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Flowers Foods Reports 'Record' Second Quarter, Issues Revised 2020 Guidance

By Rhian Hunt – Aug 7, 2020 at 8:30AM

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Good product mix, flexibility, and streamlining seem to be paying off.

Flowers Foods (FLO) reported a positive second quarter of 2020 yesterday, beating analyst forecasts and posting a year-over-year profit despite the coronavirus pandemic. The bread and baked goods company, which owns brands such as Wonder, beat consensus earnings per share (EPS) estimates by $0.02 with the $0.33 it generated, while it also posted a $1.026 billion revenue figure, surpassing forecasts by $10 million.

Net sales for the quarter increased 5.1% over 2019, while adjusted EPS was $0.08 higher than last year's figure. The coronavirus gave Flowers Foods a strong boost. 

"I am pleased to report a record quarter in which we executed well and capitalized on the strong demand for our leading brands," CEO Ryals McMullian said in a statement. He added, "a key driver of our strong performance was the mix shift to branded retail products, which allowed us to leverage costs and increase margins."

A loaf of bread on a cutting board.

Image source: Getty Images.

In order to cement its gains, the company is seeking to improve its supply chain efficiency and develop an optimal product mix based on the sales information gathered during the COVID-19 outbreak. Management expects these initiatives to generate savings between $10 million and $20 million in 2020.

Flowers Foods also issued new guidance for the fiscal year. This guidance calls for 4% to 5% sales growth, along with rising EPS.

In its report, Flowers Foods also revealed it wasn't simply volume driving Q2 gains -- in fact, volume was down and had a negative impact on sales, dropping them 3.3%. The positive sales growth was due entirely to pricing and mix. Another help comes from the company's restructuring efforts, which have seen several hundred jobs trimmed and several business segments merged to produce more rational management. As a result, Flowers now has a sales-to-total assets ratio of 1.29, showing much better efficiency than the industry ratio of 1.08.

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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