Nature's Own baker Flowers Foods 'not satisfied' with Q4 performance

By Vince Bamford

- Last updated on GMT

Flowers Foods owns brand including Nature's Own and Wonder
Flowers Foods owns brand including Nature's Own and Wonder

Related tags Bread

Nature's Own manufacturer Flowers Foods has reported an increase in full-year sales despite a slowdown in the last quarter.

Sales for the year to January 2 2016 increased 0.8% to $3.8bn, and were up 1.2% year on year excluding acquisitions and an extra week in the previous financial year. Full-year earnings before interest, taxes, depreciation and amortization (EBITDA) increased 2.7% to $440.7m.

Final-quarter sales for the business – which also owns the Wonder and Tastykake brands  - were down 2.2% year on year to $858.4m, although increased 0.5% when acquisitions and the extra week are excluded.

"While we continued to make significant progress on our strategic initiatives, our earnings in the fourth quarter were impacted by sales that were below plan​,” said Flowers president and CEO Allen Shiver, adding retail sales had slowed in line with the market.

'We are not satisfied'

"We are not satisfied with our performance in the fourth quarter​,” continued Shiver. “Even so, for the full-year we delivered record adjusted EPS [up 2.2% to $0.92] and took important steps to position Flowers for opportunities in 2016 and beyond​.”

Shiver added that acquisitions of the Dave's Killer Bread and Alpine Valley Bread Company businesses had grown Flowers' share in the “fast-growing organic segment of the specialty premium category​” while extending its geographic reach and retailer relationships. He said the company’s ability to serve the Midwest had been enhanced with the opening of a bakery in Lenexa, Kansas.

Flowers had also improved its merchandising and promotional strategies, said Shiver, and launched products including Cobblestone Bread Company Right Sized breads to keep pace with the changing consumer landscape.

Underdeveloped categories

"It would be a mistake not to recognize the team's accomplishments during the year on several initiatives integral to Flowers' long-term strategy to grow in underdeveloped categories and geographies​,” he added.

Sales in Flowers' Direct Store Delivery segment were down 7.2% year on year, with increases in white and soft variety breads including Nature's Own and Wonder offset by lower sales of sandwich buns and rolls and sandwich rounds. Tastykake sales grew as a result of new product launches and expansion in the DSD market.

Excluding the effect of the extra week and the acquisition of the Alpine Valley Bread in October, branded sales in the company’s Warehouse segment – which distributes frozen cakes and breads - increased slightly as a result of a shift in mix within branded snack cake and volume gains in bakery deli. A “significant increase​” in non-retail and other sales was driven by new foodservice products, said Flowers.

Growth predictions for 2016

Flowers is predicting year on year sales growth of between 5.5 % and 8% in the coming year, with EPS up 6.5% to 13.%.

"While we did not meet our fourth quarter objectives, fiscal 2015 was a strong year for Flowers​,” said Shivers. “Looking ahead, recently completed acquisitions, which are a core part of our growth strategy, are expected to contribute between 5.2% and 5.7% to sales growth in 2016​.

We are working to grow share in expansion markets while remaining a low-cost producer​. “

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