FLO - Earnings call transcript Q1 2024

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Operator

Good evening, and thank you for standing by. Welcome to the Flowers Foods First Quarter 2024 Results Conference Call. Please be advised that today's event is being recorded. I would now like to hand the conference over to your opening speaker today, J.T. Rieck, Executive Vice President of Finance and Investor Relations. Please go ahead.

J. Rieck

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

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

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

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

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

A. McMullian

evening, Q&A joining we the Thanks, Thanks our for also Okay. everybody's first and change flexibility appreciate everybody. Good in accommodating session quarter timing call, J.T. for today. in our

margins quarter led our with solid brands the first the investments our innovation, XXXX. retail saw Dave's Killer also away-from-home Bread for unit results and branded businesses. of its since effectiveness time the of second and label growth, marketing signs in the in way continue driven increasing brand expand we to our consecutive portfolio across XX% private encouraging grew the strategy, share consumer we our environment. Significantly, by despite but portfolio. volumes challenging we Our first gained reflect And quarter

behavior the for potential and ongoing environment. volume maintaining incorporates while financial impact and acknowledging continued promotional its outlook are which uncertainty year, the our We on consumer the economic improvement

for said thing take prepared there's would one you we do. from we're what call doing mentioned remarks, this we in I'd the As that is to I exactly away if like

and expectation I in with Although our portfolio potential, progress to continuing our extremely our of look and XXXX. I'm confident to linear, the we'll execute targets, not strategy growth progress is throughout financial achieving continue our forward long-term

questions. that, So with Carmen, we'll up for it open

Operator

first Deutsche comes Our and from Instructions] it Steve from Powers question, [Operator Bank.

Stephen Robert Powers

talk the the hoping I rate could run quarter was spending. we start expenses actually operating on and in -- SG&A just

You couple in costs, the costs. labor technology higher remarks, a prepared higher called of things out

replace also operating stranded wondering related, sort just how things And if overheads. out transition the think course relief separately in of is California You expect would course those year. on expense to some the really, over year expenditures direction we on cadence called over X stranded was are I'm if the cadence expenditures I SG&A cost we the that? some about of you those the and be on focused great. are Do that the what Do SG&A Just separate? expect of overheads? of of

A. McMullian

will that improve range twofold: our to one, million, million overhead, about may you've too. I'll some expense in labor want Steve rationale marketing the talked I'm to. yes, for there, before, of a which and $XX noticed of stranded million past. The Happy bit raised little help you talked sure we But expense chime the in there. we've higher about and that here, investment. news in is start, it's million some Sure. got to the $XX from both. And There's will There's too, $XX have in to savings we've that that good to us $XX SG&A.

in more line. that. back mentioned our we structure high, cost in As too a a noted and pull labor well cost get that some in bit actions we're taking the do and prepared I of back recognize is I play the remarks, marketing and to as role

of as particularly cost better for time structure forward. leverage us net improve I percentage our SG&A, going sales. So to over would expect a and

at all? want you add do that to Steve, to

R. Kinsey

first weeks, And we quarter forward, our then have the Yes. I takeout we elevated from that. back perspective. see initiatives. sales, some did mean to to I SG&A pull do is of cost and think kind visibility going some costs stabilize. But on a XX good as Obviously, Ryals expect that we of hit percent

do some we'll like be So able feel progresses. the of we year as under that get to control

A. McMullian

the the Yes. is The add, as -- Steve, relative I'd actually thing only other yes, goes well, overhead to this we this that to is that, stranded goes story to volume the business beginning of are that cover of stranded a that year. than And anticipated originally faster a at bit adding course, of will back new help clip we the cost. at

Stephen Robert Powers

obviously, detail just around little are M&A noticed the Okay. of front-footed supply use what respect capital little a of more And environment. to went Very bit improved cash, then terms Maybe you targeted outlook chain And also those at? then expenditure I an up. a sounded good. in more with bit investments

So maybe just there well. as some more color

A. McMullian

bullish bit of yes, really Steve, a just improvements, not a ordinary are Yes. the the now. that normal a out ongoing of equipment. of than the couple has started then, And increasing just really beginning I updating but ago mean little am at more little spend investments we primarily thought pick that activity M&A originally It's and more up pretty capital quarters on I really environment, has the stuff, continued. year. automation, course the started to bit bakeries,

slow do our years, with good So a with It's targets we're frequency, is so which know are one. familiar to that poised the last you're the sign. transaction having we when balance and a there sheet we're increasing couple you very the conversations in a right little been find out in of

Stephen Robert Powers

Very good. One last line, if I could.

track second that the the in in the half. bakeries, to on thought Just ERP on I was lifted be pause

if know still don't or been that's recalibrated? that's the if case I Just

R. Kinsey

the back the back starting Yes. bakery to to still half. No, rollout we're in sometime planning go

Operator

Truist And it line comes from Bill Chappell with the of Securities.

