Earnings call transcript Q2 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and thank you for standing by, and welcome to the Flowers Foods Second Quarter 2023 Results Conference Call. Please be advised that today's event is being recorded.

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

J.T. Rieck

good and Norma, you, morning, everyone. Thank

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

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

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

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

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

McMullian, me CEO are Joining and CFO. our Steve and Ryals Chairman, today Kinsey, President;

you. over Ryals, to turn I'll it

Ryals McMullian

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

strong pleased results. with very the I'm quarterly

that of indication levels. top-line the and is share, retail gained translated mitigate appears be brands, migrating Volume after improve, designed the to consumer in back growth strength inflationary to recovered to a That may that updated margins and reflected to moderating. earnings, Private into pre-inflationary strategic did improved in is products initiatives label demand strength which despite branded our competitive our start early performance trends Our slow guidance. an pricing helped our business XXXX pressures. but year, be by that leading

prospects, I'm our grow trend win our and over been value investments ability innovation will in confident about out really in So, over our shareholder confident never the term. and longer that towards time. to premiumization, I've we by driven more remain the marketing, excited

are we for to that, questions. with up Norma, open So, ready

Operator

line Chappell of you. Thank the Truist first come Instructions] will with Bill Securities. And our from question [Operator

now line Your is open.

Bill Chappell

Good morning. Thanks.

Ryals McMullian

Bill. Hi,

Bill Chappell

understand improves guess, little understand to market for a kind the years. deterioration going something commentary I of that bit more I guess, start on months. of, I understand. have over past if Canyon or I'm that margins I sign more seemed the Canyon? happened trying I what hitting we few a we're how a to share if had can few know just past and that's there's didn't fully strong didn't trajectory It else of And plateau like of don't forward. pretty fully a the just

Ryals McMullian

got and on nice a tight. some Yes, be but to temporary, to Canyon really help has restructure things as because it you had trajectory, sure. ways, it to. do have, made Canyon's we Bill. been We've I to additional the at portfolio, Canyon would I capacity. in happy a Bakery with has a know, lot investments a do I'd describe problem to as free up It's, some of more little mean, capacity. bit to some good

happening So, of we've syndicated got got the well half, up as coming reinvigorate that's that shift bit the little channel picked That's growth. we've and data. plans is solved. a online There that's the second by in not to

get than category. future great got on different put of again, reality. a temporary But that ahead you're what So, little it. in still a that has seeing Canyon the We'll -- a is I got track. back

Bill Chappell

on of you'd Thanks. going of kind kind category didn't update coupled have nationwide, great. categories the then I same thought a second in time the expanding moving sometime expertise at point, of before the how in M&A. those know any 'XX. of if if in you. it. talked Got of you've out rolling Killer greater about Bread tangential to Thank kind snack And is would through bars bar your put like kind think this I tangential that's or commentary or or you And Dave's be third into that

Ryals McMullian

going rollout well. The is really

initial So, are three build SKUs right rollout a of now. the middle of those in nationwide bars

We'll XX,XXX of we about our noted for more the that we're rollout. own be expectations that by we'll ahead think I commentary in pre-recorded in So, than in slightly slightly and XX,XXX actually stores. be year-end,

of SKUs. are market. For They're protein protein test proving coming out They've to product. there Really to based. three is original think bars extremely XXXX, new incremental that higher I most well done been while. be the they're SKUs a bars. amped-up in are in for market promising free great the test They've And

Those different a a then tests. So, behind that. course, higher consumer a that later. are of offering. pipeline protein be still whole bites, I behind those of segment with bit we've coming little the snack think we're And then innovation will that, in touching got And even

we're from building we're Dave's. what innovation excited about standpoint with an So, really

Bill Chappell

brand? from you're building expertise and standpoint, just category national behind a that And bars does non an a following I of of as make guess from M&A a out -- attractive more up straight the getting kind bread, building

Ryals McMullian

and I definitely category. that brand to brand on mean, crowded would depend I a what consumer. is could. mean, it it it the Yes, the brings

of there So, right in. yeah, we be in that investing we'd careful segments we're want there interested are But, to category. definitely that the be opportunities out

Bill Chappell

much. Great. Thanks so

Ryals McMullian

Thanks, Bill.

