FLO - Earnings call transcript Q4 2019

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Operator

Welcome to the Flowers Foods Fourth Quarter and Full Year 2019 Results Conference Call. My name is Cheryl, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference call is being recorded.

the to turn now will call J.T. over I of Treasurer and Relations. President Vice Rieck, Investor begin. may you Sir,

J. T. Rieck

Thank good Cheryl, fourth you, and quarter released evening, results. our we morning, everyone. Yesterday

the slide Our and filing our SEC Foods presentation Investors the anticipate section with February are website. earnings We of quarterly posted on release XX-K Flowers the in XX.

begin include the about forward-looking our company's please aware be discussion, we statements Before that may it performance.

cause and actual to be to reasonable, are uncertainties believe that we risks could these statements materially. Although, results subject differ they to

In matters, relating filings. to in are we'll addition call, discuss SEC important to fully during factors our business the Flowers Foods' detailed

Participating on and CEO; CFO. the our this call Ryals McMullian, Kinsey, our are Steve morning

to the I’ll over call Ryals, you. turn

Ryals McMullian

Thanks, for Okay. everybody. morning, J.T. Good Thanks call. joining the

the take team. developing of want brands, on about details I prioritizing value to you remind focusing pursuing to a and to four And smart quarter, to our strategic our priorities our margins, creation. drive the we Before are moment they get M&A,

priorities X% Executing earnings on foundational need sales against. and on X% are each of goals, achieve X% to there to to is how long-term these we goals our two intend XX%. grow To deliver to themes to we execute these

line top value is First, that sustainable, we recognize profitable essential long-term for growth creation.

that anticipates cultivate So our it's our imperative brands that of we consumer's a delights and products portfolio customers. needs and

efficiencies complexity driving portfolio, consistently margin deliver and managing and supply our reducing must value we second, with valueless create And to expansion by down cost, chain. up the

two that believe progress goals. mind like you to you of to listen I'd themes toward bear as in we those proof against our several for evidence our remarks morning. this are points So foundational

from complexity, our portfolio have once we're growth, our Nature's deliver supply remove solid we valueless top efforts our chain investments executed, margin program operational from driving earnings improvement high improve particularly are key and and underway confidence the now and these meaningful brands growth. Canyon in will Two, Own. and optimization are line efforts making DKB, efficiency One, that

in we improvement. the saw fact, that margin with of quarter just fourth In some some modest early evidence

The by more made business. tools the giving we've investments faster third they make of key to decisions improve our the team of drivers and around proof point the the need is informed, capabilities motivation the them to our

of complete And is action underlying from creating a team, and all to against senior is this clear the operating and leadership buy-in accountability. committed of culture who expectations

around up And for so our of over questions. turn I'll with that, priorities share review we and open before it details back then operational Steve it quarter XXXX. to guidance the Steve? and to our And come review I'll your the for

Steve Kinsey

good quarter, fourth Thank operating driven pleased by We to you, solid the and cash Ryals sales for channel the non-retail in and stabilization growth sales report retail momentum year. and in the flow primarily top record were In line morning everyone. channel. continued, the

sales of Consolidated X% by contributed lower business, increase Bakehouse basis top Canyon increased line X.X% sales improved reduced quarter-over-quarter. the the volumes drove XX approximately base while $XX.X In increase. of price/mix X.X% the million points. or this

product and for business. classes helped and breads loaf quarters. headwinds down traditional experienced to recent improved we which foodservice in due most channels activity were promotional across address realizations primarily our reduced lost to Price of inflationary Volumes

other driven sales Nature's traditional more Dave's and Bread from was sales. increased Looking branded sales Bakehouse’s by than dollars. lower largely $XX for products at branded balance sales Perfectly by Crafted, channel, accounted of the partially The growth half loaf continued or Canyon retail million incremental offset X.X%. Own these Killer

both customers, growth between The growth offset store of and distribution sales with to of Store acquired balance due cake branded X.X%, store or increased and improved the the split was increased million volume breakfast volumes items. retail attributed Bakehouse branded brand most of the sales existing $X.X to is increase business. by Canyon lower pricing

institutional Foodservice due XXXX points. and experienced lost the part Lower basis drove volumes business $X.X at realizations were In to or most was manufacturing decline XX% non-retail of the we lower percentage margin sales workforce yeast other in Improved of as and quarter, price sales. in flat disruption and decreased gross of million higher costs efficiencies from a volumes. XX by offset also lower sales. by the inferior

distributor affecting a SG&A adjusted items basis percentage press marketing as Excluding of release, and to the and the sales, costs, points higher due workforce partially logistics costs. decreased offset comparability, lower XX detailed distribution expenses fees primarily by in

