Shares of Flowers Foods, Inc. (FLO) hit a 52-week low of $17.66 on Oct 13, eventually closing at $17.79. The share price has been declining since the company reported lower-than-expected results for second-quarter 2014 in August. The company also lowered its outlook for 2014. In fact, shares of this producer and marketer of fresh packaged bakery foods have plummeted roughly 15.7% year to date.
Factors Hurting Flowers Foods
On Aug 12, Flowers Foods reported weaker-than-expected second-quarter 2014 results. Earnings came in at 21 cents per share, down 12.5% year over year and below the Zacks Consensus Estimate of 24 cents by 12.5%. Lower sales, higher costs for added production capacity, increased promotional allowances, and higher-than-normal returned products (stales) impacted the quarter's results. Product returns were impacted by new markets and promotional allowances.
Revenues decreased 2.3% year over year due to 2.9% volume decline, although partially offset by 0.6% positive price/mix impact. Sales were lower in the quarter, primarily due to high promotional activity across most food categories and reduced sales of low-margin store brand and foodservice products.
The company’s Direct-Store-Delivery segment’s sales were flat with last year, while warehouse segment sales plummeted 13.3%, due to lower cake and frozen foodservice sales. Operating margin edged down 100 basis points to 8%.
For 2014, Flowers Foods has revised its revenue guidance to a range of $3.88–$3.94 billion from $3.98–$4.13 billion, expected earlier. Adjusted earnings are anticipated to be 92 cents–98 cents per share, down from the previous forecast of 98 cents–$1.05 per share.
The lowered guidance takes into account the competitive environment and the effect of costs incurred for the expansion of geographic footprint and brand enhancement. We believe that these factors will continue to impact Flowers Foods’ performance in the quarter ahead. Flowers Foods carries a Zacks Rank #3 (Hold).
Better-ranked food companies include The Hain Celestial Group, Inc. (HAIN), Post Holdings, Inc. (POST) and McCormick & Co., Inc. (MKC). While Hain Celestial and Post Holdings sport a Zacks Rank #1 (Strong Buy), McCormick holds a Zacks Rank #2 (Buy).
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