Corporate Profiles - 2020 - 74

COMPANY OVERVIEW

Flowers Foods, Inc.
Sober view of industry outlook in revised long-term guidance
ven as the company has enjoyed the
strongest sales surge in years, Flowers
Foods, Inc., Thomasville, Ga., is tamping
down its long-term objectives for sales growth
and has changed its earnings benchmarks as
well. Meanwhile, numerous major changes at
the company have been announced to cut costs
and better align the business to compete in the
changing baked foods marketplace.
The long-term financial adjustments were
announced Aug. 7 in an investor presentation just
after second-quarter results were issued for 2020.
Going forward, Flowers' long-term goal will
be sales growth of 1% to 2%, EBITDA growth
of 4% to 6% and earnings-per-share growth
of 7% to 9%.
Announcing the new targets, Flowers' chief
executive officer acknowledged that industry
realities have made long-term objectives
established just a few years earlier out of reach.
Growth targets of 3% to 4% for sales and 13%
to 14% for EBITDA margin were set three-and-ahalf years earlier but were not achieved in 2019.
"When we announced Project Centennial
back in 2017, many of you remember we
issued an EBITDA margin goal of 13% to 14%,
with the bulk of that margin expansion to come
from cost savings," said A. Ryals McMullian,

president and chief executive officer. "We have
made a lot of progress in removing costs from
the organization. But as some of you know, we
have had difficulty translating those savings to
the bottom line, primarily due to inflationary
headwinds from things like labor, ingredients,
packaging and transportation."
He described the baked foods sector as
"pretty flat over the last several years."
The changes appeared to look beyond
the strong results posted by Flowers in the
second quarter ended July 11. Branded retail
sales during the quarter jumped 18% from
the second quarter a year earlier, more than
offsetting an 11% drop in store brand sales.
Non-retail and other sales plunged 16%. Total
volume during the quarter fell 3.3%. Flowers
Foods net income in the quarter was $57.92
million, equal to 27¢ per share on the common
stock, up 9% from $53.1 million, or 25¢ per
share, in the same quarter last year. Results

in the current year included restructuring and
related impairment charges totaling $10.54
million, up sharply from $2.05 million in the
second quarter last year.
While boosting the company's results, the
pandemic has been anything but easy for the
company to address. A spike in coronavirus
cases in the Southeast, where the company has
a major presence, caused numerous challenges.
Baking plants in two locations were closed for
a period. But the impact extended further, Mr.
McMullian said in late July.
"We've felt it in Florida," he said. "We've felt
it in Georgia. We've felt it in Texas. It does create
some operational challenges, because you have
to have enough people to run a line. We've had
situations where we've had to close a bakery
for a couple weeks, not because there has been
widespread outbreak at the plant, but because
you take enough people off that shift you can't
run that shift. You take enough people out of the
bakery that are out on quarantine or have been
confirmed with COVID, you can't run the bakery.
Fortunately for us, we have enough bakeries, we
can back that production into other plants and
not really skip a beat serving that market. It's
not the most efficient way to do it."
Mr. McMullian has been CEO since mid-2019, and

Chief executive officer -
A. Ryals McMullian

Flowers Foods, Inc. net income

Flowers Foods, Inc. net sales

Flowers Foods share price
$26

$150

$157

$165

2017

2018

2019

in millions

$24
$22
$3,921

$3,952

$4,124

2017

2018

2019

$20
$18

74 \ October 2020

Oct.
2019

Dec.

Milling & Baking News * Food Business News * Baking & Snack * Meat+Poultry * Pet Food Processing

Feb.
2020

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June

Aug.

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Corporate Profiles - 2020

Table of Contents for the Digital Edition of Corporate Profiles - 2020