FLO - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Flowers Foods First Quarter 2020 Results Conference Call. At this time, all participants’ lines are in a listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. Instructions] [Operator

ahead, like Rieck, conference Finance, Senior Thank Please now speaker to Investor hand you. J.T. today, Vice go to would over the your Relations. I sir. President of

J. T. Rieck

everyone. Thank you, and morning, good

evening, released first results. quarter Yesterday we our

are and of Investors Foods presentation Flowers on the Our earnings slides posted release website. quarterly section the

available SEC website. is XX-Q Our on the

COVID-XX and it pandemic. impact statements about forward-looking Before our we include the discussion, begin as Company's please other performance may of such be the aware that matters the

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

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

Foods' Officer; Financial on Kinsey, Chief Steve Chief Executive Participating this McMullian, call the Officer. and morning are Flowers Ryals

call the you. over turn I’ll Ryals,

Ryals McMullian

Okay. J.T. morning, Thanks, Good everybody.

one been what's for we're in know I'm a of really of you. your calls sure earnings season, all last this, I hectic

So, thanks us today. for joining

of your our had express On both are and behalf want as all at that managing times care These certainly much for through we've at and every best staying adjust challenging ones family and you And everybody. about safe are this pretty to of you hope work. my can. the you to Flowers, aspect I do home and lives,

by thoughts collective including virus, the members affected those and family. of been Our prayers own have are of certainly all who our Flowers with

every crisis, supply; to third, to of and maintain our we've workplace and communities three obligation the we a supporting committed the we in serve. as manage obviously, we our always, priorities: possible; work way nation's that a as fulfill committed that key crucial foremost through the employees that we're second, support As part and imperative food we it's First remained key it's to safe

believe head proud office, reflects operations, commitment how As to adequately distribution, far staff, their performance the from to I and our and flat Company plant really out our team incredibly the goes, difficult team. of Across our describe I success sales, has as loyalty, passion been that them. our during firmly am collective it's to support serve amazing. quarter

Our values guiding those us values waters. navigated will previously And and and always well of character core service, our have light. as been served be always we integrity unchartered

I'm grateful sacrifices distributed and hard we workers. our incremental month, heroes the especially bonuses to our to for extraordinary work, their personal dedication Last recognize of efforts. frontline

health wellness of protection benefit a pandemic distancing. the our our team. Flowers the Now, affected our the including early temperature social virus days we've number from by task to mask, top authorities, screenings, that programs and established and carefully remote ensuring travel in we the followed provided instituted course enhanced and Company led a of enhanced for steering And the committee by restrictions, work, force their a health for families. of guidance employees and themselves and priority enabling and the also of We've are safeguards is sanitation, We senior of safety employees crisis, care executives. our

have had have and one-to-many, certainly cases relatively while cases. some we efforts, affected confirmed is overall. employee been few these Despite we And we've experienced one that fortunate

responsible constant robust that for our vigilance, task think I guidance, are force, result. communications from training, pandemic And bakery largely this

managers, for team our and plant the task general the and So, committee broader the helping regional heartfelt us the maintain conditions of of steering presidents, all as thank you vice to the our as force, safe members facilities. well

feed have help and America, seriously our we our consumers. to enormous our to responsibility to responsibility an are readily very ensure products take We available

to we the to demand. unprecedented the in the the around they markets bakeries our able were retail increase because country despite Now, located supply close serve, are market strategically and

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

Our production the amazing up they an teams ensuring and job, changing with our products needed. consumers had keeping customers and did marketplace, the

the despite risk. role were For literally weeks a and a serve partners key continued of And markets our number to there, clock. played the they personal running distributor independent faithfully around their

food our time. their we of we And local finally, to connection the we're responders. banks, deep and during supplies includes a as have serve. That challenging throughout hospitals the from food bakeries communities And many them this to and donations always, supporting first country,

annual companies, this our conducting shareholder year, many virtually. we're meeting Like

recent And a mission to that a of donate worth of Feeding partner, provision the for And so, decision the in the here gift funds most we America Flowers is South donating enables Feeding South for portion Second Georgia. baked Harvest right to XXX,XXX meals conjunction than more meeting the $XX year. in goods of made America. approximately budgeted hungry Georgia, this of last with million

with our to millions warehouses of need. buns underutilized provide America's with foodservice Some of bakeries to in food Feeding lines have worked kitchens regional

helped our have Star So, safe feed maintain these guide communities workplace, priorities, and through. have three helping North America the been to supporting us to and our

and of want this the in share XXXX. with the outlook call, our details deal the I'll the for and taking it But current to review situation. turn steps Steve the to to business extraordinary over to first, we're later Steve? environment quarter So, current discuss I

Steve Kinsey

Thank you, everyone. good Ryals. morning, And

to been express but my like efforts thanks comments outstanding. nothing team this during our whose have time I’d to also Ryals’ echo and sincere

important as performance what this think presently, also what in beyond seeing and environment, what results the to the go the quarter reporting clarity we drove remainder quarter, about unprecedented numbers we could in just it's occur But, are of our the as important. and can even provide much are Our over more we year.

