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FLOWERS FOODS INC (FLO)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net sales decreased 1.6% to $1.111B as pricing/mix +0.9% was offset by volume -2.5%; adjusted EPS rose to $0.22 and adjusted EBITDA grew 6.3% to $102.4M (9.2% margin), reflecting cost savings and moderating ingredient costs .
  • Management set a cautious 2025 tone given tariffs, commodity headwinds, elevated promotions and weak consumer demand; DKB and Canyon continued to outperform, and Wonder snack cakes are aimed at stabilizing sweet baked goods .
  • FY 2025 guidance initiated: net sales $5.403–$5.487B, adjusted EBITDA $560–$591M, adjusted EPS $1.11–$1.24; ex-Simple Mills: net sales $5.180–$5.257B, adjusted EBITDA $526–$554M, adjusted EPS $1.18–$1.28. Simple Mills expected to add $223–$230M sales, $34–$37M adj. EBITDA but be -$0.07 to -$0.04 dilutive to adjusted EPS; the 53rd week adds $70–$80M sales, $5–$7M adj. EBITDA and ~$0.02 EPS .
  • Capital updates: priced $800M senior notes to fund Simple Mills; completed the Simple Mills acquisition; renewed a $500M revolver to 2030; raised the quarterly dividend to $0.24, 90th consecutive payout .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion despite topline pressure: adjusted EBITDA up 6.3% to $102.4M (9.2%), with gross margin ex-D&A rising to 48.8% on moderating input costs and non-retail optimization .
  • Branded strength and share gains: “DKB hit a record [household penetration] this year… we’re getting significant space gains this year for Dave’s… the snack bite launch is underway” . Canyon tracked channel volumes +17.8% in Q4; DKB +2.9%; Wonder +0.5% while Nature’s Own outpaced category declines .
  • Portfolio actions: “Strong execution of our portfolio strategy and cost savings initiatives drove… adjusted EPS growth,” with away-from-home profitability improved via account optimization; Wonder snack cakes positioned to stabilize the weak cake segment .

What Went Wrong

  • Volume and category weakness: net sales fell 1.6% as volume declined 2.5%; Branded Retail -3.9% driven by cake weakness and greater promotional activity; SD&A rose to 40.0% of sales (adjusted 39.6%) on workforce, rent and bad debt .
  • Promotional environment and consumer demand: “The promotional environment has continued to be somewhat elevated… lifts are not what one would normally expect,” and consumer weakness persisted into early 2025 .
  • Near-term cost pressures: management expects commodity inflation in 2H25 and SD&A pressure (workforce, truck leases/rent in California, cold storage), tempering EPS despite mix-driven growth prospects .

Financial Results

Quarterly performance (oldest → newest)

Metric (Units)Q2 2024Q3 2024Q4 2024
Net Sales ($USD Billions)$1.225 $1.191 $1.111
Diluted EPS ($)$0.32 $0.31 $0.20
Adjusted Diluted EPS ($)$0.36 $0.33 $0.22
Adjusted EBITDA ($USD Millions)$143.5 $133.3 $102.4
Adjusted EBITDA Margin (%)11.7% 11.2% 9.2%
Net Income ($USD Millions)$67.0 $65.0 $43.1

Q4 YoY comparison

MetricQ4 2023Q4 2024
Net Sales ($USD Billions)$1.129 $1.111
Diluted EPS ($)$0.17 $0.20
Adjusted Diluted EPS ($)$0.20 $0.22
Adjusted EBITDA ($USD Millions)$96.3 $102.4
Adjusted EBITDA Margin (%)8.5% 9.2%
SD&A (% of Net Sales)39.7% (implied by +30 bps to 40.0%) 40.0%
Gross Margin ex-D&A (%)47.9% (implied by -90 bps to 48.8%) 48.8%

Segment net sales breakdown (Q4 2024 vs Q4 2023)

Sales ClassQ4 2023 ($USD Millions)Q4 2024 ($USD Millions)% Change
Branded Retail$724.9 $696.5 -3.9%
Other (incl. foodservice, vending, institutional)$404.2 $414.6 +2.6%
Total$1,129.0 $1,111.1 -1.6%

Sales bridge – Q4 2024 vs Q4 2023

ComponentBranded RetailOtherTotal
Pricing/Mix (% pts)-1.9% +5.8% +0.9%
Volume (% pts)-2.0% -3.2% -2.5%
Total (% pts)-3.9% +2.6% -1.6%

KPIs and cash flow (FY 2024)

  • Cash from operating activities: $412.7M; Capex: $132.1M; Dividends paid: $203.0M; Cash & cash equivalents: $5.0M .
  • Net debt/TTM adjusted EBITDA ~1.9x; revolver availability $564M at quarter end .
  • Q4 D&A: $36.8M; net interest expense: $4.3M; diluted weighted shares: 212.2M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($B)FY 2025 (53-week)n/a$5.403–$5.487 Initiated
Net Sales ex-Simple Mills ($B)FY 2025 (53-week)n/a$5.180–$5.257 Initiated
Adjusted EBITDA ($M)FY 2025 (53-week)n/a$560–$591 Initiated
Adjusted EBITDA ex-Simple Mills ($M)FY 2025 (53-week)n/a$526–$554 Initiated
Adjusted Diluted EPS ($)FY 2025 (53-week)n/a$1.11–$1.24 Initiated
Adjusted Diluted EPS ex-Simple Mills ($)FY 2025 (53-week)n/a$1.18–$1.28 Initiated
Simple Mills contributionFY 2025 partial yearn/aSales $223–$230M; Adj. EBITDA $34–$37M; EPS -$0.07 to -$0.04 New
53rd week contributionFY 2025n/aSales $70–$80M; Adj. EBITDA $5–$7M; EPS ~+$0.02 New
AssumptionsFY 2025n/aD&A $175–$185M; Net interest $60–$65M; Tax ~25%; Diluted shares ~212.3M; Capex $140–$150M (ERP $4–$6M) New
DividendQ1 2025n/a$0.24 per share declared Increased vs prior year

