Earnings call transcript Q4 2022

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Operator

Good day and thank you for standing by. Welcome to the Flowers Foods Fourth Quarter and Fiscal Year 2022 Results Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, J. T. of Investor President Vice Executive Finance Relations. and Rieck, go ahead. Please

J. T. Rieck

prepared and Thank audio earnings call. hope our evening the on good After posted everyone an Relations Q&A were Tanya presentation release, and that slide had to our our I post yesterday review session, this morning. you, we replay all also view of to the listen website. Investor remarks today’s opportunity will

the company’s note make about Please in forward-looking session, this may we performance. that Q&A statements

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

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

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

President today to CFO. turn I are will Ryals me Joining CEO; McMullian, our Kinsey, and Ryals, over Steve it and you.

Ryals McMullian

morning, joining to in thank accomplishments performance team everybody. would that like in again Thanks, our J. their hard once for Thanks XXXX of possible. quarter T. the call. our am proud for making Good and really I work fourth Flowers

innovation important supply record environment, in and macroeconomic the that this we on advanced progress initiatives. Despite progress made year expect XXXX. challenging sales, And we we with our chain our we and generated pipeline digital to build

support as making be the marketing well will additional bar We for as launch. and investments digital chain DKB in supply

for future by Although positioning company we our success. foundation these near-term already are impact our results, I investments, continued enhancing am confident will alongside inflationary pressures, the long-term strong

we are Tanya, to ready with take So questions. that,

Operator

from Our of Instructions] Truist. Chappell first Bill Certainly. question will come [Operator

is open. line Your

Bill Chappell

Thanks. Good morning.

Ryals McMullian

Bill. morning, Good

Bill Chappell

is it it behind been talk quantification how marketing well, kind a and brand And up? color been kind on a versus impact test had of us this brand of has you of big or specifically didn’t could you stepped kind is bars? market or being snack having in really but guess I is marketing earnings up the a on invested to give Ryals, it we expected how be been have on behind of doing year? growing more this maybe little step kind or overall when spend the Thanks. of that’s kind margin gross could big and what about just what of

Ryals McMullian

Sure.

we you as Bill, So are we the know, rollout as speak. nationwide beginning

space So the it shelf as production up we will year. builds ramp and and throughout up as retailers gain

that marketing this a all really the DKB of And product. So, behind support, build for going to is quantity, known it new new support spend, a but will obviously, throughout be display digital year. a to activate be space things is of a execution, need DKB. you the most is kinds those

investments of are again, year. be it we the the intentional we new marketing line, so mostly so about the will behind a throughout very introduction the being snack And put support. And build

how the marketplace. disclose during on performing As as in as start you magnitude products going not traction But are are we we gain to goes, guys additional the give can that to the far separately. year, we color overall

Bill Chappell

much kind Just into guess Got guidance. a going I looking it how $X.XX kind trying at Is and to hadn’t given to you were earnings? it. initial to market guidance, I other that dynamics understand is of where guidance of But which we is versus mean, below granted this headwind the headwind a earnings? the before, $X.XX of

Ryals McMullian

headwinds the is mean the what it? bars, marketing of support You kind itself for

Bill Chappell

Correct. Correct.

Ryals McMullian

$X.XX or $X.XX maybe mean, $X.XX, to I $X.XX. probably,

Bill Chappell

that now helps. Okay,

Ryals McMullian

Yes.