IDP-related did GAAP diluted several resolution EPS reach for the on $X.XX per We a share. lawsuits. quarter was

this settlement per $X.XX As a reduced was EPS reported a legal approximately share. quarter by result, charge of

Excluding the quarter affecting in year. Adjusted to up release. share, the EPS items the detailed other comparability was the prior diluted compared this and per $X.XX $X.XX in

Canyon million. to and $XXX our to the of made cash leverage flows indebtedness expenditures on dividends year-to-date paid and both A capital and million by of Bakehouse in have in We EPS we've and the approximately reduced was and operating Accordingly, generated for been million accretive shareholders flows cash solid. EBITDA comments few $XXX quarter million. year. cash Year-to-date, $XXX flow. $XXX

EBITDA quarter-end, approximately This XXXX two adjusted to debt-to-trailing us brings net stood our guidance. times. at now At XX-month

remind that XX-week me let XXXX First, is you year. a

includes Nature's top Canyon the of foodservice continued which growth from by outlook in X.X%. approximately Wonder, our improvement to are gains week DKB expected in Market We line X% Own forecasting and Bakehouse. contribute XXrd and driven cake is of sales. is This an share growth the range to of balance The sales X%. and

volume category, to be broader rather expect growth the we by to shifts primarily driven consumer than products For differentiated growth.

$X.XX. the targeting share. approximately X.X% are range this adjusted reflects supply in chain executing well initiatives midpoint of per of our in to growth XXXX growth and improving expected be sales manufacturing efficiencies. we over earnings optimization growth as per Earnings the share is leveraging $X EPS XXXX, driven The For range as by $X.XX XXXX adjusted of to

and connection first our of plan XX defined with a cash complete transaction, recognize the make $XX $XXX quarter As million termination we in contribution this approximately million. approximately of settlement to we benefit a we expect In quarters, several largest to of non-cash the charge in have disclosed million $XXX first the million XXXX. of for to plan to quarter

we of in the $XXX $XXX XXXX, range For Lynchburg $XX production. to to approximately our conversion targeting the million million related which million, of bakery are capital expenditures includes to organic

We expect continued allocation on flow value. focus our and capital on shareholder invested and growing generation capital priority strong free consistent cash our with maximizing remain return

profitability We’ll strengthen well continue financial of maintaining to shareholder invest Strategic our in in return ways that priority. the to value continuing brands grade our portfolio an as acquisitions a the and to will and We to to to position intend be bakeries enhance as and repurchases. this also diversify do through of and share capabilities team. dividends – shareholders while investment our opportunistic

Now, call back the to I’ll turn Ryals.

Ryals McMullian

Steve. you, thank Okay,

chain So growth, as points: supply the portfolio proof and three margin our branded of to at expansion I the said please outset sales team and those drive mind call, in optimization keep investments.

fourth consumer Perfectly line to Bakehouse So continued sales Dave’s shifted brands like on-trend and Nature’s quarter, as our top growth. starting Own differentiated with the Killer Crafted. momentum In Bread, Canyon

country, basis brands one. gluten did exceedingly number bread free to fourth category, to was growth together all up Breads of grow points. only the gone the strong to XX brand The Fresh well. compared in has number the these double-digit experienced Bakehouse way According which integration Canyon Packaged Not in Canyon three quarter only the from IRI, three the

hard exceeded their goals targets them year. and thank both team a We in and over-delivering work the XXXX. to based for and Canyon’s want also sales creative all for there for in our earnings do Colorado entrepreneurial got out contribution I and

sales We DKB then approximately remarkable million. just DKB a retail just to it’s acquired second And continues brand, story. $XXX years largest to be ago. become with four over growth truly our grown of since

as combined. news DKB who DSD certain a really with our our carry plenty ago. Nature’s is, still have geographies within about much brands grow currently who bread and Own are think for additional underdeveloped than footprint. retail. second. just XX at And don’t more or Nature’s it’s room of today the over Own as customers, that of all in current of And years best was That’s white to So And not introduced we half almost

organic breads opportunity. under we the additional segments to with consumers, seen also our of we’ll that continue brand Furthermore, proven to in we’ve other baked our breakfast going the and products loyalty, already success foods can category. is household that from of presents in other passionate believe consumers fact, forward. And that innovative and DKB bring the of organic with we’ve play ideas penetration DKB still products And relative index DKB to

they’re a of To growth our growth Lynchburg, January, very brand team organic conversion mission. support production. and Lynchburg supply bakery the really announced and We’ve excited bakery to Virginia optimization our the DKB's at as got of the in about strong part we capable new strategy, chain