given anyone than as no the ourselves. else. times better find is committing uncertain But, we future in which possible, the we transparency into to offering as are look Our much

to turning quarterly Now, results. the

influenced our and COVID-XX. by XX the includes quarter Given were first of results two is weeks strongly April, weeks first our

top-line during Looking in cadence March, companies, the accelerate, as those the began improved more took soft early to late to orders. home. and eating the our hold at experienced of January. at orders most Sales the like we Once we food sales prior retail widespread through quarter, February mid our shelter-in-place March, saw consumers meals

adjusted As sales, record improvement. we a second delivered and and generated of result, margin quarter consecutive the EBITDA earnings

sales million being sales consumers the X.X% meals increase, volume X.X% of Consolidated items with in at with eating mix the home. due pandemic sales declines of the overall estimate to shift mix offsetting X.X% retail growth in in contributed that We approximately channels. due channel the the quarter. Price factor foodservice retail increased to the increase main drove to branded the and COVID-XX by primarily quarter-over-quarter. impact $XX.X non-retail sales X.X% Volumes to X.X% other to or increased the more

Looking at sales by channel. or Branded retail sales million increased XX.X%. $XXX.X

thrive with Own, to Killer continued Dave's from strength Bakehouse, Bread Wonder. brands Canyon Nature's and particular Our

non-retail of and store branded million approximately lost was branded retail points. decreased offset cakes. and million breads, other decline. most disruption institutions. and including of across volumes our Increases due in and We volumes all $XX.X non-retail breakfast these categories sales foodservice branded and by distribution, to QSR, pandemic, of Store $X by our sales declines in drove caused customers of business lower saw the buns broadline or store for basis sales business schools Lower business, Foodservice rolls XX%. the or by decreased most XX other

$X.X mix as margin, and ongoing Partially increased and Organic of frontline the gross our shifted to facility related Virginia points, million bonuses XXX basis workers, amortization, quarter, benefit with appreciation conversion of Lynchburg, the branded startup incurred were retail paid $X.X to products. that an bakery. million to depreciation excluding costs higher priced In to the offsetting

Excluding sales. points mix the retail adjusted items distributor the detailed non-retail basis distribution to in The product branded in XX percentage increased compatibility, as from fees. expensive affecting shift of resulted higher a release, SG&A in

costs during to recorded we customers. the performance, bad also related costs. workers, -- of million due allowances for additional retail frontline quarter, certain incentive Considering employee certain appreciation the recorded Workforce million to bonuses of paid primarily for increased uncertainty, economic $X.X to $X.X we higher debt due foodservice

was driven related to EPS by termination $X.XX charge of pension plan. for a quarter was per defined non-cash of the $X.XX GAAP a This share. benefit a loss loss the diluted

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

and completed both this that pleased our impact, are financial We transaction non-cash. in forecasted line cash with was

to compared EPS the diluted estimate comparability, was this of approximately up on to in pandemic quarter marketplace the charge $X.XX our the share, items a increase as Based EPS prior adjusted per analysis, Excluding and adjusted best affecting $X.XX in detailed and $X.XX in the judgment year quarter. per other GAAP release, $X.XX we result share. to the and changes by caused the

paid the $XXX.X liquidity and activities million. increased the to fiscal were operating $XX.X flow. quarter cash In flow dividends now first balance Turning to cash million, our from were million sheet, of XXXX, expenditures $XX.X and million, $XX capital

remains times approximately XX-month trailing position EBITDA net at At times, X adjusted year-end. the the strong. down XXXX Our at of for from debt end financial stood X.X quarter,

we pleased and uncertain global business approximately we with on caution of an financial and ensure in this impact time. $XXX drew equivalents significant of cash had told, in performed these we the million these credit quarter-end, and quarter, reduce incremental how At Given availability to of All to in our over remaining and been environment, during million environment, uncertain facility. on had million have cash the borrowings excess the has on $XXX liquidity that Company expect the line. the an has credit COVID-XX $XXX.X markets, abundance out held

turning Now, of outlook rest our the to XXXX. for

Based first in out year analysis companies, going As forecasting X%. scenarios most business the like XXrd approximately we year. balanced This forward are quarter together outlook, which think scenarios, we putting expected our the most uncertain environment. play X.X%. to the are outsized about includes the of potential range is to against we an growth and that this the on week, X% likely our contribute And over navigating of could rest results the we sales

COVID-XX pandemic. EPS adjusted which of in impact forecasting $X to of the the the are We per $X.XX share, be includes range to

some more there range outcomes, today. of I the we will factors are share of providing the result EPS setting adjusted As sales a in considered Ryals a which could when In on and moment guidance. are said, color outside ranges of wide we

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

maintaining and cash and We return capital philosophy priorities capital consistent flow our on continued on invested allocation maximizing value. our shareholder expect strong generation. focus growing remain with and And

now, you. to the turn back I'll Thank And call Ryals.

Ryals McMullian

Steve. you, Thank Okay.