Bill Chappell

You prepared now is the label And about for mass is trends then there one private mean, remarks, mean, at at as of we second next improves? move talked just expectation we as label an of kind branded your normalized customer for kind improves, your stable what’s share that these it’s in couple it kind of over of share this you terms move pricing looking the actually that private through quarters? that of outlook year in I

Ryals McMullian

Yes.

dynamics should mass have started dynamics, a say, – pricing pricing up label development. which the and private I So retail for come some, good have started the is to

I call too be the to label ‘XX. early overall in performance to as the think private it’s play what will

kind end year. share, we of saw the last it year plateau of gaining did Towards build the the end sort year, of the of as the private half second of label at

of this that sort that period is first our same through year, we completed And just play. dynamic at

actually into as and in how for between consumer standpoint factored our it’s been kind mass divergence how unit in and course, but those guidance label private of a segment. The first determined one that’s performance. last continue does of does private So, our In with that significantly overall it was That’s had the is though. the share down of how translate – pretty and the to what from was range. grocery of of label period, line watch-outs periods year, into of kind up it grocery be last year the the couple

encouraging So itself. of if in continues, that’s that – that’s trend obviously an and

Bill Chappell

I over. it. Thanks. turn will it Got

Operator

Thank you. Robert comes Our [Operator Jefferies. Instructions] from next of Dickerson question

Your is open. line

Robert Dickerson

short. side, coming down but of on I pricing a would business it year to bit. little for in of I that some just Thanks because bunch have maybe it private much. guidance, still Great. keep were of the some through And X% terms X% a the Steve, from in there the been decelerate questions, which think kind – line try obviously, so – I of top and a Ryals, incremental volumes like I overall lot and taken sounds the has year-over-year kind already is essentially asking label? curious also to the just would am branded foodservice am pricing of right I’ll

me, So the just is there a from rollout. but tailwind high also little seems coming maybe some to bar

awesome? additional be So, just color would any on that

Ryals McMullian

Yes.

have months of last tailwind little the from more Remember, pricing of bit a got definitely Rob, but X expected launch, year. bar yes, roughly from wraparound So we impactful.

that So that year. this we something are have there. top maybe with on Plus you back of additional gone missing pricing

line guidance So of we range experience higher lot to the costs. a price additional continue as is top

Robert Dickerson

Okay, margin, got it in is tough of QX a gross And like sounds then it. the comp. terms

a side? first great? Maybe would it You some the of terms would better could maybe there probably as bit? easing the be be how like year some in half? pricing. you flattish? it’s other little the hedging sounds It do the terms a margin Maybe of little color it’s down second in just costs kind than half have get of Is through you paraphrase any gross year Again, like strategy

Steve Kinsey

you I the going going you’re look Rob, at year, when pretty look to to probably full mean, flattish. I see much think you’re –

to pretty XXXX. pretty year, continue throughout that And in said, we’re even QX flattish go would pressure Ryals a additional obviously, start discussed, and strong even an from I you pricing was we significant the the expecting back with with very and QX, As perspective, inflation say, overall year. just in if coming through the some look, some margin because last

Robert Dickerson

That’s and mean prepared side of there kind Perfect. commentary around for lot enough. remarks, term. kind me of could the then the just, Ryals, those what in future of is Okay. spending lastly a benefits discussion are benefits for some on longer good also then commentary And

term, you’re to potential. strength that I And would longer stronger. spending make hopefully, and the think with mix business the be line potential. expansion benefits, margin was some Obviously, there meaningful margin expansion

maybe So then I’m cost ‘XX commodities tough like through ‘XX timing more really we’re is kind start Is like, do the it be have we let’s but see, assuming equal, flow that we everything maybe that’s you? to we’re to just margin which about then being again, just and ‘XX, will broad-based? some But still in we X this curious to spending there, and some – right, then Thanks. and of ‘XX So say, to spending year or I’m will through expect in if in on right, Is all. center, more X think yes, these but conceptually, would if spending through right, how of still I we ‘XX, – ’XX? get more, just hold, what need else we of or do, that benefits, – expansion – think and thinking playout decelerate of just kind you that that is continue benefit? as it

