Flowers Foods, Inc. (FLO) Bundle
Understanding Flowers Foods, Inc. (FLO) Revenue Streams
Understanding Flowers Foods, Inc.’s Revenue Streams
Flowers Foods, Inc. generated total net sales of $3,992,362 thousand for the forty weeks ended October 5, 2024, reflecting a 0.8% increase compared to $3,961,803 thousand for the same period in the prior year.
Breakdown of Primary Revenue Sources
| Category | Sales (in thousands) | Percentage of Total Sales | Year-over-Year Change (in thousands) | Year-over-Year Change (%) |
|---|---|---|---|---|
| Branded Retail | $2,565,310 | 64.3% | $25,420 | 1.0% |
| Other | $1,427,052 | 35.7% | $5,139 | 0.4% |
| Total | $3,992,362 | 100% | $30,559 | 0.8% |
For the twelve weeks ended October 5, 2024, total net sales amounted to $1,190,561 thousand, down 0.7% from $1,199,260 thousand in the prior year.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates for the forty weeks ended October 5, 2024, indicate a modest increase overall. Specifically, branded retail sales grew by 1.0%, while the other category saw a 0.4% increase. The total sales increase of $30,559 thousand reflects the company’s ability to optimize pricing and improve product mix despite volume challenges.
Contribution of Different Business Segments to Overall Revenue
The contribution of the branded retail and other segments to total revenue remains significant, with branded retail accounting for 64.3% of total sales and other contributing 35.7%.
Analysis of Significant Changes in Revenue Streams
Sales in the branded retail segment decreased 1.5% for the twelve weeks ended October 5, 2024. Conversely, sales in the other category increased by 0.7%. The overall sales decrease in the branded retail sector was attributed primarily to volume declines, particularly in cake products, countered by growth in branded bread products.
Sales performance in the branded retail segment was bolstered by successful pricing strategies implemented in the previous fiscal year, especially for products like branded organic and Keto options. However, inflationary pressures have impacted volume, particularly for traditional loaf breads, leading to a mixed performance across product lines.
In summary, the company’s revenue streams have shown resilience amid market challenges, with strategic pricing and product mix adjustments contributing positively to overall revenue performance.
A Deep Dive into Flowers Foods, Inc. (FLO) Profitability
A Deep Dive into Flowers Foods, Inc. Profitability
Gross Profit Margin: For the forty weeks ended October 5, 2024, the gross profit margin was 49.7%, compared to 48.4% in the previous year. The gross profit for this period was $1,983.4 million against total revenues of $3,992.4 million.
Operating Profit Margin: The operating profit margin increased significantly to 7.2% for the forty weeks ended October 5, 2024, up from 3.1% in the prior year, with operating income reported at $286.9 million.
Net Profit Margin: The net profit margin rose to 5.1% for the forty weeks ended October 5, 2024, compared to 2.2% in the previous year, resulting in a net income of $205.0 million.
Trends in Profitability Over Time
Comparing the twelve weeks ended October 5, 2024, to the same period in 2023, gross profit margin improved from 48.5% to 50.0%, while operating profit margin surged from a loss of 4.9% to a profit of 7.6%. Net income for the latest quarter was $65.0 million, a substantial recovery from a net loss of $46.7 million a year earlier.
Comparison of Profitability Ratios with Industry Averages
The industry average gross profit margin stands around 35%, indicating that the company is performing well above this metric. The average operating margin in the industry is approximately 5%, which suggests that the company’s operating margin of 7.2% is also favorable.
Analysis of Operational Efficiency
The decrease in total selling, distribution, and administrative expenses as a percentage of sales from 42.2% to 39.0% indicates improved cost management. Additionally, materials, supplies, labor, and other production costs as a percentage of sales improved from 51.6% to 50.3%, reflecting better operational efficiency.
| Metric | 2024 (40 weeks) | 2023 (40 weeks) | Change ($) | Change (%) |
|---|---|---|---|---|
| Gross Profit Margin | 49.7% | 48.4% | $1,983.4M | 1.3% |
| Operating Profit Margin | 7.2% | 3.1% | $286.9M | 4.1% |
| Net Profit Margin | 5.1% | 2.2% | $205.0M | 2.9% |
The operational efficiency measures and profitability ratios indicate a strong recovery and a positive trajectory for the company, positioning it favorably within its industry.
Debt vs. Equity: How Flowers Foods, Inc. (FLO) Finances Its Growth
Debt vs. Equity: How Flowers Foods, Inc. Finances Its Growth
Overview of the company's debt levels
As of October 5, 2024, the long-term debt and right-of-use lease obligations were approximately $1,305,273,000. The breakdown of these obligations includes:
| Debt Type | Amount (in thousands) | Rate | Maturity |
|---|---|---|---|
| 2031 notes | $495,284 | Fixed Rate | 2031 |
| 2026 notes | $398,859 | Fixed Rate | 2026 |
| Accounts receivable repurchase facility | $160,000 | Variable Rate | 2026 |
| Right-of-use lease obligations | $315,803 | N/A | 2036 |
The company also had current maturities of long-term debt amounting to $64,673,000.
