Flowers Foods, Inc. 2026 Q2 Earnings Call

I hope everyone had the opportunity to review our earnings release, listen to our prepared remarks, and view the slide presentation that were all posted earlier on our investor relations website. After today's Q&A session, we will also post an audio replay of this call. Please note that in this Q&A session, we may make forward-looking statements about the company's performance. Although we believe these statements to be reasonable, they are subject to risks and uncertainties that could cause actual results to differ materially. In addition to what you hear in these remarks, important factors relating to Flowers Foods business are fully detailed in our SEC filings. We also provide non-GAAP financial measures for which disclosure and reconciliations are provided in the earnings release and at the end of the slide presentation on our website.

Joining me today are Ryals McMullian, Chairman and CEO, and Anthony Scaglione, our CFO. Ryals, I'll turn it over to you.

Okay. Good morning, everybody. As noted in our prepared remarks, our second quarter results did not meet our expectations. The fresh packaged bread category remained challenging, reflecting pressure on household budgets, shifting consumer preferences, and sustained competitive activity. Against this backdrop, we're accelerating initiatives to better align our resources and value proposition with where the market is heading. This includes advancing innovation in smaller formats, sourdough, and protein, improving our in-store execution, pursuing new business, and continuing to invest behind our leading brands. As the Nature's Own relaunch, new business wins, and innovation initiatives build momentum, we expect them to support greater stability and improved performance. We have work to do, but we remain confident in our strategy, our brands, and the actions that we are taking. Shannon, we can go ahead and open up for questions.

Okay. Yeah, thanks, Steve. A few things, and I'll let Anthony chime in here as well, in terms of guidance. I would call out three primary factors to address the question you asked. One is we do have some pretty significant new business wins that are coming on in the back half. In addition to that, we took additional cost savings measures that will benefit the back half, and that's in addition to the roughly $200 million we've taken out of the business over the last several years. I'd also call out innovation, which is a particularly important factor when you think about where the category is going. The speed of the shift in consumer preferences, frankly, got a little bit ahead of our innovation pipeline.

The good news is we have those things coming to fill those gaps in our offerings, whether you're thinking about protein, half loaves, sourdough, et cetera. All that's coming in the back half, and then as we move into the spring of next year. Anthony, anything you want to add?

No, I think you covered it. I would say, Steve, if you look at it for the back half, it is a little skewed. We expect some year-over-year declines in Q3, but then normalization for all the factors that Ryals mentioned, related to the new business wins, reduced elasticities as we are lapping prior year pricing in Q4, and a bit of stabilization in Nature's Own from the marketing investments continue to take hold.

Thank you. Steve, I think from the way we are looking at it is really split between our away from home business as well as our retail branded business.

I would say we are seeing good opportunities and realization in both those areas. The timing of which some of it is going to come in Q3 and some of it will come in Q4. It is balanced wins across the portfolio.

Steve, just to address your question on the Nature's Own relaunch. Recall we just started this a couple of months ago. I would say it is going well. It is a little bit too early to see the actual results read through. But we are getting really good feedback from customers, social media, et cetera. So there are some early indicators that it will be a successful campaign, but I think we have got to give it, as I said on the last call, we are going to have to give it a little bit more time for it to read through. That said, we do feel really good about the campaign and where we are headed with it.