Flowers hopeful going into 2016 in wake of difficult fiscal year

by Josh Sosland
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fFlowers bread, Nature's Own, Wonder bread, Dave's Killer Bread
Nature's Own, Wonder and Dave's Killer Bread all enjoyed gains.

THOMASVILLE, GA. — After a challenging year in 2015, Flowers Foods, Inc. is expecting accelerating earnings growth in 2016.

Net income of Flowers Foods in the year ended Jan. 2 was $189,191,000, equal to 89c per share on the common stock, up 8% from $175,739,000, or 82c per share, in the prior year. Sales were $3,778,505,000, up 0.7% from $3,748,973,0000. Adjusted for special items, Flowers earnings were up 2.2% and sales were up 1.2%.

For 2016, Flowers is projecting sales growth of 5.5% to 8% versus 2015 and earnings per share growth of 6.5% to 13%.

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

“We are not satisfied with our performance in the fourth quarter,” said Allen L. Shiver, president and chief executive officer. “Even so, for the full year we delivered record adjusted e.p.s., and we took important steps to position Flowers for opportunities in 2016 and beyond. While we continued to make significant progress on our strategic initiatives, our earnings in the fourth quarter were impacted by sales that were below plan. In line with channel data for the total store, the pace of Flowers’ retail sales in the fourth quarter slowed relative to trends we observed in the first three quarters. Due to the lower-than-anticipated sales, our earnings for the quarter were negatively impacted by approximately 3c per share. Additionally, certain costs originally planned for the first quarter of 2016 were incurred in the fourth quarter of 2015, impacting e.p.s. by 1c.”

Flowers Foods’ shares fell more than 23% in pre-market trading today following the release of the company’s earnings.

For the year, adjusted EBITDA of the D.S.D. Segment was $422.7 million, up 3.7% from $407.4 million in 2014. Sales were $3,179.3 million, up 0.8% from $3,155.6 million. Branded sales during the year were up 2% while store brand sales were down 6%.

In the fourth quarter, D.S.D. Segment EBITDA was $80.5 million, down 10% from $89.7 million in the fourth quarter of 2014. Sales were $714.9 million, down 3.7%.

Looking at D.S.D. Segment results in the fourth quarter, volume was down 0.3%. Dave’s Killer Bread accounted for 3.8% of sales, but an additional week the prior year had a 7.2% negative impact in 2015. Excluding these factors, branded sales grew slightly. White and soft variety bread, mostly Nature’s Own and Wonder, enjoyed gains, while sandwich buns and rolls and sandwich round sales eroded.

Tastykake holiday flavors, Flowers Foods
New product introductions drove increased sales of Tastykake products.

“New product introductions and further expansion in our direct-store delivery markets drove increased sales of Tastykake products,” Flowers said.

EBITDA margins tightened because of higher workforce-related costs and lower efficiencies (due to below-plan sales) as well as increases in outside purchases of products, mostly due to capacity constraints for Dave’s Killer Bread.

In the fourth quarter, Flowers net income was $32,246,000, or 15c per share, up 15% from $28,010,000, or 13c. Net sales were $858,363,000, down 2%.

“While we did not meet our fourth-quarter objective, F.Y. 15 was a strong year for Flowers,” Mr. Shiver said. “Looking ahead, recently completed acquisitions, which are a core part of our growth strategy, are expected to contribute between 5.2% and 5.7% to sales growth in 2016. And with our strong brands we are working to grow share in expansion markets, while remaining a low-cost producer. The team remains keenly focused on executing our growth strategies and delivering shareholder value.”
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