FLO - Earnings call transcript Q4 2021

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Operator

Good day, and thank you for standing by. Welcome to the Flowers Foods Fourth Quarter and Fiscal Year 2021 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand conference over to your speaker today, Mr. J.T. of Investor President Vice Senior Finance Relations. and Rieck, floor is yours. The

J. T. Rieck

also may the Please our in prepared hope and note website. release will this the our evening the Q&A on good make posted replay you, were about audio everyone Q&A presentation and session, and that slide morning. to earnings Thank yesterday today's Relations our an I had all performance. of we view review forward-looking opportunity listen remarks that company's statements Investor we session, After post this call. to

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

in In SEC in factors remarks, our important Flowers fully addition you relating detailed to filings. hear these Foods what to business are

and non-GAAP the measures provided at also are which release website. disclosure of the the end We our for in on reconciliations earnings and presentation financial slide provide

President we're Q&A, Kinsey, Ryals Steve and are and today please. to me ready McMullian, Joining CEO; Operator, start CFO. our the

Operator

Instructions] Stephens. Ben first Bienvenu of question [Operator comes from Our

Jim Salera

expectations on for cadence Ben. moving can price a inflation then in talk inflation new how XXXX about year. the bit you Salera the do you that will the on about get to for think to fully wanted long implemented? new all, year? bit guess, into little I increase, ask January take maybe first I of Jim And a the little

Ryals McMullian

the of just price to the share question. price January small measure. Well, increases the but of a for in is the over, already January -- the contracts pieces due in Thanks that's for increases is few year. Sure. pricing There's rotating it lion's large

Jim Salera

of guys year about expectations can as for talk bit inflation? little maybe a you the think progresses I kind

Steve Kinsey

were I in mean QX. building we inflationary at obviously, when overall Sure. the environment, look you

XXXX ramp XXXX, QX the we -- to comps. I as then throughout it in and mean said, expect we year obviously So

back we'll slightly. still don't pull inflation, have we While

QX, then highest would it QX slightly ramp and then should back you and pulls cost, the probably So a see be QX. in

Jim Salera

question. do a in do sneak freight freight Okay. And visibility freight, cost? more I into guys could have one do any have might XXXX? regards what In to into you if costs hedging position Or on you

Steve Kinsey

things freight, cost transportation if is our Two our recall, network. you one, on biggest DSD around

out warehouses. take So we termed X network. to actually a bakeries We closed-loop the haulers from have primary the product who

contracts couple of market those years advance. on So And time as costs elevated those we business, but on from open hedge not to to warehouse kind then the usually delivery that. a are go any to do time market we we our But for in of have a from of are seeing well. there, transaction provide to

as on So be market kind companies -- try the as we like can. it situation. much in to we is, will reality XPL the most buy the current the of But forward

Operator

And next, we Bill have Chappel of Securities. Truist

Unidentified Analyst

Donald Bill. is for on This

towards time to a cost question of attribute labor? color wanted you could to is on regards And XXXX ask levels. versus play also provide inflation where front, current with point? maybe on you would some that your there Just business could the believe that much so foodservice how And do at on a you any

Ryals McMullian

levels, recovery year. sort been did some but there. of in of fourth business, and some saw, recover foodservice saw still we the It's as below last year the The the has quarter, Sure. you there half that second through XXXX

brands, et to trends, part obviously, XXXX our back given But eating the to exit our up hold our situation. business at of all to mix. have as lot as the doing know, that really pandemic really, retail below a As remain it least we does branded continued we've some we've of this of foodservice come hopefully on cetera, And of because premium profitability you it amount conversely, the it expecting helped continues place been improve as at-home reversion our been still does maintain well, work to levels. investments business business its in start

inflation? address to want You

Steve Kinsey

look labor think different around inflation, market your at we're as was I you really really the no I mean, -- you I companies. mean is tight, question than When labor know. other

kind to expecting depending we're you're So labor -- of which low the mid-single-digit to throughout market on year mid inflation in.

Operator

we Jefferies. have of Rob Dickerson Up next,

Rob Dickerson

Great.

if the you Just first a first I call, so one, I the to guess, questions. of this. probably already missed couple of spoke minute sorry

the speaking what first moving remarks, pieces, disclose, expecting, we to Just margin QX, of With say, kind of for I of higher potential whatever half-ish given should in great. year? just saw the obviously, the guess gross you're just let's of kind in margin out despite market the, terms kind cadence you're kind similar back just prepared kind QX, of of in in kind plays kind of would back in half, of gross in EPS be pricing? flattish in implied know the willing we then to of that kind year-over-year the the be And some earnings, I with half. QX