Well, anything with suffice so it how seeing environment provide the to say that quarter. unlike some that what we you first walk I'd we've in second ever now then to current perspective, you certainly through is quarter, and to saw like the the in we're far responded we To situation seen.

in our storms expect recover As outset particularly more at coming were primary to weak XX% performance first for began we of been and Like jump Easter experiencing And begin on for roughly early occurred increased things year, sales to consumers difficult of year branded to lot Sales continued the up weeks normally X% circumstances, retail the year. March. that to We in Steve approximately the payments in that winter growth week the saw momentum XX last with resumed industry, has a over and due with was three groceries up the SNAP early sales The saw the the in net us. approximately driver 'XX. flat XX.X% of began normal as against primarily under in would quarter. first crisis, We with against X% stay-at-home than business, weeks. first XX at quarter, last far our a the February was a the a having until anticipation said, in week food up ago. we comping comparison quarter relative growth prior is then, sales stock the of in in really orders, strong January which in the quarter, second to which then some a the and

the of at in demand rate retail sales the prior XX% branded of our peak growth moderate final the elevated above the weekly year. exceeded quarter, year. During did In about growth versus of XX% March, but weeks prior remained the

Looking at the overall category.

branded large margin. that in XX.X% bread Flowers the report XX% were nice up the category by sales some of to data grew track shows happy showed packaged the I sales IRI while am it fresh we While growth, a bread outperformed quarter in dollar channels.

Wonder performed Nature's XX%, Dave's especially up Bakehouse up brands Canyon XX%, was top well. was was was X%, up XX%, Our Own Bread was up and Tastykake up Killer XX%.

mentioned ability demands. up marketplace customer our performance due As in large the market, to the sped and beginning earlier, the streamlined service From stocked. our the in very our I we to well financial respond to measure was and shelves primarily to quarter of production were quickly crisis,

to becomes contributing keep to continued And apparent demand, of were more market in advantage DSD saw share even our our distribution as like new to product Also what leading and model. we our in IDPs which attract shelves. the from the gains consumers rapidly products tirelessly that on times brands, quarter, work increasing

but distribution of higher in advantage benefited that we trials. result quarter, also greater did only consumer sales from the much in Not numbers

one brands quarter. For more just retailer. of X than our time the first quality we and products. to our for reported tried retailer And that one million availability major largely our That's during the that households example, the attribute

number new and these term consumers So, of hope result. benefit retain longer a to a as we certainly a realize

time in-store forward. we online spend think has home, of more And will going behavior shopping and use continue also fewer with greater As their at consumers this changed, shopping. visits

e-commerce activity emphasis a to consumers, occurred away in in which through the category the The greater digital retain So shifted from quarter, increase e-commerce on our channel of increased media result was attract weeks. traditional and these our the sales in and the we last dollars six of bread much significant the consumer budget. shift that advertising and new in

bread by more strong, growing working was hope are connections the powerful advantages with DKB we We And to E-commerce and the of was them. online these sales in fresh many and increased and rolls to track even XX% XX%, Wonder build up of buyers channels up Own with believe Nature's attract pronounced XXX%. channel. brands new meaningful

or crisis Now, retail to as strong pressured, much in unfolded. timing the as the to curtail demand decline foodservice saw been corresponds to sharply the had we higher closed directly that the restaurants contrast retail have results sales, service. The of many

other As to and mid-March foodservice business states began implement in into were then our restrictions, and stay-at-home beginning impacted orders worsening negatively results April.

non-retail Again, year is the final our the though, margins expansion our primary weeks period. adjusted first EBITDA did margin decline than you magnitude of a to decline, that increase prior serve, XXX and So, that which driver flexibility sales of non-retail more a that compared of to of of products Despite give our sense retail XX%, bakeries, of four sales in both in the quarter, points. were a produce customers. variety the basis down the many of can non-retail

price greater retail declined, So, to for much foodservice as to the we our experiencing demand production were able which demand. were shift obviously products,

stale drove combined the margin product that So, in lower with quarter. the although flat, that shift it return the was total expansion was volume relatively in quarter mix primarily

as recent And we are continue results which strategic even to our through our disguised the as we relative one optimization, particularly come priorities, problems. instructive crisis. manage of portfolio work to often Opportunities on,

to illustrates Our accelerate significant to performance And significant an ourselves bakery this our structure our have portfolio in strengthened and the work. these our margin performance can team's improved potential Combining over time. resolve network the optimization improvement. in drive mix position quarter the results with work of margin area right deliver optimal

forward. what steps results that of see commitment success to we've certainly the our and we our strength taken hope the team in and And you can how So, we ensure going the from that's really quarter our responded. saw I and

remain sense the far you certainly still from we're quarter, give in year-over-year what XX%-plus depressed. second Foodservice branded so levels for below remained they strong quarter, but seeing are the peak to growth holding improved have do slightly but results sales March a the we rates. retail in with Now, saw first

quarter, total overall, so weekly X%. around sales growth said, So, second as in we're to I the X% far year-over-year seeing

really guess Looking where find market will anybody's forward, the it's equilibrium.

and it you position many foresee To we to want about you Churchill, to of reviewed resources, As can I've large take. just extent if research sure me unfolding to you papers any seems I'm paraphrase a course as find white would be events. could life support other have, of intolerable any that to the

So, to sales retail the assume at end more non-retail more return And our exactly the to as schools return we know and eating benefit of for don't anybody reasonable how less workplaces, eventually change, will day, vending the does restaurants seem better and or else and to that people expect when than school it will would normalized service and when but time to growth work business sales. at as that and we cafeteria occurs, drive, home. spend normal open market

and recovery. The the question is real speed the that of trajectory

On hand, the demand large consumers began to come, with one also some kind of consumers to they're get you as convinced eating But can that other amount the things hand, reopen. a to on the for is in itching you many world imagine out until acceptable. out can time cautious back the imagine of of risk remaining pent-up