Operator

One you. our moment for next question, Thank please.

Our next comes the Pinheiro from Mitchell Sturtevant with & of Company. question line

Your line open. is now

Mitchell Pinheiro

Hi. Good morning.

Ryals McMullian

Hey, Mitch.

Mitchell Pinheiro

questions a couple guess, Hey. of here. I

you First, spoke lot. a

direction? on still script or seeing into but still it's you you where And in what private to sort your label time trend just you you're here the about you're positive spent for August? -- in I'm curious the brands either of in not have improved you -- as And wary signs of going. You sure trends, and -- back either of be are looking in even might a seeing movement

Ryals McMullian

Great sure. question. Yes,

quarter. towards Private that things quarter of think that, gained this that But I this to seen label important in the there. was terms private note a of label gains it's share is was couple And the in still the slowing. of So, growth end the we've for lowest year. --

So a good on that's definitely trend.

more lost about it consumers than sort mass, as grocery. year, seek is talked of all grocery. mass. is label this a and this in is We've of we've playing dollar, talked thing. mass in private share that the there's Continues in to little been remember, gain It The channel bargains other in -- shift, thing actually out to in about bit phenomenon club,

do of the gains note buns in differentiation. private important label think to to lease I category that every share generally that you to products. other tend loaf words, differentiation, other share also see lost traditional breakfast, so In confined thing. are with that sort and virtually especially it's the the more rolls, that Private sandwich, where label category, those

for still our our consumers headed bargains, standpoint premiumization direction the trend from towards trend Clearly, definitely that there. we right look business. branded the is to So, is as in but still are looking build

commentary, also particularly premium point units Dave's mention a up good I'd given this X% in positioning. the had a in did we the Mitch, pre-recorded great its in really syndicated sign, data. quarter, to, and really, That's

positive year. had to growth also Dave's higher-income and the those and helping we about nice coming recall, in Well, unit help. units brand to but Bread to low-income in turned achieve you households. It the really unit now were lose when number of are We were XX% first surprising Dave's us found some households that If did gain in for a Killer that's low-income are out, a And fact, volume. was the shoppers lot second me the penetration starting earlier where year, shoppers I negative. the back to quarter of in

is all put of some just health give those factors that confidence together us So, consumer improving.

continue but into Now like to yet. that really play we stay, nice well to see that that we're We'd some the to definitely not trend caution before early quarter conclude here ready did everyone signs. we call the third it's

Mitchell Pinheiro

how then, there? is still you Number Thank you. how seeing one. impact looking on your to go pushback pricing that does an these have come foodservice volumes far? at category, in margins? mean, the And Number And two, I pricing much any pricing on your as gross -- so there other are down,

Ryals McMullian

Sure.

So, as in the needed pricing got goes, far as year. we pricing for the that we

that on done. to some in, I it is there continue most to fair of is the of contractual trickle business but say think will it's Now it

broadly as resistance understands speaking, environment. everybody far inflationary the goes, As

So, to all we wanted. were we -- able through that get we the pricing again,

-- lot volume volume And up volume that the volume, of declines. is remember, overall, declines all, of terms are foodservice intentional. of cake of made most In and a largely then first declines of the

certainly So, that having it. as cake side, been some we rationalize on of thing focusing some effect an the on Obviously we've plays of that's that talking, into margin the business, business branded volumes. more lower out business. getting that of on the cheaper Same just

from I think sequentially, really the we one cake, definitely performance our quarter. did in quarter this of did see quite to did suppliers finally some markedly, It improve that last have lap disruptions we storage some that in the quarter of terms heavy impacted you ramp we're year. foodservice, the should then because SKU that starting cold volume in improve. And for of

Mitchell Pinheiro

just then question. And Okay. last

whether So, leadership when How -- how to leadership of with talked local efficiency -- there from just away supply you're and force about much both sales, sales a has of -- sales interested lot -- ends, how and some in in having the you that -- And -- more moved just to salespeople have out it your, sort you bakery have benefits the in there? sales out each there the you've function is pleased sales curious, the customers. also as was bakery? reduction guess, comes and how the on out bakery to better the national at relates your improved. I positive the I you sales pointed leadership it you're And more at chain -- also, seeing I'm the of all more a influence

