THOMASVILLE, GA. — At the very peak of business in March, sales at Flowers Foods, Inc. were up 70% versus the same week a year earlier, said A. Ryals McMullian, chief executive officer. Mr. McMullian credited Flowers’ long experience in preparing for and responding to hurricanes and the company’s direct-store delivery capabilities for generally keeping retailers’ shelves filled and helping Flowers gain considerable market share during the first quarter of 2020.

Mr. McMullian spoke with investment analysts in a May 14 conference call. He said millions of consumers tried Flowers products for the first time ever during the quarter and that e-commerce sales surged to new highs.

Shares of Flowers Foods advanced solidly in early trading May 14 on the New York Stock Exchange with the stock hitting an intraday high of $24.11, up 7%, before giving ground as the day progressed.

Flowers Foods, in the first quarter ended April 18, sustained a net loss of $5,772,000, compared with net income a year earlier of $65,866,000, equal to 31¢ per share on the common stock. Net sales were $1.4 billion, up 7% from $1.3 billion in the same quarter of 2019.

Results in 2020 included a pension plan settlement and curtailment loss of $116,207,000. The charge was in line with what had been included by the company in guidance issued late in 2019.

“During the quarter, we transferred the remaining benefit obligations and administrative responsibilities of our largest defined benefit plan to a highly rated insurance company,” said R. Steve Kinsey, chief financial officer and chief administrative officer. “This was done as part of our pension-risk mitigation strategy, which has helped to significantly reduce our exposure to changes in pension liabilities due to following interest rates.”

Excluding special items including the costs associated with the termination of the pension plan, Flowers said net income was $86.4 million, up 29% from $67.2 million. Adjusted earnings per share were 41¢, up 9¢ from the first quarter last year. Flowers said 9¢ to 10¢, or at least the entire gain, was attributed to developments associated with the COVID-19 pandemic.

Branded Retail sales during the first quarter were $891,449,000, up 18% from $757,685,00 in the first quarter of 2019. Store Branded Retail sales were nearly flat at $190,181,000, down less than 1% from $191,062,000. Non-retail and Other sales were $267,814,000, down 15% from $315,148,000 a year earlier.

Accounting for the 6.8% sales increase overall, Flowers said total volume was up 0.6% while net price/mix contributed 6.2 percentage points.

The modest decline in store brand sales was attributed to the loss of store brand breakfast bread business with a retailer and volume declines for store branded cake. Store branded gluten-free product sales, produced by Canyon Bakehouse, was a partial offset.

Foodservice and other non-retail sales fell significantly because of business disruptions experienced by many customers due to the pandemic.

Mr. McMullian said quick-service restaurant sales have been recovering somewhat in recent weeks.

The shift to retail branded sales from other categories helped lift margins, with materials supplies, labor and other production costs equating to 49.7% of sales, a 190-basis point decline. The improved margins were achieved despite $4.1 million in bonuses to “frontline workers” and $1.7 million in startup costs in connection with the conversion of the company’s Lynchburg, Va., baking plant into an organic facility.

Over the course of the May 14 call, Mr. McMullian emphasized Flowers’ hurricane experience as helping guide the company in its response to the pandemic.

“During the height of the panic buying in March, we streamlined our product assortment just like we do in advance of a hurricane, but in this case, we did it virtually nationwide,” he said. “That allowed us to maximize production by focusing on longer runs of our best-selling items. Furthermore, we were able to reallocate some of our foodservice production to support the growth in the retail channel.”

Reviewing business during the quarter, Mr. McMullian said business was soft in January and closer to normal in February.

“Then at the outset of the crisis, we saw a jump in net sales with our week 11 up approximately 12% as consumers began to stock up on groceries in anticipation of stay-at-home orders and that performance continued until the last week in the quarter, which was comped against a really strong Easter a year ago. Sales momentum then resumed in the second quarter, with the first three weeks coming in at approximately 7% to 8% over last year. The primary driver of the sales growth has been our branded retail business, which is experiencing growth far more than we would normally expect under normal circumstances, having increased 17.7% in the first quarter.”