In might the I lot think about and less fully to my completely travel, any a to long out in and normal to right industries eating in how recover. mind, particular take is means unlikely it business Less them lodging event, return in away. travel life restaurants.

may holiday to Furthermore, accommodate summer remain celebrations. muted spending household-only

into be the the these to for the their outlook is plans think as account season this of already many just of plans affect one-third balance of How due about the taken year. report one might of the consumers Memorial bun different In factors will summer changes our year fact, Day we've virus. we many,

also unemployment, already likely and experiencing we're recession. the business a shutdowns the resulting that Given it's high

products portfolio diversified target various price But trade that premium to our from of a points. consumers could be margins down impacted if have We decided brands.

is good business our market our of whatever the meet to the for that to is majority changing mix dynamics market fresh vast The quickly react DSD, adjust us because and demands. news able to we're

we mentioned, tried negative that So, difficult. our did have you a and positive visibility feel to that predictions give business. as Barring strong looking is comfortable circumstances, reality what we our while does lack sense of appropriate. at for the Steve least We've is ahead, a very both make very range impact guidance current year, extraordinary start variables could to the

scenarios in above guidance. earnings given While there result the our now, available bun could are for and fall existing still to within us, range facts the which is in come in expect summer season and our ahead, we the certainly mind keeping

we'll to to the succeed summary, our ourselves do In position matter best what no environment.

reminded to prioritizing while vitally and was got of well that I've strategic on as one four focused team, it Now, team. eye lose we on crisis. well the our important we our that's future pillars: consistently we and that of improved developing our keep the pursuing manage why we the it's margins; crisis, through come smart M&A; Focusing manage sight not brands; as equally out And the important

brands strong they're and are Our driving growth.

million Our disruption margins savings in to our going the February, propel portfolio from two forward. you in optimization to we improvement $XX for we have that virus. and to committed despite chain the And program remain improved quarters. And quoted fact, XXXX in we million for $XX expect the consecutive to further supply

we're targets, pursuing comment actively future. continue acquisitions can't And drive on acquisitions growth recent similar our while help strong to in results. M&A the we generate specific And to

working, stay is a to And they've utilizing well the and circumstances. difficult team business. very with exceptionally dedicated each of finally, under And and to variety remote connected technologies adjusted our nicely other talented performing

many consider platforms how In going well us. we technology fact, for been And forward. use to permanent has this very will like companies, changes pleasantly likely increased work and these I've remote worked at of personally, policies surprised

we're mix do weekly and In rest shift can the of doing sales and present data we our uncertainty, as network in assured, quickly, just capital everything trends, With capitalize heightened is a distribution this business they our to advantaged opportunities ability on period themselves. our And position, well-positioned strong that. liquid to thrive. to production power on

ready, that, up you're With we'll if line questions. for open Julie, the

Operator

your And SunTrust. with Instructions] Chappell comes question [Operator from first Bill

Bill Chappell

Thanks. Good morning.

Ryals McMullian

Good morning.

Bill Chappell

well. I hope and your are families you -- all doing are you

Ryals McMullian

Thank you.

You as well.

Bill Chappell

of national just in of to California versus it versus a it remind more wanted us exposure -- but foodservice. kind How fairly of just exposure your I Georgia? the states bit little have retail, I terms quick-serve be Maybe relates fast-casual, open of talk just the mean know the you moving foodservice. breakdown of are to that to kind versus for both, some I faster to slower, and of on then

Ryals McMullian

we that that out Sure. it's Bill, overall, we segment within be into our foodservice. And thing. about all discreet the of speaking vending of or foodservice channels the but normally overall, business QSR don't or items, foodservice, break those restaurants, sort XX% serve broadline just whether generally

the takeout service, and bit. broad we've And categories. the the So, are drive-thru foodservice the ones than a little those it's a effect are closed, that, was bit restaurants of those on folks, fairly able Obviously, maintain side, More kind segment, in within seen as are QSR the that the even started better doing to across business. others. that there all come back QSR-oriented began have on to immediate lockdowns recently, pretty the

others affected considered, base drop-off any our which pretty Obviously, in They've casual pretty in good sit maintained of patrons. experienced turn restaurants, the down have foodservice of fast significantly host whereas can't things, significantly sales, they precipitous business. the things affected, all business. type have Some a been

Bill Chappell

Got it.

Ryals McMullian

Now, to it's too as early think a to states reopen, I tell. start little really

mentioned in come it's have prepared the remarks, we so but slight starting back, rather been far. seen As volume I to

bit improvement trend but a little enough maybe three Just it we've not to seen the of there, kind call yet. just say, to would of, I over last weeks, two a

Bill Chappell

change advertising, that? offset TV just that and especially down imagine mean, bonus if any And promotional especially or do guidance? on advertising, -- your know side, areas other next plans have incremental your -- coming Got the pay schedule over then, costs, promotional switching I like other well it. schedule of your I with -- advertising does is pays And and I few with you to stuff how months. kind baked you for that’s or How don't into there as rates

Ryals McMullian

mentioned, Well, incorporate basically has like I overall, that I this mean, we place. the to dollar-wise, period. they in say, on the would a Sure. to activity from promotional a little I digital robust of budget year, been bit work have implemented mean, promotional for would as shifted lower e-commerce and traditional increases, plans side, put did the away but retailer-by-retailer I during Advertising And in those mostly have advertising set media. dollars we some at pretty some the we channel. addition to that, actually targeted

Bill Chappell

it. Got

Okay. Thanks Stay for the color. safe.