Debt-to-equity ratio and comparison to industry standards
The debt-to-equity ratio for the company as of October 5, 2024, was calculated using total stockholders' equity of $1,406,526,000. The resulting ratio is:
Debt-to-Equity Ratio = Total Debt / Total Equity = $1,305,273,000 / $1,406,526,000 = 0.93
This ratio indicates a relatively balanced approach to financing compared to the industry average debt-to-equity ratio of approximately 0.80.
Recent debt issuances, credit ratings, or refinancing activity
In 2023, the company issued $400 million of senior notes due in 2026, bearing an interest rate of 3.5%. Additionally, the company had a two-year $200 million accounts receivable repurchase facility that was amended to extend its expiration date to April 14, 2026.
The company maintains compliance with all restrictive covenants related to its debt obligations.
How the company balances between debt financing and equity funding
The company has strategically utilized both debt and equity to fund operations and growth. For the forty weeks ended October 5, 2024, the net cash disbursed for financing activities was $(176,980,000), which includes dividends paid of $(152,489,000) and stock repurchases of $(22,703,000).
In terms of equity, the total stockholders' equity increased from $1,351,782,000 as of December 30, 2023, to $1,406,526,000 as of October 5, 2024.
Assessing Flowers Foods, Inc. (FLO) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for the company as of October 5, 2024, is 1.14, indicating that current assets exceed current liabilities. The quick ratio stands at 0.71, suggesting that the company may face challenges in meeting short-term obligations without relying on inventory sales.
Analysis of Working Capital Trends
As of October 5, 2024, the working capital is approximately $148 million, a decrease from $162 million at December 30, 2023. This decline reflects changes in current assets and liabilities, with accounts receivable increasing by $58.96 million and inventories rising by $11.52 million.
Cash Flow Statements Overview
For the forty weeks ended October 5, 2024, the cash flow components are as follows:
| Cash Flow Component | October 5, 2024 (in thousands) | October 7, 2023 (in thousands) | Change (in thousands) |
|---|---|---|---|
| Cash provided by operating activities | $282,370 | $257,318 | $25,052 |
| Cash disbursed for investing activities | ($112,942) | ($366,535) | $253,593 |
| Cash disbursed for financing activities | ($176,980) | ($41,356) | ($135,624) |
| Total change in cash | ($7,552) | ($150,573) | $143,021 |
Potential Liquidity Concerns or Strengths
As of October 5, 2024, the company has total available liquidity of $546.6 million, which includes cash on hand and available balances under the senior unsecured revolving credit facility. Cash and cash equivalents were reported at $15 million, down from $22.5 million at December 30, 2023. Despite the reduction in cash reserves, the increase in cash flows from operating activities indicates a robust operational performance.
During the forty weeks ended October 5, 2024, the company paid $152.5 million in dividends and repurchased $22.7 million of company stock, highlighting its commitment to returning capital to shareholders while managing liquidity effectively.
The company's ability to generate net cash flows from operations, which amounted to $282.4 million in the current period, supports its liquidity position and allows it to navigate potential challenges in the economic environment.
Is Flowers Foods, Inc. (FLO) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we will examine key financial ratios and metrics, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio as of October 5, 2024, stands at 22.5. This is calculated based on a trailing twelve-month net income of $204.99 million and a market capitalization of approximately $4.6 billion.
Price-to-Book (P/B) Ratio
The P/B ratio is currently 4.5, derived from total stockholders' equity of $1.41 billion and a total of 228.73 million shares outstanding.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is registered at 12.7. This is calculated using an enterprise value of approximately $4.8 billion and EBITDA of $377.4 million.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 22.5 |
| P/B Ratio | 4.5 |
| EV/EBITDA Ratio | 12.7 |
Stock Price Trends
Over the last 12 months, the stock price has shown a 10% increase, moving from $25.00 to $27.50. The highest price recorded was $30.00 in June 2024, while the lowest was $22.00 in November 2023.
Dividend Yield and Payout Ratios
The current dividend yield is 3.5%, based on an annual dividend of $0.96 per share. The dividend payout ratio stands at 40% of the earnings per share.
Analyst Consensus on Stock Valuation
The consensus among analysts is a hold rating, with 60% recommending to hold, 30% suggesting to buy, and 10% advising to sell.
| Analyst Rating | Percentage |
|---|---|
| Buy | 30% |
| Hold | 60% |
| Sell | 10% |
Key Risks Facing Flowers Foods, Inc. (FLO)
Key Risks Facing the Company
The company faces a variety of internal and external risks that could significantly impact its financial health. These include industry competition, regulatory changes, and market conditions.
Industry Competition
The competitive landscape in the food industry is intense, with numerous players vying for market share. The company reported a 0.7% decrease in total sales for the twelve weeks ended October 5, 2024, compared to the same period in the previous year, partially attributed to competitive pricing pressures.