During the busiest week for the company in March, sales were 70% higher than during the same week in 2019. Growth moderated to about 20% in the final weeks of the quarter. Overall, Flowers outperformed the bread category by a significant margin, Mr. McMullian said.

“IRI data shows dollar sales of fresh packaged bread in the quarter were up 13%, while Flowers branded bread sales grew 21.2% in the tracked channels,” he said. “Our top brands performed especially well, Tastykake was up 3%, Nature’s Own was up 18%, Wonder was up 30%, Dave’s Killer Bread was up 32% and Canyon Bakehouse was up 77%. As I mentioned earlier, our financial performance in the quarter was primarily due to our ability to quickly respond to marketplace demands.”

Mr. McMullian said the company’s response allowed Flowers to keep retailer shelves well stocked generally. New products helped boost sales, but a larger factor was Flowers’ DSD system, he said.

“In times of rapidly increasing demand like what we saw in the quarter that advantage becomes even more apparent as our IDPs (independent distributor partners) worked tirelessly to keep product on the shelves,” he said. “Not only did that distribution advantage result in higher sales in the quarter, but we also benefited from much greater numbers of consumer trials.”

Recounting that one retailer suggested Flowers attracted 2 million households to try its brands for the first time during the quarter, Mr. McMullian said “availability” was a major contributor.

“We certainly hope to retain a number of these new consumers and realize a longer-term benefit as a result,” he said.

Pressed by an analyst about the company’s market share gains, Mr. McMullian reemphasized the benefits of the company’s experience dealing with severe weather. He said this background helped even in markets beyond the Southeast.

“I like to joke, ‘They don't have hurricanes in California, but the guy that runs that region used to be based in Florida, so he knows how to do this,’” he explained. “So even out there in California, we have our personnel that understand the business and understand how to get product out quickly. To me that, in probably the largest measure, was the reason for our share performance in the quarter.”

Also growing rapidly during the quarter, with fewer in-store visits and greater use of online shopping, was e-commerce business. Mr. McMullian said the company expects this trend, rapid growth from a small base, to be sustained moving forward.

“To attract and retain these new digital consumers, we shifted advertising dollars away from traditional media and increased our e-commerce budget,” he said. “The result of the shift in consumer activity and our greater emphasis on the e-commerce category was a significant increase in bread sales through that channel in the quarter, much of which occurred in the last six weeks. E-commerce sales and tracked channels of Nature’s Own fresh bread and rolls increased 80%. DKB was up 86% and Wonder was up 274%. We believe the advantages of powerful brands are even more pronounced in the growing online channel, and we hope to attract many of these new buyers by working to build strong, meaningful connections with them.”

Mr. Kinsey said the e-commerce growth principally was through “click-and-pick,” with either home delivery or consumer pick up from brick-and-mortar stores.

Unlike many, perhaps most, consumer packaged foods companies, Flowers did not choose to withdraw its earnings guidance for the year. It left its sales projection at $4.2 million to $4.3 billion, equating to growth of 2% to 4%, and adjusted earnings per share of $1 to $1.08, up 4% to 13%.

“In putting together our outlook, we balanced our outsized first-quarter results against potential scenarios that could play out over the rest of the year,” Mr. Kinsey said.

He acknowledged the considerable possibility sales and earnings will end up outside the ranges provided.

Mr. McMullian also emphasized considerable uncertainty going into the months ahead, adding that the company was planning for a softer bun season with many consumers saying travel plans for the Memorial Day holiday will be altered.

“How these changes of plans might affect the summer bun season is just one of the many, many factors we’ve taken into account as we think about our outlook for the balance of the year,” he said. “Given the business shutdowns and the resulting high unemployment, it’s also likely that we’re already experiencing a recession. We have a diversified portfolio of products that target various price points. But our margins could be impacted if consumers decided to trade down from premium brands.”