Ryals McMullian

Obviously, the it not your have question your attrition I questions little are, important in helping Grocers that store from yes. I'll does material an sales of additional display, national a more effect Well, standpoint. that. local impact area first. lot A yeah, at consolidated. turnover. level, accounts know director always But for at answer think all We last now. a have to of bit the pieces No, have in example. sell there's the major a level, can But local of

of types one well elements quarter. critical. to the And executional that are reorganization reasons as point would Those in the performed we've I so of

big in is We you our season. quarter. this achieved buns summer We highest our ever. share the buns buns As season know, had the best

points the proof all is that are those working. organizational think restructure I

having matter possible. we've be best, they focus a really supply fronts. as both chain and side, improvements And it's on bakeries folks sales, efficiently on your point, as on of on similarly able to the having solely then our those only focus, to Mitch, focus seen expertise what running that do sales

Mitchell Pinheiro

for Thank right. All questions. you the much Okay. very

Ryals McMullian

Mitch. Thanks,

Operator

question, you. Thank please. our One moment for next

Edge. of the comes with line Rattigan Our Connor from next question Consumer

Your line is now open.

Connor Rattigan

Hey, Congrats on quarter. guys. great the Good morning.

Ryals McMullian

you, Thank it. Connor. Appreciate

Connor Rattigan

Yes.

questions Mitch's of just to of some So, kind wanted there. on follow-up

buns shift shared? the just somewhat fact confined concern temporarily more So, summer any gains noted guess quarter to that to I and and segments I factor consumers guess, just I label of towards maybe sort is to moving is more, those -- private just where a private sense, much how And traditional you maybe -- segment sort more trying label maybe different category the get or and share is a of in moderating guess months? share shifting get segments maybe of with to there I the mix a segment under trying just -- the in is guess loaf of differentiated are

Ryals McMullian

some seeing trend Actually, time. for that been we've

that talked were tend we differentiation, and heavily more of as go more buns a certainly category, to few think you towards towards items, of I quite If premium, breads, about more are that shifts within specialty we all products have towards level higher pretty back more premium rolls, and a well. breakfast seeing even which quarters, the

for Bread, buns Killer Own category. The cetera, Perfectly broader just as differentiated bun. muffins, buns bagels, So, have a from specialty extremely example, That's standard have really well. et our English done Crafted well premium done even item the a white Brioche well, Nature's Dave's with that Dave's as

about lot households in a a longer while, it's inflationary trend over pull, think by down the think we've economizing. trend for disrupted obviously the seeing we've because talked I environment trade somewhat think a place. and that I But been I So remains

bring more One we're we segment. still our that things loaf category? of to here can the focused that on largest It differentiation traditional how is is

flow of from important a very it. standpoint, it's So, all performance, cash from

et cetera? Nature's So, it we a standpoint, a something mainline from here. that quality differentiate Own those to further packaging items? flavors, that's what focused on can standpoint, Is different do So we're

Connor Rattigan

well. And just to rationalizations Perfect. a back bit then SKU little as

from was And guess, just So actually rationalizations I trying a is prior the I all headwind block wondering, by more expected obviously. that the SKUs eliminated was on headwind mean, a was mentioned SKUs driven much the guess mostly more the pretty the quarter? if but finished? again sense during volume the compares in And there or a quarter, I I second there half, potentially get if you just for lot to lessen are impact know chopping you're or to were

Ryals McMullian

into at year, year. those break And cake even the to the saw I'm that we're the we going to in move half that said largely the quarter. two we on start pieces, see of second to done. as we you'll moderate I -- volume think of the side, declines beginning the because And you back

we're of mean, continued that cake I of we've always obviously, there's last doing of sort rationalization, the years, So it the been over that. that's through on bulk side. the SKU but couple

bit of little it's to lower-margin all business we different, we'll be it's still once. On that time. not a the come And going that have rationalizing some foodservice because at side, over

that exit we the previous We it is cold rationalization say That's decline operator, heavily disruption the et cetera, the under was of Some responsible the more that. for did, more contract in volume more quarter. some storage in the affects I the with that's quarter. late second the and responsible for timing. did wouldn't