Steve Kinsey

don't margin Rob. on are sure, by some the on overall, and give not say, Yes, pressure But quarter. I margin, line. expecting specifically definitely we gross mean, guidance gross I'd obviously, we

we not certain and Ryals distribution the briefly pricing coming. will. certain anticipate if much segments, we And costs be to a the you price it then will basis have or get But cadence of heard inflationary have full So talked QX, more that in because comments. throughout the perspective, when should back, may you From obviously, about do categories our the in January we'll we year-over-year pricing in year. pretty experience then some build our pull see of a year. And down then on increase

have with build So through and while still we inflationary we said covered inflationary depending we the open have year, XX% we're then that environment back well. coverage And some hedges - will half the in first do the the happens the half. as what really for obviously about on because on,

would our build. release, the savings things will QX, to again year. We initiatives do from some thing somewhat. that we anticipate for of we we a initiatives look at A the to could come in expect overall like build don't need well. of moderate be as kind regard said with pricing to But So there and margin cadence and in the that perspective start lot potential

Rob Dickerson

Okay. Perfect. again, was kind probably then of I you, then And and simplistically, That Ryals. helpful. have for Steve, one for

level seeing guide you've single then all also down kind of for saw what digit. year, in the maybe track but this assuming maybe of the low I'm kind kind of what just or we off QX, is we basing Just that's set the of driven of kind pricing maybe of we're by on volumes pricing, top see data in of implied the already line side. on of kind I'm the January

So as just talking pricing kind kind sounds of It any pricing? single-digit-ish. rate of high of of excluding perspective any kind like fair? Is additional of kind of now, on that you're that

Steve Kinsey

tracked mean, you channel mix. data, positive I When some still the seeing look we're at

So obviously, in pricing helping is that's drive. that. also a QX, But of big driver

that So year. I development would see expect you throughout most the of would

Ryals McMullian

bit. to thus me Rob, on that a to optimistic add little elasticities. We're pretty let far

and one, units in with dollars. ahead at syndicated up category. are up data, the IRI price followed in which we're of X.X% look this significant increase of year, this the But also would of period this XX.X% both you is for have from January. essentially which January the If is We're

So retail, the and are point increases is branded price the holding pretty up -- early and volumes particularly returns on those holding for those optimistic.

but it to gives the much We'll watch confidence and see returns continue early promising. have to year. going to looking So consumer absorb, does, how able are into us what the that they're

Rob Dickerson

actually Yes, I your increase. relative year-over-year think despite up price to volumes sequentially the were December

like by cool. out. then bakeries through really still savings of just, you're year. think, in so kind across like bakery You've the contingent this savings a future, of Ryals speaking So of will material this for doesn't and have future, for lot future be the been The seem right, it's a I some out the of that year. speaking It a it's you bakery so a bakeries And the time. your of All your the provide obviously, pilots would lot in market on given sign, 'XX good then remarks the would number there's prepared that to about end right? to play but of sounds you, some far of

starts piece? of in So kind year is go more of kind of you to there? optimization a your network upside have this that and 'XX and of something Just anything that to that's kind forward potential

Ryals McMullian

the several the expect X do year. we'll the prepared this Future to saw half that mean from we have we months. on see I bakeries as pilots of over Bakery Yes. year start back -- to remarks, start we've out done the of the of in benefits you last do No, this to or rolled And X it the exactly.

expect, we that, So cadence also to of savings ramp expect as we 'XX. the do you 'XX but this and in indicate that up begin will year,

Operator

have we Mitch & of Company. Pinheiro Next, Sturdivant

Mitch Pinheiro

out Bakery around happening? a the little from computer Can and -- of bakery to it a What's you like the some future and are lines a moving are screens you talking? into follow-up -- to the over Number Is change future. on it how there Just one, is disruptive like bakery of current mode? Is talk just more bit? there? we things down about you're have shutting that servers it that? Or what

Ryals McMullian

Yes. Sure.

it's standpoint, operational an from disruptive. So not

type stuff bit down. things this type a at -- doing thing, different point. obviously, I It's is shut which data-driven to we're having of not this robotics of we're a automation story. mostly mostly some is So and that work, mean, little

Navy Yard, data, costs, is future bakery the data, inefficiencies, we As scrap to did more the of lowering for data, that out you pure mostly driving us initial cetera. know, et in around but real-time better

that prospects you mindset and benefit So takes long little in operational of them that on on These time at equipment a does bakery. change provide. improve educate that of can try bit The them, easier the time, improvement that are and the all require way very them is sell certain And fancy not Mitch, all. have lives it the folks make does operated and disruptive of way for disruptive -- us can hardly the for take little to of their it it to from bring the performance is it's digital how somewhat to daily a this a bit a standpoint, bakeries. an And it time.