Ryals McMullian

Sure. Thank you.

Operator

question Dickerson with Jefferies. the And comes next from Rob

Rob Dickerson

Good Thanks Great. much. morning, everyone. so

Ryals McMullian

Good morning.

Rob Dickerson

well. hope the to too families are bread Flowers a is at United everyone sounds great States. doing job I your doing It like providing

for thank you So, too. that

I guess, going it I'm short I So, try bunch to questions. to though. have of keep a

In calendar We've terms basically guidance. on reporting you you're guidance, of the the guidance lift increase a companies of keep kind said basis. last of had you like those said, guidance, upfront,

the to and X%. the you for speaking the few given to guidance obviously, But around lift. of the very more around X% holding specifically And quarter quarter, came You're weeks the very, strong, year comments first then, the have COVID first in top-line.

first obviously think of And of So, sure base And kind X% foodservice. if I I strong. year, potentially branded question versus I just ask say, But, to private XXrd case. have about let’s the I'm versus fairly first seems organic. guess, the your the X% not retail if because you talking, we that we’re obviously, can label is, half dimensionalize week, out once ex you

decelerate first So, bun this but back be, still, seemed maybe a buns big might that trying pressure follow-up. mentioned, have And in that a then, what it little I of better to half just summer, And what like I given understand a could know be that half? deal. you not could

Ryals McMullian

let we a Sure. some maintaining may was Well, additional of had. variety But, I considered landed mean, where we me about we Steve guys we to guidance. want things what as thought and color. we as Obviously Rob, start provide

outlook quarters somewhere we as reasonable. for at least, very most first prudent we also range. of of remaining three place results be for would uncertain what know As looked the within we would quarter, most the take given today, but felt that at the into was scenarios outsized take that the And outcomes you against trying it us, and and various current that fall the likely the for really outcome most the could to account, guidance year, we said, tempering balance

I the -- think, everything side, the remain what And I And foodservice what mean balance I uncertainty is is, the other speed real then, settles of and environment the the where that centered recovery, by elevated? does that the the on retail around long between And what how we recovery as case business. most just elevated that said, out. is two. trajectory is and business, foodservice the how the business have. so quickest foodservice recovers what out be that be into factoring foodservice kind lowest of our If to the is also it turns and previous QSR recovers? it that is to Because the of to Bill's question, margin happens the mix

a not foodservice, And for so, standpoint outcome obviously us. optimal mix from that's the within

to We talked much can't season. going about rentals, to that rental. for in Memorial state to like residents, limited period Florida, three-day example. between rentals to in-state do rent home of state can scenarios. be out does of is waiting in that How affected? then, still Day, from got bun be open a variety know, a are there's rent. Florida, And summer of it's up be -- my And in there the So, going before if you you beach still I can't nobody

at And can somewhat disruptive us. to that it's season for it's that make see to it's call. that restrictions just the being summer early day, kind of really of bun too end So, the just you that those just important --

adjustments. not this token, early not the out thought pull was other the by And thought that prudent that range just to conservative to make handle also too same we was because we feel we there, so, extreme, was that again, have with to most but way that We the guidance, necessary. confident any

to want to add you else anything Steve, that?

Steve Kinsey

Yes.

and Just obviously trade mentioned I I one from national the a that continues to the comments, in rate the the will that Ryals Rob. and other his retail on think side. be unemployment mean, -- concern, And consumer. non-premium how comment, to on even down impact unemployment impact premium

did to shifted with As of to he hurricanes, we runs market, the we we service products. do like typically long said,

a not of there's changeovers. lot So,

back market there's of of also kind normalize home. and market, shifts, to even assortment the eating the bringing the start As meals the that SKU with of at you risk some

that about factor concerned just So, well. as

recovery So, the of thought we are up, said, you clarity. couple remain it prudent country Ryals around we to we how that foodservice and with today until just, kind where opens of more the a back have was trajectory as

Rob Dickerson

all makes And kind complete question bit theoretical around I logical just of a, That this guess, is of for DSD. of a follow-up, Okay. sense. more the

there was mentioned larger a to online. shift You

of then, any just Steve, how kind Flowers those? COVID? one I system, DSD will conceptually, near-term address just SG&A costs, go So, in maybe around longer-term if the guess, commentary just by about, forward, mainly really to on in but need incremental think is, your kind and of no there do quickly, the more there any to from Thanks. you you obviously would And QX be driven are change effects

