Flowers Foods (NYSE:FLO) executives said the company finished fiscal 2025 at the high end of its guidance range, even as demand in several bread segments remained pressured. In recorded remarks discussing fourth-quarter and full-year results, Chairman and CEO Ryals McMullian pointed to ongoing efficiency initiatives and portfolio actions as key contributors, while warning that category headwinds are expected to continue into 2026.
Management said it is launching a comprehensive review of operations designed to “reignite top-line growth and expand margins.” The review includes evaluating and optimizing the brand portfolio, assessing supply chain enhancements, and reassessing capital allocation to fund growth initiatives. Executives characterized 2026 as an “investment and transition year,” with higher marketing and innovation spending expected to create near-term margin pressure.
Category conditions and brand performance
Traditional loaf remained a weak spot. Flowers said traditional loaf unit sales declined 4% in the fourth quarter, compared with a 2% decline for the bread category overall, while overall food category units posted a modest increase.
Within the company’s growth focus areas, management highlighted several segments where it said performance outpaced the broader category:
- Dave’s Killer Bread: Unit sales rose 3% in the quarter, with dollar sales increasing at each of its top 10 customers. Management cited distribution gains in underpenetrated areas such as sandwich buns and rolls and breakfast.
- Specialty premium loaf: Flowers said it gained 60 basis points of unit share, driven largely by DKB (up 50 basis points), with Canyon Bakehouse and Nature’s Own each adding 10 basis points.
- Breakfast: The company reported unit and dollar share gains of 40 basis points and 50 basis points, respectively, supported by Wonder and DKB. Management noted DKB has grown dollar share in breakfast every year since 2021.
- Sandwich buns and rolls: Unit share increased 50 basis points and units grew 3%, which management said outpaced the overall category by about 600 basis points. Nature’s Own innovation, including keto buns and Perfectly Crafted Brioche Buns, was cited as a contributor.
- Cake: Flowers said actions to mitigate category weakness improved revenue, aided by a Wonder-branded cake line launched in 2025. In the fourth quarter, management said category unit sales fell 3% while Flowers’ cake unit sales grew 5%, and that Tastykake sales remained solid with minimal cannibalization.
Leadership and operational changes
McMullian introduced Anthony Scaglione as Flowers’ new chief financial officer and said he has already had a positive impact since joining in January. The company also named David Roach, previously chief strategic projects officer, as chief DSD (direct store delivery) operations officer in a newly created role with full profit-and-loss responsibility for the DSD business.
To support the shift, Flowers is implementing a new DSD structure that places full P&L responsibility at the regional level. Management said the change is intended to improve execution, increase accountability, and strengthen sales performance and profitability across the network.
Fourth-quarter results included impairment and restructuring costs
Scaglione said fourth-quarter net sales increased 11% year over year. Price/mix rose 70 basis points, helped by pricing actions taken late in the quarter to offset input cost inflation, while volume declined 2.2%, which management attributed primarily to branded traditional loaf, foodservice, and store-brand cake. The Simple Mills acquisition contributed 4.7% to sales growth and the extra week in the fiscal year added 7.8%, according to the CFO.
Gross margin (excluding depreciation and amortization) was 48.5% of sales, down 30 basis points from the prior-year quarter. Scaglione said higher outside purchases tied to the Simple Mills business model were partially offset by lower labor and ingredient costs associated with the addition of Simple Mills and higher sell-through of finished goods.
Selling, distribution, and administrative expenses were 39.9% of sales, down 10 basis points year over year. Excluding matters affecting comparability, adjusted SD&A was 39% of net sales, a 60 basis point improvement driven by efficiency efforts and lower distributor distribution fees as a percentage of sales, including an impact from Simple Mills’ co-manufacturing structure.
GAAP diluted EPS was a loss of $0.32, down $0.52 from the prior-year period. Scaglione cited several significant items, including:
- $136 million non-cash impairment of intangible assets
- $9 million in restructuring-related implementation costs
- $3 million loss tied to inferior supplier ingredients, which also impacted sales
Adjusted diluted EPS was $0.22, consistent with the prior-year quarter, he said.
Scaglione said the impairment charge followed an early-stage evaluation of the brand portfolio and current and future investments, in conjunction with the company’s typical goodwill and intangibles process. He said the long-term outlook for certain brands was “lower than previously forecasted,” leading to the write-down, but added that in the short term management does not expect further impairments based on the outlook for the remaining portfolio.
The Simple Mills acquisition contributed $57.5 million in net sales and $6.3 million to adjusted EBITDA in the quarter, and resulted in a $0.03 adjusted diluted loss per share, inclusive of $0.04 of related financing costs, management said.
Balance sheet, cash flow, and 2026 guidance
At year-end, net debt to trailing 12-month adjusted EBITDA was approximately 3.3x, up year over year due to the Simple Mills acquisition. Scaglione said Flowers remains focused on maintaining a strong balance sheet, particularly ahead of an upcoming bond maturity.
Operating cash flow for fiscal 2025 was $446 million, up $34 million from the prior year. Capital expenditures were $127 million, down $5 million, and dividends paid were $209 million, up $6 million, management said.
For fiscal 2026, Flowers guided for net sales of $5.163 billion to $5.267 billion, adjusted EBITDA of $465 million to $495 million, and adjusted diluted EPS of $0.80 to $0.90. Management said guidance reflects one fewer week (a roughly 1.5% headwind to annual net sales growth), inflationary pressures including labor, and continued weakness in traditional loaf, where the company “over-indexes.” The company expects total sales to range from down 180 basis points to up 20 basis points.
Scaglione said the plan assumes category headwinds of about 4% in 2026, and also incorporates a normalization of corporate bonus compensation that benefited 2025 by about $0.08. He added that net interest expense is expected to increase due to a bond issuance that occurred partway through the first quarter of 2025, and the full-year tax rate is expected to be about 26%, with an estimated first-quarter rate of around 30% and approximately 25% for the remainder of the year.
Competitive and consumer trends
McMullian said the competitive environment remained “rational but challenging” in the fourth quarter, with no major change in promotional intensity. He noted average price per unit in the bread category rose 1.1%, helped by higher private-label prices, while low-price branded offerings continued to take unit share from both private label and mid-price branded products.
Flowers said it uses promotions selectively to encourage trial and repurchase, focusing on differentiated better-for-you products with relatively low base sales, and that it pulled back on promotions in the fourth quarter due to typically low year-end returns.
Management also pointed to consumer pressures from inflation, high debt levels, a slowing job market, and economic uncertainty. The company said value-seeking behavior has increased bread sales through club stores, and that consumers are shifting spending to the store perimeter. McMullian added that the move away from foods perceived as less healthy has continued, and said the company expects that trend to persist amid increased GLP-1 adoption and other influences.
In response, Flowers said it is prioritizing better-for-you and value-oriented products, including innovation around attributes such as protein, sourdough, and keto-friendly options, alongside value offerings such as small loaves. Management also reiterated plans to optimize the supply chain and align the bakery network with demand as part of its broader review.
About Flowers Foods (NYSE:FLO)
Flowers Foods, Inc is one of the largest producers of packaged bakery foods in the United States, offering a variety of fresh bread, buns, rolls, snack cakes and tortillas. Headquartered in Thomasville, Georgia, the company operates an extensive network of bakeries and distribution centers that serve retail grocery chains, convenience stores, mass merchandisers and foodservice customers nationwide. Flowers Foods markets its products under well-known brands such as Nature’s Own, Wonder, Dave’s Killer Bread, Mrs.