of bakeries. much as as So it's anything change with the it's so is receptivity of a been we've very -- far, pleased management But it else. really exercise the

Mitch Pinheiro

the big a a X personally, costs how of with does mean, is stunned of just that's -- shopping been that that little hardware? program for $XXX see I cost so years. that lot Is I a of where ERP but number? being spent? then And number? mean was sort it dovetail maybe of for new ERP to software an over that program. million is where haven't Or bit all big is not a Like what -- I -- like with -- I

Steve Kinsey

you and are when of look I set if kind projects kind mean mean look projects, cheap across I can you of as these Yes. will. these our you well. at peer not

be not flow The not of part kind a of this it's digital a at ERP for through are the lot the standpoint ERP project an we the XX% XX%, in the implementing the costs of majority the be cost come the runs out kind technology-driven primarily foundation that Future. the rolling capital year. Bakery about the Bakery your from itself. cash cost costs a of But will itself, Future. an and large said when a of of will of As will of the be ERP is of But And release, will And around through look enabler point, item. rest to or and capitalized. work you insignificant necessarily the

or So you'll some that next tail years X off see so. to begin the over

Mitch Pinheiro

Bakery it numbers, mean, back we of going look at stuck. realize of you kind you -- sort like manufacturing. Okay. some as and your turns and asset asset expecting comes like of forward? at see roll capacity I to that, we I was that And things mean, when are sheet better the like turns adjust see to fixed Future, balance things like baking fixed we are of through a that, you then regional just going And when and to go is of been the as I sort of your going and it'd business if look sort I

you going a your really go a not near talk several see to be it there. we going here adding or are that, of to capacity it asset markets. please? through going can where be leverage need But what fixed your is some see much without efficiencies improvement You turns? to sort Can -- finding you're set about you Is little while? We're for to your years bit because

Ryals McMullian

aim significantly Mitch. improve things the obviously, Well, of the is our a couple efficiency One, there, of bakery. to

help But time, our of we'll and some So business strategy we the our And capacity. mix with to to that create further are will lower-margin customer into open continue those branded and you've via of Lynchburg some work do we optimize business. examples branded us conversions, convert that in of network. some and the as itself organic Tuscaloosa also in to us that. doing shift up customer remember, opportunities over retail that of to more for seen to the strategies also But

of as close close some old XXX-mile used not in it the there we're that You we as [enzyme] market, a to don't out that's but be. point that, out to now radius business, that to be as relevant is to With the need already was. as relatively we have once technology fresh we be utilizing, do

So additional that as us opens well. for up opportunities

Mitch Pinheiro

Moving on.

foodservice, As give taking examples? us as type some Can of far there? initiatives improve what you profitability are to you

Ryals McMullian

many are underperforming. one. sure. the And we we've said some Yes, that most look, mean, do times price have I accounts that is obvious

So to on work we those. continue

take Some one price certainly they those under are do of contracts, so time. some But lever. is

It's This as the are incumbent own another. customer. possible. efficiencies us is be about to all efficient not Our as upon

converting things. a a you too. of them help of accounts route So those And more some model Because well. market, are But expensive to are X method optimized can as also DSD, delivery, which know. to distribution still is as pretty these

a just we're of are those the So few levers pulling.

Mitch Pinheiro

on a final M&A. question then And Okay.

Your balance sheet shape. is in terrific

debt some great have You low-cost now. fixed

ample have You room your on revolvers.

cash next free on You'll still my ample estimates. based plenty flow year generate

know that I So disciplined. to going you're stay

what know to coming You're are I expect XXXX? this thing, year? now? -- can't going are the some we things we on we really I M&A in but right that we? is I surprised mean, right predict close mean, see to is find it that working you still to are there like is timing, radar how Should but be -- shouldn't something the Or see And

Ryals McMullian

certainly since Yes, we've is time one. rather for been our M&A Mitch. saying high. some appetite while been done now, mean, I we've It's for a

We good have a at. opportunities to that we look of continue pipeline

we price I be on But we a one for the because combination Just reason or And the one space. another, of fit pulled or the of we haven't in two. trigger to active or continue I can't in happen -- to And active predict want we're to but what's there, this year. just don't wouldn't know going that be to I -- sort of market. prognosticate continue that

Operator

Instructions] Our Edge Consumer Ryan Bell question comes Research. of next [Operator from

Ryan Bell

question that cost it. efficiencies ERP saw sort Is any would just sort the I the there to? of talk quick by could that number had a savings and upgrade be you provided the on of about something We side.

out Just of you kind get what exactly understand that to of program.

Steve Kinsey

Yes, Ryan.