Coast converted facility lower enable at fall markets that East fresher with to operational in cost. us Converting the this Lynchburg year. be will to product expect And of serve we a

addition from In we and we’re begin saw the modest Wonder. we of about quarter. excited plans back saw in Mrs. Perfectly a Nature’s Freshley’s, good and growth Tastykake gains the show even DKB for And both share to as half some year Canyon, to Crafted the and fourth Own business stabilize the and in

well trends, and positioned you in powerful branded this So segments being we’re driven can that results and solid we tell, is growth for continued as that from brands growth. portfolio are leading confident portfolio given consumer is seeing the by benefiting

Turning in the expansion. now to first to margin the adjusted point, expansion margin pleased report EBITDA In the eight quarters. for I’m quarter, proof second fourth time

improved businesses. stabilization we a yet, of to reach service by price and still lot encouraged And our realizations, and goals. sale our control do cake to We’re food better in have

concentrating these you three our achieve last to consistent the expansion over And time. of areas quarter. mentioned execution we how margin focus Now we’re against primarily, on to I is intend efforts

the portfolio our margin optimization. mentioned, area portfolio in review I reduce the supply of to more operations. optimized is complexity and we a first growth profile, underway supply Last that streamline shift chain our to portfolio The aggressive to focus accretive and quarter, support chain to had

improve customer direct week review, which formulating tool. were this of among consolidate utilization are informed more tool, And our volume distribution the the plans this actionable other products view have Coming we bakeries. economics finished up network, and insights now we with and at efforts review, out underperforming product much we cube Just serve. profitability and to lower certain of costs, specific of things, improvement more included able prioritize take a last for development holistic to improve input cost a to and product

initiatives. various incorporated savings be we’ve And investing timely this a us done result, from year. our in as initial these support a can from range. And into work will of degree delivery we’ve we The projects the to confidence, results outside to the XXXX high of date them be gives realized guidance resources

We the of expect in $XX of we’ve included benefit year, XXXX for the second begin accruing million benefits half guidance. and of most $XX in to to the million our

execute Now bakery amount come improving as focus, you actions projects margins. of we capturing accordingly. timing will work the be to savings and and and additional to we’ll critical against begin The update into the savings clearer improvements

market the areas impact of plants, efficiency has focus. intense of And While six all at been be acute plants. tight labor affected has our initial virtually those the will particularly of the our

we I the bringing team we’re are increase areas support that’s in give And us investment think speed to to of accountability. mentioned, in help improvement particularly to our them additional operations outside making in and this resources to value. and As and critical I

business. and reinvigorating Turning our focus, to of investing cake in area our second

we’re here, has an high scrap processes, intensive critical and In Navy sales course The Yard bakery, things detailed workshop comprehensive focused specific actions been experiencing our clear we for conducted improvement and rates. January, which a operational and standards, both and develop discipline. several efficiencies lower standpoint. on team a improving Now has to operation plan of now a from doing

efficiencies We we’re year. also with bakery this at making expect automation the investments higher realize to significant

delivers these From an innovation. reduce we’re cost all cake, of standpoint strategic distribution service the drive high and overall consistently growth And focused volume of a is efforts culture incremental innovation. complexity that additional sales absorption, and excellence quality underlying opportunities for of reinforcement through to on rationalization, SKU

to important is it towards contributor intend and drive earnings and line, business us it growth. our to and setting accelerate focus to key meaningful is We potential art clear bottom but its cake providing Our a priorities.

flow foodservice to foodservice new nearly source drive our focus scale taking advantage business and also to increasing business. growing To billion And of cash grow engagement and around annual is to and informed $X team winning our to pricing profitability our the area, customer growth make operational product is a which sales, and third product decisions tool finally our on grow. focused more going They’re in At lines business Flowers. enables key of stabilizing profitability, forward.

proof And that point, our team us brings investments. to final

are investments higher so they accomplishes ahead. improve operational in mentioned earlier, more making to greater goals: standards doing to to the receive to improve and and processes, approaches I and team’s several we excited the As The additional team structured speed efficiencies ready of and tackle stand key discipline, levels challenges these investments value.