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Consumer demand & promotionsOutperformed bread category; maintained FY24 outlook but warned of uncertain consumer/promo environment Elevated promotions with weak incremental lifts; cautious tone persists into 1H25 Cautious/unchanged
Sweet baked goodsHeadwind noted; branded cake volume pressure Significant weakness; Wonder snack cakes launching to stabilize category (national, warehouse) Stabilization attempt
Premium/better-for-youGains in keto, buns/rolls; DKB/Canyon strong DKB record penetration; Canyon double-digit growth; small loaves and DKB snack bites expand reach Positive momentum
Away-from-home (foodservice/QSR)Exited low-margin accounts; improved margins Expect QSR recovery later in 2025; non-retail optimization boosted pricing/mix Anticipated 2H improvement
Tariffs/commoditiesModerating input costs benefited Q2/Q3 70% raw materials covered for 2025; first quarter tailwind turning to 2H headwind; tariff exposure primarily Canada/Mexico Near-term tailwind, 2H headwind
California distribution transitionLitigation settled; DSD changes in state Transition to employee model improves control but increases SD&A (truck leases/rent) Mixed: cost up, execution improved
ERP upgradeOngoing upgrade with measured rollout Bakery rollout resuming in Q1 2025; careful execution to avoid disruption Proceeding
M&A (Simple Mills)Announced acquisition (Jan 2025) Completed acquisition; 2025 guidance includes partial-year contribution; pro forma $258–$266M top-line potential Accretive to adj. EBITDA, EPS dilutive

Management Commentary

  • “Flowers’ strong execution of our portfolio strategy and cost savings initiatives drove fourth quarter and full year 2024 adjusted EPS growth in a difficult economic environment… margins benefited from improved pricing and the addition of profitable new accounts in our away-from-home business combined with a positive mix shift toward higher-margin products within branded retail” .
  • “DKB is a strong brand… we’re getting very significant space gains this year for Dave’s… DKB hit a record [household penetration] this year… the snack bite launch is underway” .
  • “Our financial guidance is cautious, given the volatile environment… potential for tariffs, commodities volatility, higher promotional activity and continued weak consumer demand… we are excited about the pending acquisition of Simple Mills, expected to be accretive to adjusted EBITDA in 2025, but dilutive to adjusted EPS” .
  • “Currently, approximately 70% of our key raw materials are covered in 2025… benefit in the first quarter transitioning to a headwind for the remainder of 2025” .

Q&A Highlights

  • Brand performance and innovation: Management reaffirmed DKB strength despite seasonal noise, highlighted new SKUs and mass-channel space gains, and emphasized national Wonder snack cakes launch via warehouse distribution to stabilize cake .
  • 2025 cadence: First half benefits from carryover pricing/savings and commodity coverage; lapping these in back half with commodity inflation; mix-driven growth expected; Simple Mills modest growth post-close with integration ramp .
  • Category/mix shifts: Secular shift away from soft/white loaf toward differentiated premium items (e.g., Nature’s Own Perfectly Crafted, DKB white); targeted small-loaf offerings to meet affordability and waste reduction needs .
  • Costs and SD&A pressure: SD&A increases from workforce, truck lease/rent in CA, cold storage; gross margin expected broadly stable YoY; California move improves execution/control but raises costs .
  • Promotions and tariffs: Elevated category promotions delivering weak incremental volume; Flowers’ brands need less depth given strength; tariff exposure mainly ingredient imports from Canada/Mexico .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable due to data access limits at the time of this analysis; as a result, we cannot assess beat/miss versus consensus for Q4 2024. Values would normally be retrieved from S&P Global; consensus data was unavailable at request time.*

Key Takeaways for Investors

  • Near-term execution focus: Expect stronger Q1 on commodity coverage and carryover initiatives; watch for 2H margin resilience as inflation headwinds emerge .
  • Brand-led share defense: DKB, Canyon and Nature’s Own premium lines should continue offsetting softness in traditional loaf; Wonder snack launch is an important test to stabilize sweet baked goods .
  • Mix over price: Management guided to mix-driven growth with selective pricing; monitor promotional rationalization and its impact on volumes/margins .
  • Cost vigilance: SD&A pressures (workforce, truck leases/rent, cold storage) cap EPS leverage; margin initiatives (manufacturing efficiencies, procurement) remain key .
  • Capital and M&A: Funding Simple Mills via new notes; integration should be accretive to adjusted EBITDA but EPS dilutive in year one; pro forma growth/TDPS expansion potential medium term .
  • California transition: Greater shelf control and service days may boost sales execution in that state, albeit at higher cost; watch early 2025 operational KPIs .
  • Trading implications: Q1 print likely benefits from coverage and carryover—market focus on category trends, Wonder adoption, and Simple Mills integration milestones; 2H risk skewed to commodity/tariff headwinds .

Footnote: *Consensus estimates were intended to be sourced from S&P Global but were unavailable due to a temporary request limit.