Flowers Foods Q2 Profit Down On Weak Volume; Cuts FY14 Forecast

(RTTNews) - Flowers Foods, Inc. (FLO), a producer of fresh packaged bakery foods, reported Tuesday lower profit in its second quarter as sales were hurt by lower volumes. The company also trimmed its forecast for fiscal 2014 earnings and sales.

In pre-market activity, Flowers Foods shares were losing $2 or 10 percent, and trading at $18.01.

For the second quarter, net income decreased to $42.06 million or $0.20 per share from $46.46 million or $0.22 per share, last year. The latest results included asset impairment, while prior year results included acquisition-related costs.

Adjusted net income was $45 million or $0.21 per share, compared to $50.1 million or $0.24 per share a year ago. On average, eight analysts polled by Thomson Reuters expected the company to report profit per share of $0.24 for the quarter. Analysts' estimates typically exclude special items.

Sales decreased 2.3 percent to $877.38 million from $898.15 million last year. Analysts expected revenue of $940.83 million for the quarter. The company said the weak sales mainly reflected lower volume of 2.9 percent, driven primarily by decreases in the cake business and to a lesser extent decreases in store-branded bread and rolls and foodservice.

Direct-Store-Delivery or DSD segment sales were flat as a 3.1 percent branded bread/roll increase was offset by lower volume in cake and store bran sales. Warehouse segment sales were down 13.3 percent, impacted by lower cake and frozen foodservice sales.

Sales of the acquired bread brands - Wonder, Home Pride, Merita, and Butternut - increased approximately 34.5 percent sequentially.

The company said it continues to strategically exit low margin business in both the foodservice and store brand categories to improve future earnings.

Allen Shiver, president and CEO, said, "Although the second quarter was challenging, we remain confident in our long-term growth strategies. We are particularly encouraged by the traction we are continuing to see in our new markets, where sales doubled since last year. We also are seeing strong sequential growth in our acquired bread brands."

Looking ahead for fiscal 2014, the company now expects adjusted earnings per share, excluding the asset impairment, to be in the range of $0.92 to $0.98, reflecting growth of 1.1 percent to 7.7 percent over last year's adjusted results.

Sales for the year are now expected to be in the range of $3.88 billion to $3.94 billion, an increase of 3.5 percent to 5.0 percent over 2013.

Previously, the guidance was for earnings per share of $0.98 to $1.05, reflecting growth of 7.7 percent to 15.4 percent, and sales of $3.976 billion to $4.126 billion, or 6.0 percent to 10.0 percent increase.

Analysts expect the company to report fiscal 2014 earnings per share of $1.02 on revenue of $3.99 billion.

Shiver stated that the revision reflects the expected impact of current competitive dynamics as well as the effect of costs incurred to expand geographic footprint, add production capacity to serve expansion markets, and enhance the strength of its brands.

Further, the company said its board will review the dividend at its next regularly scheduled meeting. Any action taken will be announced following that meeting.