revisions And the XXXX frauds successful adjustments propel to in structure, incentive XXXX kind to finally, I us made and to necessary drive goals. our and we was many activity our believe the have further even to incentives, we’ll do towards more quite and of effort our which

the the line in on category. demonstrating sales we XXXX imperatives growth trajectory, the right broader consumer margin are top progress Powerful benefiting So of out, and expansion. some to despite close dual enter softness our clear against trends

quarter Our operational forward. and margins improvements can of executing strategic meaningful savings projects clear focused identified a we all that a against in and fourth And showed has that going that talented understanding on and is have dedicated the and team some our them. priorities drive of is supporting improvement

open for line questions. the And that, Cheryl, with so we’ll

Operator

you. Thank

will Our Dickerson Rob [Operator session. from now first comes We from Jefferies. question the question-and-answer Instructions] begin

Your open. line is now

Rob Dickerson

and everyone. Great, you in vis-à-vis a of incremental internal of the and you, go network, just is sounds over we’ve Good you the – plant some pillars, we Because hearing I for around just might be is, very kind there because I’m Flowers study an to was out all it’s this Hopefully, thank laid done few portfolio lot there’s time. of next what what and thinking work. and of beyond. back that three timing, map question morning, price/mix – kind kind improve all it Centennial some outlook road so positive, is optimize obviously expense optimization, just for potentially of what all If years take Project XXXX to your – kind of main the year. XXXX, have think XXXX kind general the much. guess, and

now in beyond We’re we’re now XXXX phase. you’re what is – basically this is, so in saying

go-forward and years. is tell might the what haven’t might In are mean which few might of margin you for first We this investment kind those what be for but there all be there next the going outlined XXXX, few benefits, the to year, benefits. potentially And in XXXX of just to if XXXX. offsets those then of terms revisited we’ll outlook That’s benefits later mean it. a in a

Ryals McMullian

in all, of back back. have welcome first Well, Rob, Okay. Good to you coverage.

yes, did finish the last So diagnostic up week. we just

the – refined, just timing and of to really numbers the numbers, that those Until share than there’s laid And I’m to But that. clearly, even the not it’s that I’m themselves, confident today. feel savings the numbers. indicated for so in that initial what I that more highly we’ve mean, we we we out today more on of until have I prepared it’s achievement XXXX. refine come is until

So guys we as go you we’ll forward. update

But year And frankly, the what on – medium-term longer-term confident buttoned and $XX we’re quarter of our piece, for chain you have you’re there The about and to components this, highly as million the part this, achieve. all call. are $XX first piece. to to short-term, is part million you optimization, represents the up that’s that actual complex some right, for in of start And most this that bakery when supply long-term thinking it. should optimization

to given that account is portfolio. network reciprocal we all to not that exit or a the got the affects pretty and if complicated you What, You’ve may makeup of baking do. thing, into take the how anything, may your plan bakery

opportunities we nearer the are some things to And in network. those are care of with regard there take front, optimization that distribution can fairly the on some However, fairly, quickly.

we If was the of the did things centralize Centennial days, And decentralized of was back that a Centennial Project procurement you of be of lot one to used that recall functions. to in depots. the things one the

independent by Those were typically some their remain, the in account. still and on now We’ve actions the of care own the centralized legacy term. done But near by kind that bakery network things those we those each of can were take that created that. issues individual are of

with the some we’ve that the a about, business thing. of With of to savings. lot inflationary units, innovation teams, obviously, talked Centennial, made the regard that investments were captured, form to back of business teams, that into into the were regard investment, dug kind those savings in And then marketing pressures that the

I the can is, if this that With project, what investment of makes into net you there’s regard savings, back business sense. much the tell gross to less

There’ll up investment of less We experienced bit for part. much lower much Centennial. that to targets. stood what savings most there’s resources this a the required have for all are capabilities our project achieve And our in we’re making little the we but outside than be it, of the with

So hopefully, there. that thoughts kind of your most of covered

Rob Dickerson

makes Yes. and That’s comprehensive sense. great. It’s very complete it

just So to year. later this the forward looking update

So thank much. you very

Ryals McMullian

welcome. You’re

Operator

Brian Our comes from next from Davidson. Holland question

now is line Your open.