The say because we're enterprise-wide has reality move but SAP ERP SAP system. platform we couple their whole. had a think the the I to across one our is, forced, a ERP things One, make upgrade. to of been on S/XHANA is would

So some platform point, for our at will off. service ECC drop

the portion the a driving cost. that's in of So move

bakeries. because move hopefully they Secondly, the productivity that have efficiencies to because digital we drive and the looking at were will make or across of initiatives, enable needs that long-term things

not initiative, disclosing So those come of there have point. out that this we're efficiency this will but be gains at

Ryan Bell

really migration evolution private that of think of why been your bit Obviously, despite then the And of question the just soft the how trends, And just you continue? to part branded your you Okay. some do well. so And industry branded? of the from doing then we're actually towards shift environment. seeing broader of through trying that do has a normalization about business terms can think in How the label more a the as in understand, the the coming of pricing they're much about that's portfolio standpoint?

Ryals McMullian

Sure. Yes. is Ryals. This

seeing category, it accelerate the it people get was dollars for And rather I of the Dave's up X and digits premium this kind been year. It's we even we're in Bread And quarter. premiumization fourth Dave's trend a units. again side, double in in through seeing significantly January, extremely continue. particularly Perfectly of a Killer And side, terms and where in items. on trend as seeing today, price with we it's think from after point seeing to you to so it the far So even the obviously, done are towards over you're benefited portfolio have -- the Own differentiated we Own down significantly But in already we in I seeing Nature's really pandemic. the end we're even down Crafted research more about during then And similar have down up towards would really are mean, the certainly Nature's that in continue that, years when for little now. as items. the those mean, quarter. on gravitating of after bit subline We're private we particularly label the trend Canyon. We're that trends. well. branded of a Canyon the we're continuation the But start going the And the year. trend this that on fourth were seeing that's units, what seemed increase is both that our

you lot private premium in So the with quality label our that. demonstrates it for item. really differentiated category, a don't And of consumers' a typically, preference see

we're bringing the bars primary snack strong kind really play with And that's returns across been opportunity as the if to those going gives our about for market, think obviously the that have innovation that's on fantastic, us outside brands -- prospects so DKB of these categories, mentioned then you space, will. that of we excited can we really which And core our And the shows driver. we're you early forward, brands about.

Steve Kinsey

Ryan, Steve. this is

Just as plus. discussion well, that helps drive long-term there. targets part quick around When was, have one benefit times follow-up out to to of question many said hit project, Ryals really enabler productivity we and ERP us have on the there this going be we an started your this initiative is it the

upper us from really will that's expect, those the And more ranges, So to But to how really that's see at somewhere benefit the -- and looking we we're ERP drive it our that, of digital in range. initiative. the internally. target hopefully, the end

Ryan Bell

And you're me what category. terms then just know about pricing one last for standpoint. I of talking one premiumization in from seeing trend across you're a the the

of Canyon's Just much is versus there and driven basis? of like -- a sense an sort individual on to and being product actually for mix demand shift pricing how products the is as pricing stronger by Dave's

Steve Kinsey

with data seeing mean, it whole, we've I I we think the the briefly period I But with increases. -- not really IRI whole portfolio. branded pricing products the for pricing would the taken talked took, any are more across, say, so across drive Ryals one, to your Obviously, going current about and far, we're it one premium brand. specifically

Operator

Instructions] we of have follow-up a [Operator from Jefferies. Robert Dickerson And

Rob Dickerson

Great.

probably question, cash on It on cap headwinds was light. clarification there assuming were side. a little a inventory in some the Steve, I'm Just QX. working flow

part rarely the X that if So the sure Maybe the the question pop item lease if maybe future of I up. optimization on And have the line of bakery other I'm was then those that's quick explain seen I've purchase just of just questions. portfolio. just that's plans. only right. not

Steve Kinsey

lease fits regard came collection warehouse with quarter kind when the look warehouses in a it that. kind I an that there mid-quarter was optimization us you It the to opportunity at mean our fourth strategy. portfolio, to of with Yes. several and on was of of

to look us to So the and potentially have we're to out now at some we or how warehouses. some did give going take these some warehouses it leases ability combine flexibility utilize

the fit the project work, you've was QX kind of to that CapEx strategy. the will, remainder in the the of So some elevated that of alluded in transformation capital. working with if then does long-term primarily And around driven you in [Indiscernible]

Operator

the I'm I'll queue. comments. And it over back the to for speakers further seeing in turn no questions closing

Ryals McMullian

for interest thank time today. Well, weekend. Foods. Flowers your you a Appreciate Thank good in your everybody. Goodbye, you. Have

Operator

Thank for call. all conference today's concludes participating. you This

disconnect. weekend. You a Have and now may enjoy day, your pleasant

Flowers Foods (FLO) 11 Feb 222021 Q4 Earnings call transcript