Ryals McMullian

is still we small to believe Yes. a market it's fascinating watch mind, some you percentage that's rise I quoted that but mean, But, Good to off numbers, I way forced as high shop, employees were relatively have adopt of demonstrates And it that overall comfortable some base. different Instacart a might pretty way that example mean, changing growth growth of way guys for almost they've be these is higher. along in of this. seen consumers alone The these wild too. to behaviors question, the the changing more number e-commerce, in the I in with mean, dynamics. it small. bear you just gotten grocery permanent. of pretty Rob. And, a we

do as changes, have on it's with as don't change our system. the have not changes, currently. marketplace certainly, prepared But, incumbent distribution to Certainly the so, us any changes to to it. market And any evolve to comment to with We upon that we'll it. plans

Steve Kinsey

the of click-and-pick. Ryals’ -- surge final happened buying actually on Yes. comments one It most follow-up in Rob, just brick-and-mortar. is, was one through

ordering drove retailers It delivered they So where was have to out order major deliveries. and the necessarily either or up through other that picking that like online drove but it reaching home consumer primarily having channels. were online, wasn't you Instacart, other

primarily they at on of to products forward, discounts. as look going SG&A will costs, regard mix you the depend again With distribution you

expect X% growth Ryals and also about. the the the that We related -- or some so XX% heightened if probably the costs kind continues this talked at as buying to the of continues, range X% workforce

the weekly so handle our a barring Ad believe we’ve but seen write same the So, off, elevated is anticipate it out just business than conditions about driven across ordinary. were heightened talked maybe out Right nothing the a I by is really that. historically, on on they historically, It’s factors good near-term, anything of reality now, really the get catastrophic, but hand. basis, different board, AR have don't we we of some that of workforce. the we to

comfortable feel we with So, that.

Ryals McMullian

the as sure across as optimistic circle question be Rob, want about to of crisis do that net large say And work our I resources this make on, that, optimization optimistic portfolio that our and continued ahead. through we responsible strategies deploying behind to said it. even visibility certainly believe we these this against we're the Ryals. and prepared chain supply manage But, of brands, measure the has real process. having the are comes is do quick mentioned one we brands, the I in optimism lack behind positives. need now. all believe back before I about that's want in still to optimistic temper as them, we working, we to are that just business. remarks, it were the more and thing But the We in and the we're in guidance

all schedule. large measure, very on in So, remains that

It's So, we good very a -- as the unprecedented just simple an feel still it's about environment, very, uncertain do business. that.

Rob Dickerson

Great. Thanks much. so Doing a job. great

Ryals McMullian

Rob. you, Thank

Operator

& Sturdivant Company. And Pinheiro your comes next question from Mitch from

Mitch Pinheiro

morning. good Hey,

Ryals McMullian

Good morning.

Mitch Pinheiro

looking with couple I and versus was of How business? do that? were the come you it what -- how how benefit last to your year? COVID a did plans up like actually questions. Was number sales So, curious you a you calculate just your

Steve Kinsey

did that different coming the of several built the off went and we is of then first we the out months, potentially and did we quarter happen we And through at half scenarios two period through we kind could of in back adjustments February. what seeing on trends first those and looked we as what January Mitch, and some performance made back based thought of holiday the were the with well.

we FP&A did our different insights group in did within we We that group. -- our made accounting did our to and functions. that. And we So, also did within our did best And insides we two it teams. it within like it we attempt also we and felt

And sales as took so, different well. we trajectory views on

Mitch Pinheiro

right order mean, your it did private of that at accept curious, internal they we're make get curious, maintain label their And your -- long Did lockdowns, you an now? Do take from customer I like how of and I'm point you product to view, so whole your with brands height imagine go doing Then, say evolving point customers like private out obviously customers shelves the were Okay. guys terms How just anything? guys -- -- in you fresh do supermarket, customers from bare. that, like not the they bread. I'm at that pattern, today? I the And your things situation that did is -- and to and and any could would pan just runs of -- label?

Ryals McMullian

want shelves end the Mitch, stocked. at I the the So, of day, the mean, retailers

panic label with it much you out have stocked from of mean, over mix, that so to which to the we in fully large, have week out we the some production as exemplary that to and sat was I even support. foodservice far around it here us keep XX, get faster, hard like that production stocks. of didn't Now, super for we we it I I as our think And peak help said, branded tell the XX day. service buying the for a hours might shifted order private I us, But particularly was to provided, have was eliminate changeovers.

runs bags you changeover best how you the and get to day to market that And your longest you the items. can to get time eats changing the impact selling is of want ability so, up times, much things the so what during that's fastest. products the And out. get different does label The private like do enough that it

to hurricane as possible. that's can you why as go limited just So, you out so SKU get like much that's why in in a assortment, that Florida,

did Just virtually it every in bakery. we time, this

Mitch Pinheiro

configuration maintain? bakeries. bit? -- way that And How Ryals, objective, you future? about has team you about you highest do time? long focused look keep mean, this different that a and How spoke -- the your right that’s a Is on to lot mix seen in a -- going? do little in different, opened you've to drove talk going that looking within EBITDA could And and you're the the assortment then, other at of your not but you any -- eyes how bakery of I the at your that the you of your right are been one a margins

Ryals McMullian

hope of really -- extreme but our and we've premium this time, wouldn't it I it we're Again, did But will, it, that example as is business, we more the me certainly think we're I our -- way. you mix if and that Sure. and what branded already brands. as some you begun solidify correct any But, the we example, that towards over particularly products, a fixture become focus on we about to branded approaching more is cetera, the margin that more understand acquire shift our having products, what be mean, sure. right we of team way over thinking skew, towards would viewpoints, these to it's way time solidified to priced is say extreme the value the certainly as I items. I have. of permanent the really a this, the that viewpoint for more fact it foodservice branded skewed see the but changed be in us higher et optimize to an more fast-growing, think mix did

Mitch Pinheiro

questions. All Well the safe. Okay. thanks Everybody right. for stay

Ryals McMullian

Thank you, Mitch.