So on like we're business, stay a up at It's about importantly, in And would done not yet. going like in really not come and, We it's the it's to over be sum margining -- really once, spread lower-margin production foodservice of up, the side, will I we out all number it But shifting foodservice about and years. retail. capacity intend more branded that it's to that business. to exiting even foodservice to foodservice. say,

Connor Rattigan

as for Thanks color Great. always. right. All the

Ryals McMullian

Thank Okay. Connor. you,

Operator

One question. you. moment next Thank for our

Our with Jim of question comes Stephens. from the Salera line

Your now line open. is

Jim Salera

Thanks for question. guys. our Hi, taking

Ryals McMullian

Good morning.

Jim Salera

standpoint juice Do like or prepared is the anything to back going an whether a from the the get can a kind along right you gaining direction remarks way stabilization of feel promotional and you side. you there's in term maybe Do advertising that in branded it standpoint? going feel the little brand talked the there's near bit, that the do help it You a on in about you share? -- to it's

Ryals McMullian

question. that. good somebody Yes, glad get promotions. about I was hoping I'm Yes. asked we

your things words. to to juice are to So we answer your it, question, yes, doing use

quarter. So, up marketing at SG&A, if you was look the in

expect us. our marketing that's something I to We're support these to to very from think brands. you committed can to efforts see continue

I think that's always important.

as promote standpoint, I From it the a quarter. promotional we in did out a little bit call more terribly significant. anything wouldn't

overall, category, I below levels. pre-pandemic well historic even were up a still think the or but in promotions little bit,

So, no significant there. movements

seeing attractive. bit terribly interesting promote, the when even incremental that do The that we're units aren't we is

else you to are to have is good those there be had we ensure to tells But a selective I out So, be And you're do that that buying really that me an shopper think when what If on lift getting tells very something promotions item we're you're about only about normally to -- return be the we not little a not on they're what still there getting it good promotions. sure. they putting ones some what see, the promotion and you is right? need. is consumer,

another indication it's trying the household. to economize consumers still So, are in that

terribly gotten yet. there past. takeaway has seeing that trends not continue. So, we're how might seen those promotions, But I the the extent promotional, not you that that have the the category is to And incremental not least really we'll think in lift see at are

Jim Salera

for on to Is kind better which mentioned versus maybe visibility, of a has promotions one the then have balance low a consumer? engagement, or on it mind differentiated branded X% priced of drill to $X.XX or step-up you [indiscernible] better with less especially products? it less, the Great. side. That's give drives the marketing helpful. because marketing, sense Could consumer those so have brand of top the is airtime for And it to you down between more

Ryals McMullian

Yes.

I for mean They effective be purposes. serve in I different example. trial, think promotions they're very can slightly both important. driving may

and the So, that we're it But retention because you can to look is about for bar bring think well. marketing about to our we're that. for ads do bars if almost consumers obviously, new doing marketing as as at Certainly, promotions launch, you much acquisition. trying as

important really two combination -- really drive. on what so, to And it's the are depending the you're of trying

In a consumers of drive the thing think more marketing. at about. and commoditized despite with bit that to historically, more got finished But do can just important most a talking is drive what we that category, of yes, combination least promotions differentiation I are a and I brands then to promotions our continue probably, portfolio little within effective

Jim Salera

helpful. very it pass That's I'll along. Great.

Ryals McMullian

Thanks, Jim.

Operator

Thank you. further Executive to Ryals the showing Chairman, I at like to currently and President, no would remarks. Chief Officer questions for I time. McMullian, back closing now am conference this turn

Ryals McMullian

Great. speaking Thank time thank and And today you, next joining us take questions. We with our we you to everybody forward company. Norma. always, to as look interest your for I Everybody, in quarter. appreciate just really want for care. taking

Operator

Thank you for participation. your

disconnect. You wonderful have now day. may Everyone, a

Flowers Foods (FLO) 11 Aug 232023 Q2 Earnings call transcript