KANSAS CITY — Hostess Brands, Inc. is moving its principal distribution center to Kansas from Illinois, the company announced May 8. Plans for the move were unveiled with first-quarter financial results. The company said the new distribution center will open by the end of March 2020.
“As a result of this geographic move, the new Kansas-based distribution center will be closer to the company’s largest bakery and more centrally located in the United States,” Hostess said. “Upon completion, the company expects to be able to reach customers faster, reduce transportation costs and improve service levels.”
The Hostess baking plant in Kansas is located in Emporia, about 100 miles southwest of Kansas City. The precise location of the distribution center was not disclosed.
For the first quarter ended March 31, Hostess recorded a $6 million tax benefit in connection with the distribution center move, reflecting a remeasurement of deferred tax balances. Thomas A. Peterson, executive vice-president and chief financial officer, said the company is working with the state of Kansas and local government authorities in connection with the move and anticipates “significant tax incentives and credits.”
Without quantifying the cost of the new center, Mr. Peterson said capital costs associated with the move are included in capital spending guidance for the year of $30 million to $35 million.
“There will be transitional costs with some inventory write-offs and some retention and several transitional costs, and those will be adjusted out of e.p.s. (earnings per share),” Mr. Peterson said.
Benefits from the move will include improved efficiencies and will enhance the company’s position with customers, said Andrew P. Callahan, president and chief executive officer.
“We expect to improve our customer service, take miles out of our network and improve lane rates,” he said. “Additionally, this new distribution center will position us well to support our future portfolio growth. We believe this further strengthens our category differentiated direct-to-warehouse distribution system and core prebuilt pallet and shipper merchandising capabilities.
“Our ability to efficiently and effectively build pallet-ready displays, shippers and other merchandising forms fuels our L.T.O.s (limited-time offers) and merchandising programs with retailers.”