Brian Holland

Good thanks. morning, everyone. Yes,

pretty little obviously, look category. Volume And steady scanner year, a we seeing soft the price/mix the if the at throughout promotional pricing, data, some bread increased QX. question, was First intensity tailwinds. fresh around in bit

a guess, I question. So two-part

it touched and First if remarks. I this prepared – me and missed during you your forgive

that to rationalization, market are in on what would Or noted then But strategic costs market? your QX? in SKU the some especially QX, down the in to attributable the that presentation the et down be, seeing volume part end? your here, in attributable that something you competitive maybe as you cetera? second were And is activity in ingredient is

Ryals McMullian

Sure.

it overall, quite actually that. whether in QX, market on were year a did between made that looking we in see the for volume in kind the balance. we and reductions was some trade volume traditional totality, – pleased promoted volumes promotions we We primarily lot QX, loaf question, items we your So directly so us. slippage at some in did yes, with the But forces and answer lower less have the from to softer year-end of

As year competitive are bit some markets over far last over QX as and little some there consistent, this has pretty it’s higher. a specific competitive QX of year. But been activity all, where even activity retailers

Brian Holland

Okay.

– the price is sustainable that, you the you that stance you on QX, softer, your held have good. seeing as give the off roll competitive year obviously, little volume And as you so bit forward, that’s you Do a stance. comfortable you noted, promotion but we that what and do might are some was or to leveling either expect the there? that, Or given market in you’re some side back? that think

Ryals McMullian

the take trade what we would tool prior smarter promotion helping say and that’s new market-by-market we more helpful Well, here we to quite I we’ve us look. is have promotions think get that been And and a said of promotions. those I in return targeted us a to off quarters, around and be management

market we the where market we market. obviously, we activity competitive monitor So and see by action fit by market take

Brian Holland

sense more active initiatives? enough. – think just occasions, kind interesting And getting really guess, as adjacent cetera. the against opportunities know I those other update sense for I opportunities talked any breakfast is that in to of curious, forward? business thinking one as I’m in-store forward, bigger, to opportunities we – way before. of or going we’ve the Any category. Any here how space exploring white then some kind think about you the some start that the look And as bakery, progress of Fair to about about a and I et in maybe some those of

Ryals McMullian

Nature’s continue want Asia. ever we with that’s important, into we growing. mean, because think in right? kind we’ve And said, and than I overall So Crafted, DKB to think innovate internal behind it’s the softness with absolutely. breakfast traditional Canyon particularly even with the DKB, as as both I through you one that’s that internally done loaf, is and the quite And we innovate more extremely if M&A about we is Perfectly innovation, to important Yes, did market it’s of successful. been we’ll the where moved as Own space

are as obviously, opportunities, play gaps and I certainly And to frankly, for opportunities space. M&A I of those do outside in done, there. my prepared looking have DKB fill remarks, And traditional those both at as as then for we brands, said of we opportunities we actively of well. kind Canyon, look always that see their can

Brian Holland

Last helpful me. you. one color. Thank for That’s

the – about looking gross thinking the margin and overall XXXX. margin construct Just in

cetera, like been then, labor that Is So other obviously, trend be front, little understand, freight some we bit us so you I’ll looks relief plans be pass steady? which those could that, there. ingredient of improved expect on is to has I margin over – obviously, cost, Or or are just – you the expansion. it do there? to expect how to that have any do just et you baked on. in for drive been in that guys in headwind and place, more there. some help place And some the we manufacturing components they’ll It understand with But more the course that a XXXX? has while efficiencies, less If

Ryals McMullian

sure. Yes,

labor So commodities I’ll the piece and I’ll front. take let and comment of on Steve that, freight the

continued same as we cost market mean, So the XXXX. Those from quarter fourth very – through standpoint, a we remains labor in issues some had saw you persist. Labor elevated I labor saw tight. still

efficiency issue, the of an thus affecting bakeries. – is Turnover the

of thing that cost quite to turnover read seen and bakeries, from Now as bit quality that time extra through. off, down. the that to see little mentioned take And through start yet have that a kinds things. do beginning standpoint do life underway days days of a of come number are off, and we provide I of also quarter, improve: in quite it’s a push to yet, to things consecutive early, last training of we but sort trying those still we’re Haven’t

question, of forward you the as then even chain that as relieve of some cost And your should optimization part well. help as mentioned, supply going piece

not increasing we at years that but off. X.X so. level over market transportation the the seen saw the It’s is still have or last rate elevated We

piece? Steve, on commodities to the comment do you want

Steve Kinsey

Sure.

at you frame. honest. when covering strategy So look line of of time to the cost, six open be coverage still stated our have kind much with in Brian, back input we’re We half, overall nine-month pretty quite in some to

able perspective, it’s single-digit we material. I forecast, year-over-year. nothing incremental low again, from some are mean, our up input the a the very in and some we very dependent half have So our of on in that in year. we improvements commodities over little in come to coverage the run finish back It’s improvement But in seen of have And overall the months. past that’s several cost. how

So sure to mitigate we’re and trying where that watching that make we we can.

