other category posted solid volume growth, driven primarily by food service.”

Warehouse Delivery segment EBIT in the second quarter was $13,976,000, up 3.8% from $13,460,000. Sales were $136,828,000, nearly unchanged from $136,427,000.

While volume fell by 1.1% for the Warehouse segment, pricing/mix added 1.4% to sales.

Flowers guidance for the full year was left unchanged, with sales expected to range between $3,786 million to $3,861 million, and earnings per share to range between 96c and $1.01.

“Looking ahead, we have significant momentum as we continue to execute our strategy,” Mr. Shiver said. “To grow sales and attract consumers, we intend to innovate our product portfolio and leverage our strong brands. To increase margins, we will improve efficiencies and reduce our costs. And finally, we continue to seek out strategic acquisition opportunities in order to expand our brand portfolio and geographic footprint.”

For the 28 weeks ended July 18, Flowers’ net income was $113,149,000, equal to 53c per share, up 10% from $103,130,000, or 48c. Sales were $2,034,840,000, up 0.4%, from $2,026,708,000.
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