Flowers Foods (FLO) Q2 2026 (Q&A) earnings summary

Executive summary

• Net sales for Q2 2026 declined 4.0% year-over-year to $1.193 billion, driven by lower volumes in both Branded Retail and Other segments, partially offset by favorable price/mix and contributions from the Simple Mills acquisition.

• Net income dropped 30.3% to $40.7 million, reflecting a challenging consumer environment, higher costs, and increased marketing and restructuring expenses.

• Adjusted EBITDA fell 19.2% to $111.3 million, with margin dropping to 9.3% from 11.1% year-over-year.

• Management is accelerating strategic initiatives, including innovation in smaller formats, sourdough, protein, and brand relaunches, with a focus on cost structure realignment and operational simplification.

• The Nature's Own relaunch and new business wins are expected to drive greater stability and improved performance in the coming quarters.

Financial highlights

• Branded Retail net sales decreased 3.8% to $794.6 million, with a 3.8% increase in price/mix offset by a 7.6% volume decline; Other segment net sales fell 4.4% to $398.3 million.

• Gross margin declined as materials, supplies, labor, and other production costs rose to 51.6% of sales for the quarter, up 0.4 percentage points year-over-year.

• Selling, distribution, and administrative expenses increased to 39.7% of sales for the quarter, up 1.6 percentage points, due to higher marketing, logistics, and restructuring costs.

• Cash from operations year-to-date was $241.5 million; capital expenditures were $44.5 million; dividends paid totaled $81.0 million.

• Adjusted EBITDA margin for the quarter was 9.3%, down from 11.1% a year ago.

Outlook and guidance

• Full-year 2026 net sales guidance revised to $5.070–$5.142 billion, with adjusted EBITDA guidance of $453–$481 million and adjusted diluted EPS guidance of $0.75–$0.85.

• Fiscal 2026 sales are expected to be lower than Fiscal 2025 due to the extra week in 2025 and continued weakness in the fresh packaged bread category.

• Sequential improvement is expected in the back half of the year, driven by new business wins, cost savings, and innovation pipeline, particularly in protein, half loaves, and sourdough.

• Ongoing restructuring and marketing investments are anticipated to continue in the second half of Fiscal 2026.

• Assumptions include depreciation/amortization of $165–$170 million, net interest expense of $65–$70 million, effective tax rate of 26%, and capital expenditures of $115–$125 million.