William Chappell

know lower more the end, at Just weakness I'm maybe brands sounds label but anything, holding just obviously, by for there's it a a Killer surprised if color over label more I private it's private little there. if Dave's in little up, strong. quarters, receded growth. really you're pretty we to said any kind growth and if mean, branded bit trying I the accelerating? Killer has of economy, Bread -- XX% Bread the about past but If Dave's the real was heard didn't few you broader,

So beyond you and just how of thoughts working Bread, of around doing Dave's maybe Killer kind label color, us consumer how is more environment some private kind give could out? brands are versus the

A. McMullian

growth saw that been the in the to I the of say Sure. the start, shoppers obviously, low questions income -- Yes. show broader just has of I Dave's. star and of was I Dave's back volume know to But will a you're from one quarter about mean, asking but the portfolio, standpoint. coming we interesting things sort

and defining So you of or that all quite $XX,XXX we a annual back shoppers. as we're had in less mentioned income, while XX% low-income of shoppers to -- Dave's XX% were Dave's around shoppers that

inflationary dropped XX% we about bit little to environment, and that recovered back a With XX% to off again. the almost

So that that sign either perhaps getting products to macro tired healthier, that and and that they're lack starting as tells me that households differentiation Dave's. they're the of cheaper a a coming or back. consumer of I see is come are good lower-income to bit back

price is continues doing to quite unit some strength has Perfectly the positive in but the across us, buns a Nature’s well seeing Crafted point lower sandwich, Wonder, growth are other is well. Own item Wonder we been a do that, good portfolio. for of and with example. That in Beyond parts rolls, quarter.

Whole experienced the XXX% I product, we've about Honey weakness quarters prior or that sort Wheat, the that's of Wheat broader this the we most spot basic that of the talked during label still Own one has of that private trade era is down. area think weak whether in category have the is Nature's that

well. into Wonder. I'd private if it to continue And of I out is like to expect some back that up continue brands to to think brands come like come improve, Own starting Nature's to things back of as label

William Chappell

Are we Got about velocity it. you really a talked Any the network of that areas in just on be network would is then DSD it helps. No, it stand? helpful. adding expansion. California that trying question today does kind long still shrinking? existing be it you're as Are products DSD time Are the actually of and more make doesn't you routes, kind sense through as a stands today? kind thoughts about to it efficient? elsewhere And routes? more Is Where or more as of much it where there haven't be

A. McMullian

Yes. a a bit It's mixed Sure. of little bag.

because Now get routes routes nice area. we California are it's is areas its the routes up to routes converting growth, usually to to break company own we're thing that a some there. starting because that and stores adding of have quite service lift we're sales those happens, better When full. higher in in But where

in And in fringe, In well. some adding So we territories, geographic places, other into as as the not. adding. new move places we're we're areas, on routes we're some

how it territory the where of what you new is. on is, are, kind So depends growth the trajectory

key I network -- takeaway our efficient is that make as to possibly DSD are do think the can we're it what really as we is be. trying

got if we actually independent routes may penetration, lower you've So for while sales. split company and them other where and get a in growing, for In lower them might enough routes an we'll we share where household area struggling, until routes. add those example, market you're be convert areas we're the up

for. So though. depends. is word looking we're The it key just efficiency, of kind what really That's

Operator

And it comes from Jim Salera with Stephens.

James Salera

food? been been planned In the If of side. business weakness have you remarks, would have total been Ryals, helpful. primarily fast beyond be that's ask volume you absent obviously headwinds any to some that, the other have contributed would mentioned on in wanted would out category it the So company volume number color on strategy restaurant And And us possible, some the from coming I can customers called because volume tell you weakness the the that would what that? volume some prepared absent the like that, actual around side. is the positive. in

A. McMullian

Yes, sure.

of that free out the quantify move to to did beginning low you the we did say, that's positive. lap strategic on had what business. The larger we into one we The going those purpose, exits yes, be the to decision we of that up margin exits. the volumes have we that would and contributor, if Jim, didn't stories exactly is as was made been capacity higher-margin all because reason company -- strategic it, exits news, We're intentional never intentional we're took good this doing. we're way is if about. but to quarter talked strategic think big We I strategic you it business a the and and took total saying So