Brian Holland

helpful. again. Thanks, of Very Best luck gentlemen.

Ryals McMullian

you. Thank

Operator

Our comes from next from Pinheiro Sturdivant. question Mitch

open. is line Your now

Mitch Pinheiro

the when good discussed your – if XX.X%. on I’m for the morning. you a had questions. the couple call but jumped Did share looking I quarter – Hi, I late, dropped of into apologize I surrounding comments at have bread that? Any

Ryals McMullian

according our sequentially? Are thinking up dollar to in IRI. you share total in were fresh packaged Well, slightly we breads, –

Mitch Pinheiro

Okay. I dropped sequentially? it guess

Ryals McMullian

Sequentially, yes.

likely missed maybe There it’s So Crafted, traditional we Dave’s to talked a the quarter – for Canyon and loaf well. and the in bit was that. little Nature’s Own which that and the growth segment fourth about you by And it. continue offset in Perfectly accounts of do softness some

Mitch Pinheiro

there if your what – affecting the – end. then the And week, extra factors not low low are there’s XXXX adjust also end the it’s range? the you when And guidance, there. a Okay. Is for and of I’m the at lot of – growth looking

Steve Kinsey

up extra the regard the top range on lower from to have volume perspective. sales a big on the of With the top the contributors again the week think to business, of low end, end traditionally volume X.X% low from volume mix upper rest to the range, obviously, the at looking end And adds – are get end Ryals nominal overall about end. line. the softer of the the said It’s a to line week at earlier, looking So the we’re and upper growth. to perspective, I may

brands, help nice our and in they improvement. to growth acquired really We see a nice drive continue recently mix

see we perspective, that from critical it’s the continue those So on line, good be from that going to top brands. growth to

the $X.XX, kind margin the you again, look we maybe coverage around With $X.XXX, – perspective, overall on that of regard the add a when softer and to there. the earnings. it’s somewhere at Again, earnings week typically

our again, that’s low the end to hitting about a optimization efforts out, million we’ve is the $XX of range. of driver So put the big that Ryals The the on million $XX range, end primarily driven. half and talked lot which range upper back

So it’s be in we of items end critical on us for going hit be those range. deliver that the the to to and upper able to projects

Mitch Pinheiro

are bit based this just the you And then – what's your Okay, any particular? foodservice? last helpful. side? the there's question. fact plans But What the on on struggled little inferior for year yeast foodservice there is in QSR – a there but issues, outlook your

Ryals McMullian

the year. in There's lap mean, quarter it, lap issue. of We'll believe, the yeast last this standpoint due of little left bit all just to I a comparison I that. Mitch. a we're XXXX, the in to going Better from first

good able plans talking be about foodservice. So stop to we'll But growth in no, that. for

business. It's very a it important contributor. $X a said I've the of is piece prepared our It's business. billion important in an As remarks,

is us helps tool And That profitability we've which And Mitch. that actually going case that first is, to cost business we focused have of the they as lost some smarter said. business of – are we on as on can team and the see new stabilize now what missed on, in come well. in some product quarter, unit using we're be encouraging really business, about we types foodservice, the is and see commentary, to as you where one, that new economics of both take the grow back more the we serve, winning focused come true winning frankly, on and then but back on

Mitch Pinheiro

questions. all you Okay, right. the for Thank

Ryals McMullian

Mitch. Thanks Sure.