Operator

next comes Your question Holland Davidson. from with Brian D.A.

Brian Holland

I the share morning. surprised market. are of given, out realize DSD of was gains, the of Good by Thanks. that competitors believe I the most magnitude

channel? So, I was capture quarter. was could I you acute more just pronounced any category, price where mean, if was within that it brand, shift highlight most curious in the point,

Ryals McMullian

which go was used about, And network ones our then, broad estimation talking able was get in were unbelievable market. it, independent just I least on partners excuse it to production, I very pretty was quickly early and mean, I is, It those that to in is, shift serving The distributor the the my remarks, largely we doing to longer what ready were at of -- that prepared we're there it covered me, was out. really product Yes. -- pretty based. for and reason to get this.

don’t -- Florida. based region We've storms, to they winter always guy that like in that for runs whatever. done used If or I be in but for we to joke. don't the it hurricanes have California, hurricanes

how So, he to knows do this.

we out there our in to California, that how understand understand get a quickly. have there and So, personnel even business out product out the

for was quarter. that reason me, largest So in measure the in to probably the performance the share our

Brian Holland

in the mean, when you underlying I is that? the there a insights, these to persist wonder I've is that guess, is you or that could it I around look holidays Okay. how flat context the versus around which or is that we into holidays? demand surge scenario levels. just could summer a just same gatherings into, at category some above-average more balance there continues if of any fewer surveys down out I If provide Ryals, you to Steve, And significant little at I Ryals maybe your as provide season grilling as of thought context read pertains the kind a referenced. and business. mean,

Ryals McMullian

steps other because hand, less the in if here depends as what mean, sure is pretty Florida. anything's good we restrictions level I has one we we to, estimate you production have be. bun have celebration, And It on our mentioned could allowed celebrations. what just will people a be, say, make hand how -- whatever line on I you still the can, dug every I holiday household is. on that a demand with severe best now on might can see it reason possible. the I in you taken aren't mean, But, it of season. or it, best to might gather our could Certainly. see of

serve quite to to of completely not of so, this And not to much. we in year outside to that manufacture. order we the copackers Company -- season, on less a -- the taking as help go full we're and have We're lot bun doing times us

have side, the how reasons as factors they to is canceled retail they July kids are guidance they're used it's But, on Xth of a hope on just summer about it then, school it -- start we'll and these nearly lot to. is used wait holiday camps see as summer are much hopefully too. better. schools move be one for us, for -- the back. conservative in as start big of But us other the being but the than a out so earlier plays not Labor back and still to again, obviously just of Day is the summertime, I So, out. thinking we through of

through a eating. the So in-home level maintain still you're help which that of going summer, at together home elevated of lot to still have could families

Brian Holland

me. to helpful some I landscape, it. color. mean, I Last That's Thanks. reference mean, question M&A for

little folks, from of backdrop the side more curious, be we've up commentary sort more your out this. foodservice some on bit about we would Maybe the as side. Just heard focus maybe opening a branded on the here of maybe come

to and or Just in hearing you're getting what environment, are palatable? any increased more seeing? hearing curious, just for sell evaluations there seeing you folks an curious there? this Is appetite what So,

Ryals McMullian

of last back I the M&A saw I of the decline and that a up level of maybe last Not -- the pursuing in, right it last June made of commentary the pretty They really a whereas sort a any until, change year, a of of year, of are from they activity, is kind in in in seemed starting kind level are half which substantial decline continuing in, once really, in interested coming quarter, they companies transaction, call like -- week. trickling were that's now. were

of has to But lot completed least So, we not people's at haven't in I remain in, engaged that the change this those transactions. with active, nonetheless, appetite remain we're in. valuation whether engage a transaction. seen a don't from whole environment, certainly expectations, changed actual necessarily know valuations whatever I if we interested

Brian Holland

I appreciate it. Best everyone. of luck

Ryals McMullian

Thanks.

Operator

Faiza And comes Deutsche from Bank. Alwy with next your question

Faiza Alwy

Yes. Hi, good morning.

Ryals McMullian

Good morning.