So in what exits strategic minor the in move through pretty much to go continue of We those all it third on the and of meets or or you'll category lap depending we're as very it's back year. be the our half, see with down other. them whether replacing we talking margin that business it's variable quarter, branded volume whether that business we're exceeds targets about,

takeaway really there. that's key So the

James Salera

could source Continues sense of for it Okay. in it Obviously, size up just players? mean, Great. for dig Dave's the it volume a a people to growth? ahead I run broader the to give other is grow to And Can great. to we category, of larger which just on how outside a long Is continue offering. branded maybe kind there from can so us is second. the ahead I differentiated from? category, of category bringing you very can where continues if

A. McMullian

Yes.

of quite at at really is premium is specialty really, As the other right anything it to. it to a specialty Dave's look the premium specialty the of now. players it's because from compare share specialty in weak -- Dave's category. point that, at from premium don't rest looked a premium taken we segment the special against premium, we the even stands bit some But than really higher apart kind have else category price category and because And of it's we've

it's to kind that. much the compare hard organic it pretty it -- of And really So brand is drives it the to category.

penetration. The into Own of people Dave's and also But its remember, Nature's But to also because yes, back brings does. new household category what quality of penetration it differentiation. just from the question, roughly half household is it's your answer Jim,

our And cetera, household et through so investments, penetration. as we're growing we marketing geographically, grow that

So well. that's a big contributor as

Operator

with Pinheiro Mitchell And Company. from & it's Sturdivant

Mitchell Pinheiro

strategy said you're of as I you the grow category. that elevated thought part Does growth portfolio that your was of to balance And means your interesting. curious, and above business that and growth to -- balanced away-from-home I'm you part mix. the mix the the going

is and there driving exited that's thoughts at excess now love of unproductive Or sort to are hear does share your that? on that strong category, what's the but you've I why? an I'd So from mean, that accounts you're -- move. some the growing gain of accounts, ability in in to margin? a

A. McMullian

noticed an going of to Yes, up it so into capacity important glad Sure. on sense point we we're it to our better it. that. freed you I'm felt all, that now business, to make. Well, place move first we that focus because to more made It's that category pursue

Now, the a same. that that branded to remains to mean company. of We're it moving consumer-focused, brand-oriented allocate we're detriment does to strategy over the the to not going be business. The resources

margins But them when fairer you that et that in there a than there have may capacity are willing cetera, foods investment. opportunities baked customers look We past. limited terms out the have we want deliver category, serve or opportunity in of with don't us tremendous away-from-home had who to is can we broader to to at capture whole that capture volume. much to there do in the are lot and some automation, of And

you So contributor fun that stuff have and And to every makes our an talk the we've the sense we going towards more can like always this the about marketing we're business, away-from-home we business quarter. to and resources allocate talked profitable to being that make to all about innovation the important to more company. because guys

rationale. the that's So

Mitchell Pinheiro

on Okay. are And -- the new the a do hear new which obviously of read would the new products. contributor of I top? be of that like of margin as in And do things, the like to addition priority think it as you're And in about complicate, gate at products. about to Is transitioning is certainly, new thought how lot comments these to a then I And going products? XX terms products how in those I'd of that, bakeries, love you as to positive all, your you to look, ones you're products, new out going first think sales? that. launching be

A. McMullian

or with go we very rigorous mean, that then just the If process start points I question. consumer, yes, one. to is the covers number looking consumer the one want right? Is sense and financials does at doesn't we you operational Great If Sure. create does single every don't and make for the to sense how going operationally? standpoint. does a this financial it make through answer the place? complexity even We commercialization a we launch an fit how sense so, that make start it much? And of it in Does this, made. that or anything consumer from from standpoint

boxes a check you We of process, sort these have we'll launch of will, But before that entire any through those because we funneling items. anything. launch to question all great of go new before it's if we

Mitchell Pinheiro

soft Or more going launches? Are are these be there substantial rollouts? to

A. McMullian

most this that a them because reasonable. But bakeries, of many some will are There so times, are Yes. the Mitch, can lot we make more of network. throughout of in stuff be them

Mitchell Pinheiro

in quarter. you things, several talked rate about out contributing, order quarter. just see then mix a there to gross called the but the then largest -- on more it or you that mean, quarters, it's it I'd It And question like know I at And sizable contributing seems if is pricing long -- for has pricing which price do been were than them but helping other the a And expansion not? some contributors. about know that. you last was had I love more all One And it's to really is the so margin. you --

you in in -- quarter? a leverage You margin gross to we Does the some drop-off going there. second generally get are nice see some get -- volume, some that

R. Kinsey

obviously, mean, the some to said mitigate Yes, Mitch, is of pricing pressures. had we've considerable help taken we've I inflationary this Steve.