Ryals McMullian

is first this all, would that commodities not normal Well, new as go. certainly far as the hope of I

you’ve through largely investment So think get got hopefully, benefit, about steadfast future. and food there it’s good others think laid Obviously, other as is Rob. inflation into going the right? business some, yes, no, space. for out with and this I question, year it. due this come year. I that And And continuing the for this challenging we’ve But to to and year before consumer the in to us has next coming we we things, But invest in be remain a pretty to and

we’re not down. so reason slow to see down. And slowing no We

So we continue to out will bars. the roll

put will that. marketing behind We support

of chain in you that’s see be benefits going to we We moderate come. you well. are in We’re well. spending. as will to need And the have you’ll beginning then, expected these as obviously, this to of that the peak supply the that have kind the bakeries. We’ve ERP talked year. that digital efficiency investing lot think with improvements in course, we a that in where And spending a the years about And investments I that year, this think rolling unlock then,

investments which all think improvement. to we will coming and contribute of down So going margin up, benefits substantial

Robert Dickerson

it. Alright. Thanks, Got guys.

Operator

question Bienvenu next will our come Stephens. of Ben And from

open. is line Your

Jim Salera

Hey, good morning, guys. for It’s on Ben. Salera Jim

Ryals McMullian

Ben. Hi,

Jim Salera

elasticity. I like looked volumes the the ask probably whole just an to the Can a is demand rat. to questions cake decline I guys would side for have half SKU due rat, was SKU significant some prepared decline wanted I rat? demand called of eliminated SKU but like the portion know the branded us you other all half branded volume give on around idea in out you assume elasticity? the in about what volume maybe ex – the SKUs, remarks,

Ryals McMullian

don’t lion’s tell I a you have of and is volume share of today, and for are that that mean, intentional. disclose to foodservice, is we that I – don’t strategic breakout. declines cake you lot the in the I right and what you’re that can

will of foodservice. that to back to lot cake, a SKUs. we lot continue business, pulled business attempt on underperforming optimize a of will. in if And pulled underperforming we In back on So you we

think when softness about been certainly, side. and there – branded on volume the So yes, has some you declines

I seen As label, mix – towards don’t shift you most as it’s and foodservice. the think it’s this to weighted business, think overall private we’ve heavily a surprise cake that’s to But about anybody.

Jim Salera

that for my you if Okay. evenly kind kind on a of is narrower that up? the more is Or pricing, And put portfolio? it narrowing, is to foodservice thought Or guys of the trend kind the value label? pricing does then going is XXXX, mass as across on gap gap gap? back at Because targeted still reopen private to is spread that that of and

Ryals McMullian

Yes, I maintain little But expect this us foodservice. I total to of there retailers bit dollar can depending on should more the private heavily they think gap pricing stay be the to assuming business, overall, entire is the – – I gaps the stable something would gaps pretty weighted do they year. sort talking, towards throughout foodservice is but always different, is the I but to the and going but probably mean, are. more a overall, private the and in label where label should expect across – would

Jim Salera

be one perspective, from they do you have normal label, maybe just whether think from or question kind go – in naturally high do value normal channel branded more from then back it’s the they’ll needs think buying back just to if the think once chain? And promo to a a down, branded on Or the there them Okay. private to you the to gaps you to get traded consumer more that up a premium as SKUs? do make to the switch premium narrow, that, of

Ryals McMullian

just that will something hope That’s what have here. to see my is we wait certainly, mean, the it’s latter. I happens and Yes.

continuing that – been reason our that hope consumers certainly will haven’t has something meaningful a I continued back. Own else we’re So would seen be to DKB far, stable, uptick. Nature’s or also And the that come the remember might have environment But to has down, marketing spend. competitive any trade that’s with left that any

year because that to a the We’re not be for it’s year. slashing difficult going

that marketing comes differentiated the time to to continuing on We’re top when of consumer, pressure is brands. our alone, our think this them brands. in the invest the think support, And drive to and addition aspects they I that I back of in I will And recognize relieved mean us. some the all

Jim Salera

on. guys. it Okay, pass thanks, I will

Operator

question Rattigan, Edge. the I’m come platform. to remove Instructions] Connor Our next from Mitchell from will [Operator Instructions] going [Operator And Consumer

is line open. Your

Connor Rattigan

Hey, question. guys. Good the morning. Thanks for

Ryals McMullian

morning. Good

Connor Rattigan

Yes.

exciting sounds it breakfast pipeline guys you snack innovation Own from So Nature’s and a really to coming like have Dave pastries. bites bars

is clearly, to on breakfast the so snack do muffins is on this to products the a guess English customer incremental this your And the existing breakfast research, or I really like totally you guys occasion new a see [ph] pastry, But portfolio. or current bringing or as your bagels new in a substitute occasion?

