Flowers Foods — Second Quarter 2026 Earnings Summary

Financial Performance

• Net sales decreased 4.0% year-over-year to $1.193 billion for the 12-week period ended July 18, 2026.
• Net income decreased 30.3% to $40.7 million, representing 3.4% of sales, a 130-basis point decrease from the prior year.
• Adjusted net income decreased 30.5% to $44.1 million.
• Diluted EPS decreased $0.09 to $0.19; adjusted diluted EPS decreased $0.09 to $0.21.
• Adjusted EBITDA decreased 19.2% to $111.3 million, representing 9.3% of net sales, a 180-basis point decrease.
• Materials, supplies, labor, and other production costs (excluding D&A) were 51.6% of net sales, a 40-basis point increase.
• Selling, distribution, and administrative (SD&A) expenses were 39.7% of net sales, a 160-basis point increase; adjusted SD&A was 39.1% of net sales.
• Depreciation and amortization expenses were $38.6 million (3.2% of net sales), flat with the prior year.
• Net interest expense decreased $1.3 million primarily due to lower debt balances.
• Year-to-date cash flow from operating activities decreased $24.9 million to $241.5 million.
• Year-to-date capital expenditures decreased $11.9 million to $44.5 million.
• Year-to-date dividends paid decreased $23.7 million to $81.0 million.
• Cash and cash equivalents were $52.8 million at quarter end.

Guidance and Future Outlook

• Revised full-year 2026 net sales guidance lowered to approximately $5.070 billion to $5.142 billion (previously $5.163 billion to $5.267 billion), representing a -3.5% to -2.2% change versus the prior year.
• Revised full-year 2026 Adjusted EBITDA guidance lowered to approximately $453 million to $481 million (previously $465 million to $495 million).
• Revised full-year 2026 Adjusted diluted EPS guidance lowered to approximately $0.75 to $0.85 per share (previously $0.80 to $0.90 per share).
• Outlook assumptions include: Depreciation and amortization of $165 million to $170 million; Net interest expense of $65 million to $70 million; Effective tax rate of approximately 26%; Weighted average diluted share count of approximately 213.5 million; Capital expenditures of $115 million to $125 million.

Business Segments and Product Lines

• Branded Retail net sales decreased 3.8% to $794.6 million; pricing/mix increased 3.8% while volume declined 7.6%.
• Other net sales decreased 4.4% to $398.3 million; pricing/mix decreased 1.0% and volume declined 3.4%.
• The relaunch of Nature's Own is underway with early feedback described as excellent regarding simpler ingredients, better-for-you positioning, and Non-GMO Project Verified status.
• The company is taking select actions to realign its organization and improve cost structure to simplify operations.

Market and Competitive Landscape

• The fresh packaged bread category faces macroeconomic pressures, evolving consumer purchasing behavior, and sustained competitive activity.
• Volume declines were the primary driver of sales decreases, offset partially by favorable pricing/mix in Branded Retail.
• Store branded sales in the "Other" segment were impacted by inflationary pressure on consumer spending.

Risks and Challenges

• Operating environment challenges include a challenging consumer environment, increased marketing expense, and higher labor and freight costs.
• The company cites a more difficult operating environment than anticipated in the fresh packaged bread category.

Management Commentary and Tone

• Chairman and CEO Ryals McMullian stated that second-quarter results reflect continued challenges and a more difficult operating environment than anticipated.
• Management expressed confidence that actions underway will strengthen the top-line trajectory and better position the portfolio to meet evolving consumer demand.
• The company is accelerating initiatives to sharpen its value proposition, improve in-store execution, accelerate innovation, and win new business opportunities.

Other Key Points

• The company is implementing business process improvement costs and restructuring-related implementation costs, which are excluded from non-GAAP measures.
• There was a recovery on inferior ingredients of $1.963 million in the second quarter.
• Long-term debt decreased from $1.755 billion at January 3, 2026, to $1.686 billion at July 18, 2026.
• Stock repurchases for the 12-week period were $37,000; for the 28-week period, they were $3.8 million.
• The company operates bakeries across the U.S. producing a wide range of bakery products including Nature's Own, Dave's Killer Bread, Canyon Bakehouse, Simple Mills, Wonder, and Tastykake.