Flowers Foods net jumps 22% in quarter

by Eric Schroeder
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THOMASVILLE, GA. — Strong sales across all categories helped drive a 22% gain in earnings at Flowers Foods, Inc. Net income in the third quarter ended Oct. 4 totaled $27,415,000, equal to 29c per share on the common stock, up from $22,501,000, or 24c per share, in the same period a year ago. The stronger earnings led the company to raise its full-year guidance for both income and sales.

Net sales for the third quarter rose 21% to $575,937,000, up from $475,225,000. Branded retail sales increased 20% in the quarter, driven by Nature’s Own soft variety and premium bread, Nature’s Own Whitewheat bread and regional white bread brands. Flowers said recent acquisitions, including the ButterKrust Bakery and Holsum Bakery Inc. businesses, contributed nearly 4% of the branded retail sales increase.

In updating guidance for the year, Flowers said its earnings in 2008 would be in the range of $113.6 million to $117.3 million, up from earlier guidance of $109.2 million to $114.7 million. Flowers also raised its outlook for sales to $2.42 billion to $2.43 billion from $2.4 billion to $2.425 billion.

"Sales across all categories remain strong, and we are on track to continue expanding our geographic footprint, deliver profitable growth, and drive product innovation," said George E. Deese, chairman, president and chief executive officer. "Our performance in the quarter again demonstrates the strength of our brands and our team’s ability to execute well in the marketplace."

Mr. Deese said that although the company achieved a 3% gain in manufacturing efficiencies during the quarter, it was not enough to offset higher input costs, leading to a decline in gross margin.

Mr. Deese said Flowers is making good progress on integrating the acquisitions of Holsum Bakery and ButterKrust Bakery, which combined are expected to add approximately $220 million in annualized sales.

In the nine months ended Oct. 4, net income totaled $87,147,000, or 94c per share, up 19% from $73,184,000, or 79c per share, in the same period a year ago. Net sales rose 15% to $1,563,010,000.

Looking ahead to fiscal 2009, Mr. Deese said the company expects sales growth of 12.2% to 14%, with recent acquisitions accounting for 7% to 7.5% of the increase. In total sales are expected to range from $2.72 billion to $2.765 billion. Net income, meanwhile, is expected to be between $124.1 million to $135.3 million.

"Our team’s ability to deliver good results this year and our confidence in our preliminary guidance for 2009 are possible because of the underlying strengths of our company," Mr. Deese said. "As 2009 brings continued volatility in commodities and economic uncertainty that could influence consumer buying trends, our plan is to continue working to be the most efficient and cost effective operator in our industry and to offer products and service that meet the needs of our customers and consumers.

"Our 2009 expectations are based on our ability to perform well in the marketplace, to maintain our volume, and to further improve our efficiencies and reduce our costs. We will continue to manage our business well and further implement the strategies that have created competitive advantages for us in the marketplace. Doing so will help us maximize shareholder value over the long term and we remain focused on achieving that goal."

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