Flowers Foods Reports Mixed Fiscal Q2

Flowers Foods (FLO -2.77%), a leading producer of packaged bakery foods best known for brands like Nature's Own, Dave's Killer Bread, and Wonder, released its second quarter 2025 earnings on August 15, 2025. The results showed adjusted earnings per share (non-GAAP) slightly above expectations, but revenue (GAAP) came in below analyst forecasts. The company reported $0.30 in adjusted EPS, slightly exceeding estimates, and $1.24 billion in GAAP net sales, below the $1.27 billion (GAAP) predicted. Compared to last year, profit margins narrowed, and net income (GAAP) fell. Management also cut its outlook, citing pressure from lower sales of traditional breads and rising expenses. The quarter highlighted both the benefits of recent acquisitions and the ongoing challenges of cost inflation and shifting consumer demand.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Flowers Foods' Business Overview and Recent Focus

Flowers Foods operates as one of the largest producers of packaged baked goods in the United States, shipping fresh breads, buns, rolls, snack cakes, and specialty baked goods to a wide range of retailers. Its core business relies on a stable of well-known brands including Nature’s Own and Dave’s Killer Bread, both of which hold top spots in key bread and organic segments. The company also manages private label and foodservice business, though branded retail remains its primary sales engine and differentiator.

Recently, the company has put a strong focus on portfolio transformation, investing in digital systems, and expanding into high-growth and "better-for-you" product categories. Acquisitions, like the recent Simple Mills deal, are central to efforts to reach health-conscious and value-seeking shoppers. Flowers Foods views success as tied to brand strength, careful pricing and product mix, tight cost control, and the ability to adapt to changing consumer trends and competitive pressures.

Quarterly Developments and Performance Drivers

Branded retail net sales rose 5.0% to $826.7 million, driven in part by the Simple Mills acquisition. The company reported a 1.3% decline in branded retail volume and a 1.5% fall in branded price and mix. This reflected both increased promotional activity—especially in differentiated products like Dave’s Killer Bread and Keto options—and weaker demand for mainstream breads. Management pointed out that "softness in traditional loaf sales and a more-intense competitive environment" remain heavy headwinds weighing on the middle of the market, where many of Flowers Foods' flagship brands compete.

Strategic integration of Simple Mills contributed $61.4 million in sales and $10.9 million in adjusted EBITDA, but the acquisition was modestly dilutive, subtracting $0.01 from diluted EPS and generating a net loss of $2.1 million. The company remains confident in Simple Mills' fit as a gateway to the "better-for-you" and value-oriented segment, though the near-term financial impact was negative. The initial lift from the acquisition was one of the only bright spots in top-line growth.

Rising costs remained a critical issue. Cost of goods sold (materials, labor, production) increased to 51.2% of net sales, up 110 basis points. This resulted from higher outside product purchases and lower internal volumes, partially offset by cost improvements in ingredients and workforce. Net interest expense soared by $10.1 million as new debt financed the Simple Mills acquisition during an environment of elevated interest rates. Average price/mix fell 1.2%, and overall company volumes declined by 2.4%. These trends echo broader shifts toward health, value, and changing eating habits.

The company invested $30.8 million in capital expenditures. Cash flow from operations (GAAP) rose by $98.0 million year-to-date. Despite earnings trends, Flowers Foods continued to return capital to shareholders, with year-to-date dividend payments rising to $104.8 million, an increase of 2.8% compared to the same period last year for the 28-week period.

Looking Ahead: Guidance and Investor Considerations

For the remainder of FY2025, management cut its previous full-year guidance for net sales, adjusted EBITDA, and adjusted diluted EPS due to ongoing category pressure and higher cost expectations. Flowers Foods now expects full-year net sales (GAAP) between $5.239 billion and $5.308 billion for the 53-week Fiscal 2025, down from an earlier $5.297–$5.395 billion range. Adjusted EBITDA is expected at approximately $512–$538 million for the 53-week Fiscal 2025, including the Simple Mills acquisition, down from a prior outlook of $534–$562 million. Adjusted EPS is forecast at $1.00 to $1.10, versus earlier guidance of $1.05–$1.15. Excluding the Simple Mills contribution, net sales are expected to decline compared to the prior year. The acquisition is forecast to be dilutive by $0.07–$0.08 per share to adjusted diluted EPS.

The company continues to prioritize innovation, cost efficiency, and targeted brand investment rather than relying on heavy promotional activity to drive volume. Investors should watch developments in consumer demand for traditional versus premium and health-oriented baked goods, the scaling of Simple Mills, and margin trends as the company invests in digital and supply chain improvements. Flowers Foods’ ability to adapt its portfolio, realize acquisition benefits, and control costs will be central to future performance. Year-to-date dividend payments rose to $104.8 million, an increase of 2.8% over the same period last year.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.