Ryals McMullian

prospect. think will we which Yes, is exciting actually Connor, it incremental, a be pretty

those just intend what’s test. And these we to interesting about those additionally differentiated. in isle. thesis pastries But would actually remember, pastries the is still breakfast bringing that are Now market is bread breakfast in the something

that, bagel DKB those an of of the are course, to like the item incremental that are an which muffin, English and bars, out. in as distinguishes they kind it see I warehouse the traditional bar something a from So, or distributed,

Connor Rattigan

savings That’s a gleaned share thus collecting to that the or the of interesting. too, any bit Okay. of the far? you some the guys And great. basis have as insights points some And you pursue? then budget maybe the data maybe really possible, little also, could maybe cost you That’s of initiative, just are if on future initiatives

Ryals McMullian

reduction. big a or us scrap waste mean I one Yes. is for

having cost insights we be bakeries so the running And run smarter about greater Waste a into is reduce the and big waste. how us. allows lines are to that for us data how

at immaterial it’s not all. So,

do whole us micro of unplanned with occur is And then helps breakdowns is on may that having for line. maintenance, plan stops the us The can notion it which a preventive we it when helps thing understanding downtime other of so instead there costly. is downtime,

You expense day-by-day, that that the a become a or or cleaning stops it’s have build XX-second, your month-by-month mechanical problem, up XX-second, have X-minute if well. but stops, normal you big throughout the XX-second, downtime whatever XX-second, week-by-week, year tiny the for as

and this of alongside bakeries the gather able all have us us in time those we are that help data improvements, needed like efficiencies for to things now. process that some capabilities going leadership we So, to help is that gain of

Connor Rattigan

Appreciate I it. pass Alright. great. Thanks. That was will it on.

Ryals McMullian

Thanks Connor.

Operator

our next come And will from Sturdivant. moment. Pinheiro One question Mitchell of

is open, line Mitchell. Your

Mitchell Pinheiro

Hey. Good morning.

any So, your Pita is guidance, of sales Papa included that? in

Ryals McMullian

Yes.

Mitchell Pinheiro

what guidance should we – Is Papa assume? small, percentage sales Pita? of from you Have the what that but Okay. so comes

Ryals McMullian

Mitch. Yes. it’s co-manufacturer I We Remember, for were can’t not a break us. that tremendous. out specifically, mean they

So, sales the overall not top is impact line huge. that

Mitchell Pinheiro

it in you But be to would of Okay. included is incremental there, expect get included? right? So, whatever that out

Ryals McMullian

yes. in It’s sales the guidance,

Mitchell Pinheiro

Okay. the And mix what’s breakdown in guidance, and the year? then mix the – pricing of and volume sales of

Steve Kinsey

Mitch, It’s yes. primarily price/mix,

Mitchell Pinheiro

rat Okay. – of would in year? X%-ish same sales? And Is the this be now the that there? SKU maybe what included Is it

Ryals McMullian

we effect the of rat get We decline should year. throughout as see SKU the

moderate should that through you do so, losses the again, year start year. but Now will last – seeing over to the to or that will that the we as volume continue have we SKU rat, move been

Mitchell Pinheiro

try When looking but are in of quarter and X take – to look terms at I in some presentation. going to fourth private label, am I Slide foodservice pricing Okay. you of your

your going You those and taking have some price? you in store where What of the store brands your categories? of the store tactical. some in of your to are of percentage brands brands each are be And priority

