THOMASVILLE, GA. — After enduring a “year of unique challenges,” Flowers Foods, Inc. is poised for strong top-line progress in 2022 along with flat to reasonably rising earnings, the corporate mentioned whereas saying outcomes for 2021. Inflationary pressures are anticipated to accentuate within the new yr.
Flowers Foods web earnings within the yr ended Jan. 1 was $206.2 million, equal to 97¢ per share on the widespread inventory, up 35% from $152.3 million, or 72¢ per share, in 2020. Net gross sales had been $4.33 billion, down 1.3% from $4.39 billion the yr earlier than. Flowers mentioned adjusted web earnings was down 5% for the yr. Adjusted EBITDA was down 6%. The firm’s EBITDA margins had been 11.3%, down 60 foundation factors from a yr earlier.
In the fourth quarter, Flowers earnings had been $39.3 million, or 18¢ per share, down 30% from $55.8 million, or 26¢. Net gross sales had been $983.5 million, down 3.9% from $1.02 billion.
In the fourth quarter, the three.9% drop principally was due to a 53rd week within the prior yr, which shaved 7.7% from gross sales. Pricing and blend had been a constructive 6.2% contributor to gross sales whereas quantity was down 2.4%.
Branded retail gross sales at Flowers in 2021 had been $2.88 billion, down 1.3% from a yr earlier. Store model gross sales fell 12%, to $535 million. Non-retail and different gross sales had been $921 million, down up 6.3%.
In the fourth quarter, branded retail gross sales had been $650 million, down 4% from a yr earlier. Store branded retail gross sales had been $117 million, down 15% and non-retail and different gross sales had been $217 million, up 4%.
In a name pre-recorded Feb. 11 for funding analysts, R. Steven Kinsey, chief monetary officer and chief administrative officer, emphasised that the largest motive gross sales had been down within the fourth quarter was due to the additional week a yr earlier. The distinction obscured quite a few positives within the firm’s outcomes.
“Despite the difficult prior year comparisons, Flowers fresh packaged bread gained 10 basis points of market share in tracked channels,” he mentioned. “Excluding the extra week in the prior-year period, sales of Nature’s Own increased 4%, and Dave’s Killer Bread and Canyon Bakehouse each rose 15%.”
A. Ryals McMullian, president and chief govt officer, additionally recognized constructive gross sales traits.
“Our household penetration grew significantly over the last two years,” he mentioned. “Importantly, we’ve held onto many of those new customers and further increased penetration of our leading brands in 2021. Since 2019, our household penetration has increased 300 basis points, with Nature’s Own up 460 basis points, Dave’s Killer Bread up 350 basis points and Canyon Bakehouse up 70 basis points. And consumers are also increasing the number of times they buy our products, with repeat rates up 270 basis points since 2019. These improved metrics are driving sales and market share gains.”
Mr. McMullian additionally highlighted progress the corporate had made round quite a few initiatives, together with the corporate’s digital transformation and new product introductions. In the latter class, was the latest introduction of snack bars underneath the Dave’s Killer Bread model.
“The bars, which come in three flavors, offer the same killer taste, texture and nutrition that DKB fans have come to love with the ease of a grab-and-go product,” Mr. McMullian mentioned.
For the total yr of 2022, Flower mentioned gross sales would vary from $4.66 billion to $4.695 billion, up 7.6% to eight.4% from 20201. Adjusted earnings per share had been forecast by the corporate at $1.25 to $1.35, versus $1.24 in adjusted diluted earnings per share in 2021.
Mr. McMullian mentioned Flowers has been profitable in securing increased costs in response to inflation, including that the strikes don’t seem to have price the corporate enterprise.
“So far, we’ve not seen a meaningful reduction in demand due to our two price increases, and we’re hearing similar commentary from other companies in the consumer goods space,” he mentioned. “The early indications this year are that units are holding up well and our trade promotion rate remains low. I have seen some research that suggest consumers are beginning to look for value as prices rise, but so far, that dynamic has been less apparent in the bread category. In fact, most of the category softness has been confined to lower-priced, less-differentiated products. Premium items such as Nature’s Own Perfectly Crafted, Dave’s Killer Bread and Canyon continue to generate growth in dollars and units. That product mix gives us confidence that 2022 has the potential to be another very strong year. However, if consumers begin to trade down to lower-priced products, that could put some temporary pressure on margins until the current inflationary environment subsides.”
Actions the corporate is taking to reinforce profitability will yield extra advantages within the second half of 2022 than within the first, Mr. Kinsey mentioned.
“While our January pricing initiatives will impact the full year, the benefits of many of our growth and efficiency initiatives are expected to occur in the back half of 2022,” he mentioned. “Some of the factors we considered when setting guidance — including inflationary pressures, our ability to take additional pricing and the resulting demand elasticity. Variations among these factors could drive our actual results to the top and bottom of the ranges provided.”
A level of uncertainty at all times surrounds monetary steerage early in a yr, however Mr. McMullian elaborated on particular elements he mentioned may drive the place outcomes fall inside the vary offered by the corporate.
“The first is demand elasticity, and the second is the timing of our efficiency initiatives,” he mentioned. “As we said, our early analysis suggests that consumers are absorbing the price increases well, but we will need to get a little bit further into the year for a more complete picture. Also, given the success of our portfolio optimization initiative, which generated $60 million in savings over the last two years, I am confident in our ability to deliver incremental value. However, a timing shift in those initiatives could impact overall results this year. So consumer trade-down to lower-priced products and a timing shift in our savings initiatives could move results toward the lower end of the range, but continued strong demand for our premium brands and timely delivery of savings would help drive results toward the upper end of the range.”
Mr. Kinsey mentioned inflation is increased in 2022 than in 2021, partly as a result of a number of hedges established in 2021 earlier than price hikes have ended.
“In total, we are expecting high single-digit cost increases (in 2022),” he mentioned. “Prices for commodities such as flour, fats and oils; and packaging have risen significantly. And we are doing everything in our power to offset these higher costs. Our hedging strategy, in which we attempt to lock in commodity prices 6 to 12 months out, provides visibility into future inflation. Approximately 70% of our key raw materials are covered for 2022.”