Operator

Bill comes question next from SunTrust. Chappell Our from

Your now line open. is

Bill Chappell

kind talk Canyon you guess full spring you plan of the And bit Canyon? opportunities kind a this little can both distribution and ownership is just I about Can first morning. the more, have with Good better. of and I bit little guess, of Thanks. where a DKB? kind

the DSD And seeing coming does see trying in or in the of throughout distribution is growth some I to frozen? your gains Or business with understand, So from intermittent the happen? kind the you is do you mean, growth spring? more it more that of part network are out still flat year? the

Ryals McMullian

question. Great

mean, the we're encouraging. stay was it we in is growth part distribution side on that growth answer What still I certainly fresh substantial XXXX But as really side, first me would which in initiated seeing saw the expect there. Let we last. frozen of both. on you the

fact, outperformed of the in the the which customers in I've I expectations, our stay about largely for are piece piece awareness that's freezer gluten-free believe said expectations. frozen Most to due accustomed slightly think past, the to case. on consumer I matter gluten-free shopping The shelf. bread breads a our As actually underperformed fresh

that all increase that's consumer awareness, on So us to we're which doing.

to with is Now as increasing the continue see And even we of well. as velocities nice really one distribution increased gain seeing things to to Canyon. that's do expect we're we're also distribution,

really carry both And have we opportunity of DKB, may and geographies in to it today. with with that that, it's then still see ton So both. to not a nice grow retailers

the growth about So opportunities of brands. those really excited for we're both

Bill Chappell

are Nature's more – on Own to you're to and if are demand? that How XX let's – you follow-up have DKB SKUs? shelf expanded Or kind space, using of shelf replace does DKB. I white? you you just a feet get feet And taking it expanding as it shelf look XX Or of of per space? say, mean, you and

Ryals McMullian

look will shelf to our Of retailer, by differ goes. space course, total we expand far footprint it as always as but

Bill Chappell

incremental the across for But giving you're of seeing board that DKB? they're kind space that

Ryals McMullian

Yes.

Bill Chappell

one for And Okay. last me.

of you a the you're And people I offset look higher how fully Just at more that. maybe understand give paying don't just kind you color on that and to labor I you guess said how bringing other more? costs, in them – than little me offset

Ryals McMullian

really from a But being it are want And costs I of pure fair – – efficiencies is question. efficiencies. don't lower generated just terms to tight market. the it's the necessarily in what it we're lower Look, elevated. turnover the higher about think that labor seeing by is, I you labor What

doing labor to we're will mitigate that things the of some costs. that Now increase

life and additional example, consecutive reduce But for have Well, reduce efficiency labor if bakeries, we're overtime give do that's benefit net from So to a turnover the that, increase worth to significant increase that we and to additional add we it's amount days of doing, sometimes off, that can okay? in costs. gain quality shift, the and experiencing, then an right. of

that start you the before So to as want bakeries, up And down. we're some come out. go bakeries seeing proven said, of of to there, because let's that this being just do expect I XX all – it's with then our it the spray efforts and don't country But the we four are into shifts underperforming over in putting we some putting turnover year. efforts I say, efficiencies are we with to focused both we're the go careful

more of So increasing as opposed terms inflation. wage in thinking efficiency it's really it about like pure the to about

Bill Chappell

it. Got All thanks color. so right, the for much

Ryals McMullian

Sure.

Operator

Deutsche question Bank. comes Our Alwy from from Faiza next

open. now is line Your

Faiza Alwy

you. Yes, morning. hi. Thank Good

Ryals McMullian

morning. Good

Faiza Alwy

– gaps about get you as was say pricing. to private your with your question more about high. you're ingredient we first hear the deflationary for feels look wanted and But anything guess, I it. outlook price on it thinking I into a have label I think versus might little be might Because didn't how don't like pricing XXXX. I color missed bit costs potentially – just So I like

you're about So about next how year. pricing thinking just curious

Ryals McMullian

pricing. monitor we action last this took I And for can – pricing say took is, but some don't we take monitor outlook Well, pricing What effective comment by as deem typically necessary. year. everything we some year that we market. earlier, market as We year, I is about said we

Faiza Alwy

Okay.

that's $XX is am a to might think question savings? either to that right Okay. It sounds I short, or sort kind upside to what's like around clarifying we guess, the back procurement half? I million. million fall there – just, like $XX the how And primarily – think of as And of then you or entirely about

Ryals McMullian

portfolio confident is to very million $XX achieve million – in different what said XXXX. million the we're in is over chain that It's that The five a Right. any we're to in optimization. I spread was $XX And not working to of $XX this we $XX on under area. million one year number the supply halo initiatives have

while – have and we them completed actually. that my just numbers publicly. However, not the share I I numbers timing to And to just last those achieve they're make we week, I fully sure the refined desk, diagnostic work on understand want before

you probably we'll update clearer focus. So into in May that as comes

Steve Kinsey

just And to clarify, this is Steve.

than to $XX $XX to million input little million incremental side, bucket. cost on That's the very or the Just there's clarify, low I've commented, separate tailwind single-digit.

million $XX to million incremental number. $XX an is the So

Faiza Alwy

guidance your to correct? includes $XX this $XX million But million, Okay.

