Flowers Food
Dave’s Killer Bread is now available in more than 9,000 new stores through Flowers' direct-store delivery network.
THOMASVILLE, GEORGIA, U.S. — A competitive marketplace, unusual weather, and a major capital project pressured first-quarter earnings at Flowers Foods, Inc. Still, the company raised its guidance for profits modestly for the full year.

Net income of Flowers Foods in the first period ended April 23 was $59.36 million equal to 28¢ per share on the common stock, down 3.3% from $61.38 or 29¢ per share. Sales were $1.204 billion, up 5% from $1.146 billion.

Flowers Food
Allen L. Shiver, president and CEO of Flowers.
“During the first quarter, the team delivered on our priorities as we continued to execute on our strategic plans to drive profitable growth,” said Allen L. Shiver, president and chief executive officer of Flowers. “We realized higher prices for our core white loaf and soft variety bread brands, and added production and distribution support to drive growth of our organic brands, Dave's Killer Bread and Alpine Valley. While a competitive marketplace, unseasonable weather, and costs associated with the Tuscaloosa conversion pressured our earnings this quarter, we are confident we are taking the right steps to position Flowers for continued long-term success. For example, with Nature’s Own, our largest brand, we simplified the ingredients in key items, and launched a new marketing campaign emphasizing the brand’s ‘Good & Simple’ positioning.”

Completed during the quarter was conversion of the Flowers’ Tuscaloosa, Alabama, U.S., plant to accommodate production there of Dave’s Killer Bread (DKB), an organic brand acquired by Flowers in 2015. Shiver said DKB is available in more than 9,000 new stores through the company’s direct-store delivery network.

“With this introduction and less reliance on co-manufacturing, we expect to begin realizing improved profitability on sales of organic bread while capitalizing on strong consumer demand for organic bakery foods,” Shiver said.

At an investment analyst event in April, Shiver said Flowers is focused on widening margins and driving earnings growth.

“To that end, we are aggressively improving our promotional effectiveness and increasing consumer awareness of our brands,” he said.

Progress toward margin improvement was mixed in the first quarter. EBITDA as a percentage of sales in Flowers’ largest DSD segment narrowed by 1 percentage point, to 12.9% in the first quarter of 2016, from 13.9% in the same period last year. Warehouse Segment EBITDA margins widened to 12.2% from 11.7%.

The company attributed the tighter DSD segment margins to higher workforce-related costs, the Tuscaloosa project and outside purchases of products weighed on margins while lower input costs and reduced independent distributor distribution fees represented tailwinds. Costs associated with the Tuscaloosa project were $2.5 million, shaving 1¢ per share off quarterly earnings.

The lower input costs and lower workforce-related costs helped lift Warehouse segment margins.

Pressuring DSD segment sales during the quarter was a smaller number of winter storms than during the same quarter in 2015. Competitive market conditions and decreased promotional activities also cut into quarterly sales. The drags on sales all were offset by sales of newly acquired brands, which totaled about $43 million in the segment.

Flowers raised its earnings per share guidance for 2016 to $1 to $1.06, which would be up 9% to 15% from adjusted 2015 eps of 92¢. The 2016 earnings guidance was up 2¢ from 98¢ to $1.04 as initially projected by the company. Flowers kept unchanged its 2016 sales guidance at $3.986 billion to $4.08 billion, up from $3.779 billion in 2015.