So line there, that really the really talking growth see help continues to the nice to top And price gross about overall contribution mix, from Dave's and from margin the perspective. mix. continue and

QX tailwinds some quarter, and some coming would we first third read primarily to nice I'd started the and had half, and year, QX. the it that, it commodity through rain does in to I So say number obviously, one. And from then continue into the that

the line margin of So would overall with say, driver from an perspective. second, I'd that gross that's -- outside top the the primary be

A. McMullian

about also of couple SG&A Mitch, to savings of And to, margin, some the the turned a even discrete on in the gross would operational we also, margin, definitely gross that to well. those not just plan, but as pointed we have margin bottom the had closer we number we as are initiatives, we benefit had talk on that issues going we that quarter, that we hit were impacted outperformed working gross line. if

X things impact going gross bakeries. benefit did a particularly that but bring those end whole it's get bit that's not It line, also the we margin. of to away, margin. have we as It's on world will an just gross P&L quarter it as benefit of more in So the back the the but

R. Kinsey

I mean different to gross some the we're is increase quarter-by-quarter, had gross margin margin year-over-year. obviously, up expecting magnitudes. forecast just But expectation

Operator

comes it with [Operator of Edge. Connor line the Instructions] from Consumer And Rattigan

Connor Rattigan

prepared the promo on But lift guys you below does in that doesn't it like noted digital real impacting really like you your So and strategy. pre-pandemic remain promo it that initiatives remarks, notable well your there's promo. really are a levels big sound seem Ryals,

initiatives? as what the And have so may we guys should interpret like, of would guess, between balance you you're promo decisions spending versus the inform front you lift using you seen far guess, as if of a learnings maybe spend? marketing promo as I also, not your, seeing that I from So on debate more that, kind you're those strong

A. McMullian

down we a are bit did And targeted, less order little promote but tools And that. We strikes bit better promotions It's we're spend and lot last did. mean, you enabled let's much pretty generally doing X get better, better spending digital whole mentioned of when have helping X pre so you -- we insights, trade via lot the them a I has been that it to and you I little a say, over come certainly will the now by them, a in if it, on a tremendously postmortems, how of because, but absolutely. we're good tools see get or that like really years, the has period, can We TPM. will, we us where do the digital helpful achieve more but been not sort then inflationary Yes, return. with lifts do were our we gotten say. we have the in positive that quarter, seems

Connor Rattigan

it. Got follow-up quick for And just Very me. helpful. then one

of the Is you for So change cost expected it some no maybe half. any called wins a expectation Or profitable change was into expectations? from flow increased there initiatives the and savings the in to prior out guys second half? just Or out there? business XQ shift sort also through back savings cost of of a

A. McMullian

costs business, of listed million. new in $XX to categories out Connor. So few raise to now. And we to able line. The no, we to as to bring we our been that were out that, where we've remarked $XX we really I've enjoying publicly million -- we already we And that when a further had of back some to we pretty million. million we And uncovered those able and confidently we're remarks, looking in the were $XX of prepared the target a actually came identify had year, savings -- opportunities got into $XX

Let me too. touch on that,

line move year, really move year exited this sight strategically similarly, continue up And that of and -- the we expectations when We we business ended were new out rather, more to. through on certain as quarter capacity. again, through had going we to work refilling thought started the for wins good we So than and finding had the we we to.

that the quarter expectations somewhat. the Nobody's And so yet for have our asked of of about how went. us increased sort cadence

address good it. So this any, is as to a time,

got of weaker of did kind year. we than that had half That us in anticipated early unexpected we weakness the quarter it a start cadence. the a weighted little a cadence little know sort first would. off quarter I off signaled to The originally,

that line thus we able to savings to that, we hire be that's to think have year. that now offset the we early sight However, and targets, maintaining weakness, these business going guidance increased have of for new wins,

So all that's out. how shook sort of that

Operator

I I final in for will no it Ryals McMullian as to And see further back questions hand queue, remarks. the

A. McMullian

your just again Carmen. We to taking interest time always, to for company. our you. Everybody you, you forward Thank as we look seeing the Thank next very questions. take care. Okay. I'd joining today everybody appreciate for quarter. like us and thank And in much

Operator

thank everyone. you concludes and you, conference, And now may This the disconnect.

Flowers Foods (FLO) 16 May 242024 Q1 Earnings call transcript