Faiza Alwy

me. for of couple questions So,

you talking a But, the more cost that by of don't end back see we I have risk that we -- get you sourcing, about that benefits I think savings how of or is And there $XX of imagine that's on were First, that in that half, and you time? about sense sort the or I were year, were we when the that you were of still that to talked, do other the have a this sort get burner. I there just these talk we million million if $XX year? should know you savings last things time supposed to sourcing incremental thinking about of, last savings “normalize” don't about wanted savings back to

Ryals McMullian

Sure.

everything the to with committed amazingly, remain on else schedule, $XX we So, Everything $XX million that's million, even going to that. remains obviously on on.

still is yet. think around do work I I'm any our So, we we're of that, ready further million likely in $XX not midst feel but Yes, behind $XX that. to the just very to doing that comment good additional benefit some about million. there that

Faiza Alwy

I sort relates does your to with maybe for this as I'm margin to you mix you've of is of difficult more opportunity or make crisis ahead? -- an the for those it the some wondering provide -- and as margin mix know conversations And business. this the about have of this look we you customers sort improve if then, historically Okay. it improving this does foodservice talked And

Ryals McMullian

Well, easier it harder. any doesn't any make or it

lot about and to it And is higher strengthened the resolve with that expect the it the go doing. a us work strategically in and -- a of does can important business. their foodservice the that crisis very kind speed to some what on us. of customers talking business focus a side, cost to which continue forward. while it We think, than fixed what We're the The of frankly foodservice fits branded of our up is things, to that business margin work is already of going lower them part side cover various business. done high ahead I overhead for how accelerate overall the and some profile of we're think, were I has which and sense very margin we margin with of our it is

this, doesn't very, So, in And as role have that, very you're you able it as the when retail either to to any we to to a flex necessary it But, there. make well. of day, extraordinary the addition like then, harder. production work end it at way. serves question, situations important It's answer mentioned, your any easier,

Faiza Alwy

Okay, I understood.

last the question, rest ahead your to get on I look as of year. take the wanted private label Just to we

recession, much -- you time seeing in And I you're historically, go to a private a think, that might take share not labels already mentioned scenario. different, be as you that seeing we in not of have but consumers this it recessionary eat. you're seen sort think out we're

of there's and trusted back going a home consumers about at brands. demand talk more is there been So, lot to

trusted of want or label? do this on brands, see will going Are out risk I'm year? a you to stick the So, is what how play course take your just toward curious private greater this through consumers to with

Ryals McMullian

to not in recessions, -- speaking Well, I'm category, we category, Sure. our our in prior and well. others. held our category just historically, In pretty up

of trade to the label is our a quite private see others. overdeveloped of speaking, side might the little has branded business that relative bit pretty You category generally in But held up well. Remember down.

imagine in already Own total a at recent of price higher least that would point more today. that that it is we trade high The Nature's an to Own. deep it's for acquisitions, scenario can Own difference carry pretty from the of private remain see premium we down some a share those, one Canyon that because it, recession stands it and Nature's see more if to much out one out our Dave's pretty don't So, market does, quickly, do a you But, Nature's to I bounce will, I than wouldn't could some as super of even particularly example. call if premium down of expect and label, where from too items, you

Faiza Alwy

so much. Great. Thank you

Ryals McMullian

welcome. You're

Operator

And Consumer your from Bell question comes from Research. Ryan last Edge

Ryan Bell

less XQ, When we of look meaningful portion your a than normal we see at trend.

assume As that out you take similar if we few of that next about how weeks there the get more that months? the talked we're you the seeing activity, would the about, peak that cost are trends or latest do stock-up be three four impacts seen think over the we

Steve Kinsey

Yes.

mean, pretty we're I and think, quickly. to typical look I you pretty categories, loading happen our our life when category. you at a product, business, look shelf of at the terms not pantry things due robust the the are

go our elevated the elements cost of primarily flowing you higher the the of the see tandem in gross So, because our the elevated did you to with have within And of priced normal see on say fact increases some costs retail DSD. we then, trends, the they the you volume. overall. don't did business, of most side And because margin -- items distribution and were through costs also volume

significant in back that. as that sale the slightly over of the just less the to next relatively costs continue to quarter element top relative that decline or pressure it if the progresses, backs expect item off seen. the shelves percentage, line haven't cost and to this the where cost reacted significant the come as obviously don't talked and this already same out we overall I line, differently think of sales as that one empty, trend quarter, stale have sales I watch fairly we'll top-line a pulls The actually could and But line, even trend see were off, area the significant any two, one most somewhat should the pulls So, [ph] we of one years did for with benefit see did several we about now, we our realistically, the market somewhat. is

Ryan Bell

plan got helpful. around more of -- That's Thanks. do And into encouraging we environment? take household efforts that of consumption what the been to we've you seeing very normalized retention as increased types a increased

Ryals McMullian

budget our a you marketing Sure. or continue it. Well, already that a difference seen plan, year we very, earlier, brands. raised significantly. from some for big nice plan to And And We've if to two as our mean, robust very years have We I mentioned we've increased frankly, that's had ago. results very budget. overall I e-commerce support this three remember, from

of the so our top-line part performed that that's think I well. reason has

In addition, end the very very, but briefly we new the at of we mentioned that have out introductions, product went did right several quarter.

to another so, that to exciting And products is innovate continue to new we loyalty. way and retain their bring hope to continue consumers

Ryan Bell

Thank me. Great. for you. it That's

Ryals McMullian

Ryan. you, Thank

Operator

at time. there And McMullian, this are Mr. more no questions

Ryals McMullian

your for and thank Well, care. today Okay. each in Take one safe. stay And your certainly you you hope that much very interest and of every time Flowers. we continue all to for

Operator

you conference and call. Ladies participating. Thank for gentlemen, concludes this today's

disconnect. now may You

Flowers Foods (FLO) 14 May 202020 Q1 Earnings call transcript