Ryals McMullian

And taken. already Mitch. portfolio, taking price been the the We across are pricing has

Mitchell Pinheiro

is between Okay. priority tactical? And your mostly you and it what XX-XX? Is that? breakout store – Is and describe Can is priority? percentage that brand, it the

Ryals McMullian

front I back don’t to have you, that I in of me. to have get and will

Mitchell Pinheiro

to And expect I cash of when year, your guidance, on preliminary debt I anticipate go sort cash of And so wrong? your you the look going interest I based but this flow, just up free Am fix. flow, to Okay. expense, just then debts you to at rise. it are most on question, another wouldn’t have

Steve Kinsey

financing you Papa mean, the have I acquisition. the will of Pita

to until investing will perspective, see in we we are time in an year. are de-lever you back able moment pay So, from down. investment and And this ERP rise a for also still it

significant So, as it’s the XXXX cash although was highest pretty well. last still year, in flow year

Mitchell Pinheiro

so at range, down your then cause as you And look let’s if – private EPS, at be end? you Okay. finally, are low the what’s to bottom, were gets saying at guidance would more say guidance what down that very to label Is pressure, about EBITDA down – cost your range, if low the that be spikes? What the to there end? commodity you you

Ryals McMullian

commodity side because hedging to Yes. be of our going the on program. It’s really just not

mean private So, start costs the you to in to some overall consumer, But those it’s people health the getting Mitch. to competitive our promotions. we the to out inflations $XX up additional year? $XX does we label to then environment, the going on, the the earlier be spot for year, to remarks, – be us programs. and for on we throughout an I are of think ability of how this going higher question. million you uptick perhaps know back win pretty this to million of do of mostly promotions much into I our of saw the And and move start What prepared to are trend it’s much what the start the that. trying consumers on to seeing as savings savings it’s play size execute happens year it back Does and in plan with with we year, execute finally, our have

pretty again, investments items, that year once you this note EPS year biggest are could the And see also making the are headwind in addition acquisition those the behind the ERP capabilities, then $X.XX spectrum. Plus a digital, we yes, additional additional the guidance move I or opposed supply on those the could you So, pressuring swing the to that lower are ERP in we would from that, that’s EPS during plus our to factors higher behind this that year, on are as program the chain that Pita EBITDA. investment D&A much alone side bars, the and Papa digital have pressuring

Mitchell Pinheiro

not made your you is improvement, should any in – business, – margin ask. in do Have that helpful. guidance continued the included anticipate your That’s growth in your I that I guess or cake or guidance, be you would in

Ryals McMullian

syndicated up, despite every mean last our cake I cake improvements business. see last business profitability are our nearly of all that Yes. year, pick all mean business. the making The substantially doesn’t year, the that we with of you some I improved cake data year. in

Mitchell Pinheiro

Okay. And I I little thought the in year bit. still struggling that remember, should continue. I mean a it earlier was

So, is there growth incremental there?

Ryals McMullian

of on a about we struggles specifically. all And right. are the Yard of the focus the is struggles the times, business, at lot talking Mitch, cake Navy Yard that that Remember are Navy we business, some when cake the of the not

at the our to made the a significant with the all all So, innovation, Navy of pricing have of improve has them, lot improve the getting overall to profitability, we SKUs, alongside – Yard. rat unprofitable but SKU But etcetera, unprofitable not have profitability well, improvements done been business. of taking well program, really a of lot that, rid cake the done

Mitchell Pinheiro

have. Alright. Thank all That’s Okay. I you.

Ryals McMullian

Mitch. you, Thank

Operator

closing conference McMullian remarks. like back turn to would I now for to the Ryals

Ryals McMullian

everybody interest with in Everybody, care. Okay. for and you forward next again Thank take you, quarter. speaking and Flowers Foods, Tanya certainly we look your to thanks

Operator

you for participating. conference today’s Thank call. concludes This

You may disconnect. now

Flowers Foods (FLO) 10 Feb 232022 Q4 Earnings call transcript