Steve Kinsey

it does. Yes,

Faiza Alwy

Okay.

like really just But then XXXX. know seem in at is mentioned it snacks. data, I stabilization improved. And look Okay. last doesn't around we you as question sweet anything's

So about can sweet of your within you just some snacks? initiatives talk

Ryals McMullian

Sure.

improve on that's cake, Navy there One scrap to working team low so place that actually, regard is in a plan that bakery in and high bakery. on we two and right to centered efficiencies. up with some that. bakery there, has the have our they're been now So been pieces That the They've underperforming, we to up running Philadelphia. primarily pretty put Yard efficiencies at operational,

big of it's and some but we of for the part cleaning distribution see part a the sales was we growth of the growth a went in piece year in but then have distribution. quarter good. coming things. And frankly, did part in rat from up is new it and We on They which fourth of cake really gaps see things through actually cake, innovation bit both some and is the of So did latter on it, little some SKU modest last side. operational, year,

focus both to experienced here solely distribution assigned and actually that, Tastykake improve of an Mrs. to we've Freshley's. on And executive

we seek and So that the side the it's year. improvement on this both sales on operations

Faiza Alwy

right, All very you thank much.

Ryals McMullian

Sure.

Operator

from from comes Edge. Ryan question next Our Bell Consumer

line Your now open. is

Ryan Bell

a back be driving the in? morning. and level And at help we're in clarity to you and softer with health company a some And give categories Good the you core overall? within what seeing a take operate step presentation might to on the pool on be cake might rationalization? that Would XXXX? And talked it Is that of SKU the wider consideration within you for level that, that be seems to primarily at that from line be for about, able sort rationalization talk scanner the be would respect about top trends then of the impact in the anything that like that the fresh might category there a business. bread SKU material your

Ryals McMullian

continue well look brands the I've the core on loaf meet I segments. to said, Crafted, So cultivate in Own mean, And all introduced data it's very critical are softness so us is Canyon. that's like Internally, to trend, and growth as that why category health the at performed same and we Nature's year. this Perfectly Dave's traditional we've seen needs, very, the current for consumers' we've has which first.

differentiated those we've seen from of traditionally loafs are on variety and All that bread soft white the the aisle.

in payments was that's lot this the year the into year anticipation so And look and soft shutdown. double in of government storms of some little year. issues far this of of a seen if how we government sort the probably got January that, year And as started, As category well comp there a in possible last segment. you've with a bit a recall, you'll lot traditional

a it point. for and M&A, there's us trend there need that to does noise grow continue But once call internally wouldn't I at needs. this meet in directly highlight, that through brands consumers' So the to again, both some

look of As we complexity optimization, taking from to system. removing chain a lot far supply obviously, SKUs, have get a need that. as And we're extent SKU rationalization operations. at close them slow-moving we to I've our out the talked goes, of as the about portfolio and part

shelf cleaning able We're it we're too, another up needs. directly you like to partner because retailers is number from do. brands meet reason it's about which to If two we quite fortunate to number with one, the their why retailer very think shelves, standpoint, their a they're important have on the

So fit. as the year, see the we we incorporated evaluating we're portfolio, the constantly into we'll that's moves guidance. go all where make through But

Ryan Bell

Great, to some these be on about then go you the is mostly your of doing through terms thank Or you going then initiatives, in in M&A, deeper again? you. the That's going profitability on business, then are near-term? the thinking of priority you TAC And and look anything take sort a once to of helpful. be of

Ryals McMullian

both. is question the to answer The

You can't of timing control going it'll always the continue growth and a M&A very to M&A. always has story, forward. our important piece be of been

well. So take of opportunities to the by being we're token, base business, that a as proactive. care those But and opportunistically the we'll remains take same and we have priority

to both operate got of – you have really kind you to So on fronts.

Ryan Bell

me. That’s Great, thank for it you.

Operator

McMullian. this no now time. at Ryals further over We will questions turn call have back the to I

Ryals McMullian

again for first Okay. and your Well, very Flowers, speaking we and your quarter thank interest much. today very in for you to in you on much May. all forward with call time you our Thank look

Operator

call. And thank concludes you, Thank your today's ladies and participation. for gentlemen. you conference This

may You now disconnect.

Flowers Foods (FLO) 6 Feb 202019 Q4 Earnings call transcript