FLOWERS FOODS INC Q1 FY2025 earnings call

• Held unit share in a category with greater than expected declines in an uncertain economic environment, highlighting importance of portfolio strategy and brand strength.
• Continuing to invest in on-trend innovation and target faster growing categories/adjacencies to align with evolving consumer tastes.
• Use promotions selectively to drive trial, not volumes, focusing on brand investment and innovation.
• DKB, Canyon Bakehouse, Keto offerings, and Simple Mills are health and wellness-focused offerings.
• Foodservice business profitability improving despite continued weakness in overall foodservice sales.
• Private label marginally reversed downward trends with unit share pickup, new business to refill volume.
• Supply chain optimization included closure of a fresh bread bun and roll plant.
• Push into smaller loads performing well, addressing smaller household and value-oriented consumer needs.

No detailed breakdown of absolute revenue and contribution % for product segments provided. Discussed categories include core packaged bread, Dave's Killer Bread (DKB), Canyon Bakehouse, Keto offerings, Simple Mills, away from home foodservice, and private label.

• EBITDA margin guidance down about 30-40 basis points, with majority impact on gross margin from category trends and tariffs.
• Cost savings in SG&A to offset top-line challenges and tariffs.
• Longer-term EBITDA margin targets (12%-14%) remain, but current environment is a setback.
• Tariff impact laid out with worst case scenario considered, as tariffs on certain inputs were expected to change and were modeled accordingly.

• Category weakness and economic uncertainty impacting performance.
• Tariffs affecting input costs, particularly on ingredients from various countries.
• GLP-1 penetration and broader shift to healthier eating posing structural headwinds for the bread category.
• Potential impact of macro pressures on initiatives like Simple Mills.
• Exposure to imports/inputs from China for some ingredients.

Q: Jim Salera asked when unit share in the core packaged bread category might stabilize.

A: Ryals McMullian said the environment is dynamic and uncertain, maybe no improvement this year, looking towards '26, focus on differentiation and innovation.

Q: Jim Salera followed up on Wonder cake innovation.

A: Early days, more time needed to see trade-off with legacy cake business.

Q: Max Gumport on promotions.

A: Promotions used selectively for trial, focus on trade promotion system effectiveness to ensure good return on investment.

Q: Max Gumport on bread category and GLP-1.

A: Plans to address, innovation leader, health and wellness offerings like DKB, Canyon Bakehouse, etc., to meet consumer needs.

Q: Mitchell Pinheiro on EBITDA margin guidance.

A: Majority impact on gross margin from category trends and tariffs, cost savings in SG&A to offset, longer-term targets remain but current environment is a setback.

Q: Mitchell Pinheiro on healthy eating and lower income.

A: Pullback in consumption across income groups is playing a role.

Q: Steve Powers on tariffs.

A: Tariffs impact input costs, worst case scenario laid out, some exposure to China for certain ingredients.

Q: Scott Marks on private label, away from home, bakery closure, smaller loads.

A: Away from home weakness but profitability improving, private label marginally reversing, bakery closure part of supply chain optimization, smaller loads performing well