FLOWERS FOODS INC Q3 FY2024 earnings call

• Strong performance of leading brands in a challenging environment with growth in fresh packaged breads and share gains. • Execution of portfolio strategy in the other segment with pricing offsetting volume losses. • Focus on enhancing shareholder value by maximizing opportunities in branded retail, private label, and Away-from-Home businesses, and executing on cost savings plan. • Excitement about the Wonder brand rollout in sweet baked goods category with early good returns, and DKB snack line with SKU innovation and expansion of snack bites.

The company has two main segments. In fresh packaged breads, they grew dollars and units, driving the largest share gains in the category. In the other segment, sales growth was achieved as strong pricing initiatives more than offset volume losses. Fresh packaged breads had units up some 70 basis points and gained 20 basis points of dollar share and 20 basis points in share, the largest among competitors in the category.

• Early returns on Wonder brand rollout are positive with good retailer enthusiasm. • DKB snack line has SKU innovation in pipeline for next year. • CapEx reduction with some projects rolling to 2025. • Conservative EBITDA guidance with cautious outlook given promotional environment and other factors.

• Consumer value-seeking behavior pressuring category sales. • Category softness in sweet baked goods and other areas. • Competitive promotional activity across the category. • Impact of external factors like hurricanes, though not materially significant in the quarter.

Q: Steve Powers asked about expansions for Dave's Snack Bites and Wonder, including scale of expansions, confidence in sweet baked goods with Wonder, and placement for Dave's snack bites.

A: Ryals McMullian said Wonder rollout is early with good returns, early returns on DKB snack line are good with SKU innovation in pipeline and no risk of overextending.

Q: Bill Chappell inquired about sweet baked goods category declines, duration of softness, and promotional level in bread line.

A: Ryals McMullian said it's due to consumers pulling back on discretionary spend, expected to normalize next year, and promotional activity is broad-based across the category.

Q: Robert Dickerson asked about hurricane impact on the quarter, trends in bread subcategories, and M&A interest.

A: Ryals McMullian said hurricane impact was not material, trends in bread subcategories relate to shopping patterns and in-home meeting, and they are looking across baked goods for expansion.

Q: Jim Salera asked about food service headwinds, private label in other segment, and new business wins.

A: Ryals McMullian said mid-single digits from strategic exits, private label volume down, and new business gains for the year mostly captured.

Q: Mitchell Pinheiro asked about market share gains in geographies, near-term obstacles, capacity utilization, and EBITDA margin guidance.

A: Ryals McMullian said share gains in newer geographies, OEE at 70-71%, and EBITDA margin in low teens is within reach.

Q: Max Gumport asked about category pressures persisting in 2025 and update on Dave's Killer Bread.

A: Ryals McMullian said category pressures are temporary, and Dave's Killer Bread is still positive in dollars and units.