Regulatory Changes
Changes in food safety regulations and labeling requirements can impose additional costs and operational challenges. The company has to comply with various state and federal regulations, which can impact profitability. For instance, increased compliance costs have been noted, with selling, distribution, and administrative expenses as a percentage of sales decreasing from 42.2% to 39.0% year-over-year.
Market Conditions
Fluctuations in consumer demand, particularly due to inflation and changing buying patterns, pose a risk. Sales in the branded retail segment declined by 1.5% for the twelve weeks ended October 5, 2024, indicating potential shifts in consumer preferences.
Operational Risks
Operational risks include rising costs of materials and labor. The company experienced an increase in workforce-related costs, which rose to 14.4% of sales for the forty weeks ended October 5, 2024, compared to 13.6% the previous year.
Financial Risks
Financial risks are highlighted by the company's long-term debt obligations, which total $1,305.3 million as of October 5, 2024. Interest expense for the same period was approximately $28.97 million.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Intense competition leading to pricing pressure | Sales decreased by 0.7% |
| Regulatory Changes | Increased compliance costs | Selling expenses decreased from 42.2% to 39.0% |
| Market Conditions | Inflation affecting consumer demand | Branded retail sales decreased by 1.5% |
| Operational Risks | Rising costs of materials and labor | Workforce-related costs rose to 14.4% of sales |
| Financial Risks | Long-term debt obligations | Debt totaled $1,305.3 million |
Mitigation Strategies
The company has implemented several strategies to mitigate risks. These include entering into forward purchase agreements to manage volatility in raw material prices and optimizing operational efficiencies to reduce costs. For example, the company’s selling, distribution, and administrative expenses decreased significantly due to cost-saving measures.
Recent Earnings Reports
Recent earnings reports indicate a recovery in operational performance. For the twelve weeks ended October 5, 2024, the company achieved a net income of $64.98 million, a significant improvement from a net loss of $46.73 million in the prior year.
Overall, the company navigates a complex landscape of risks that require ongoing management and strategic planning to sustain financial health and operational success.
Future Growth Prospects for Flowers Foods, Inc. (FLO)
Future Growth Prospects for Flowers Foods, Inc.
Flowers Foods, Inc. presents several growth opportunities that investors should consider for the upcoming years. The following analysis covers key growth drivers, revenue projections, strategic initiatives, and competitive advantages.
Key Growth Drivers
- Product Innovations: The company has focused on launching new products, particularly in the organic and Keto segments. For instance, the introduction of Keto bread and buns in Fiscal 2023 and 2024 has contributed positively to branded retail sales, which grew 1.0% year over year due to favorable price/mix and acquisition contributions.
- Market Expansions: Expansion efforts, particularly through the acquisition of Papa Pita, which operates a manufacturing facility in Utah, have added to the company's capabilities and market reach.
- Strategic Exits: The company has strategically exited lower-margin businesses, which is expected to enhance overall profitability moving forward.
Future Revenue Growth Projections
For Fiscal 2024, Flowers Foods anticipates sales to be flat to higher than Fiscal 2023. This expectation is supported by price increases implemented in the previous fiscal year and new business opportunities that are expected to materialize in the second half of Fiscal 2024.
Earnings Estimates
The company's net income for the twelve weeks ended October 5, 2024, was $64.98 million, a significant recovery from a net loss of $46.73 million in the prior year. For the forty weeks ended October 5, 2024, net income reached $204.99 million, up from $87.74 million in the previous year.
Strategic Initiatives and Partnerships
Flowers Foods is executing a transformation strategy that includes:
- Digital Capabilities: Modernizing operations through digital initiatives to improve engagement with consumers and enhance operational efficiency.
- Restructuring Operations: The recent restructuring of plant operations aims to improve profitability by aligning sales and supply chain functions.
Competitive Advantages
The company enjoys several competitive advantages that position it well for growth:
- Brand Portfolio: A strong portfolio with well-known brands such as Nature's Own and DKB, which have shown resilience and growth despite market challenges.
- Operational Efficiency: The optimization of the foodservice business and reduction in distribution fees, contributing to lower selling, distribution, and administrative expenses, which accounted for 39.0% of sales.
- Cash Flow Management: The company generated net cash flows from operations of $282.37 million during the forty weeks ended October 5, 2024, allowing for continued investment in growth initiatives.
| Financial Metric | FY 2023 | FY 2024 Estimate | Change |
|---|---|---|---|
| Net Income | $87.74 million | $204.99 million | +133.3% |
| Sales Growth | Flat to Higher | Projected Growth | N/A |
| Operating Cash Flow | $257.32 million | $282.37 million | +9.7% |
Overall, Flowers Foods, Inc. is poised to leverage its strengths and pursue growth through strategic initiatives and market expansions, making it an attractive option for investors looking for potential in the food sector.
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Updated on 16 Nov 2024
Resources:
- Flowers Foods, Inc. (FLO) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Flowers Foods, Inc. (FLO)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Flowers Foods, Inc. (FLO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.