THOMASVILLE, GA. — Flowers Foods Inc. kept earnings on a growth path in the fiscal 2024 third quarter while continuing to navigate challenging consumer trends that squeezed sales.

Net income for the quarter ended Oct. 5 came in at $65 million, equal to 31¢ per share on the common stock, marking a rebound from a $46.7 million net loss in the prior-year period that stemmed mainly from legal settlements and related costs, Thomasville-based Flowers said.

Adjusted net earnings totaled $69.3 million, or 33¢ per share, up from $61.7 million, or 29¢ per share, a year earlier. That topped Wall Street’s high-end forecast of 31¢ in adjusted earnings per share. Flowers said adjusted net income excludes the legal settlement and costs, business process improvement costs, and plant closure costs and asset impairments related primarily to the recent closing of its Baton Rouge, La., baking plant.

“Our third-quarter performance was highlighted by strong execution in a challenging environment,” A. Ryals McMullian, chairman and chief executive officer, said in remarks on the quarterly results. “We achieved notable margin improvement and drove strong bottom-line growth despite top-line pressure that was largely due to external factors. Our leading brands continue to outperform the competition, and we are making significant progress in improving profitability in our ‘other’ category.

“Shifting consumer spending patterns have led to headwinds in fresh packaged bread. As a result, category sales declined in both units and dollars. The encouraging volume trends we noted last quarter did not persist, though results improved toward the end of the third quarter, partly due to the impact of Hurricane Helene.”

Net sales dipped 0.7% to $1.190 billion from $1.199 billion a year ago. That compared with a 0.2% year-over-year decrease in the 2024 second quarter and a 3.5% gain in the 2023 third quarter. Pricing/mix rose 1.7% and volume fell 2.4% in the 2024 third quarter.

“In contrast to the (overall baked foods) category, Flowers grew both unit and dollar sales,” McMullian said. “That growth led to superior share performance, gaining 20 basis points of unit and dollar share, the largest increases in the category. We are investing in innovation and marketing to maintain that outperformance.”

Branded retail net sales declined 1.5% to $760.6 million, reflecting decreases of 0.6% in volume and 0.9% in price/mix, the latter due to higher promotional activity, according to Flowers. Underperformance in branded cake pulled down results, despite an uptick in branded bread, the company said. In the quarter, fresh packaged bread edged up 0.5% in dollar sales and 0.7% in unit volume, while commercial cake dropped by 5.5% in dollars and by 4.5% in units.

“Our cake business has also been hampered by weak category trends,” McMullian said. “Although we maintained share in the quarter, unit sales in tracked channels declined 5%, in line with the category. We are taking action to overcome this pressure, including the extension of our Wonder brand into sweet baked goods.”

The Wonder extension refers to the planned rollout of the Wonder sweet snacks line, including offerings such as cinnamon rolls and confetti cakes, in April 2025.

“We are capitalizing on Wonder’s extensive brand awareness among consumers by expanding into the sweet baked goods category,” McMullian said. “We are excited about the strong momentum building around the upcoming launch. Retailers are responding enthusiastically and even voted Wonder a ‘Top 10 Cool New Product’ at the recent National Association of Convenience Stores trade show. These exciting new products will launch nationally in the spring of 2025.”

In Flowers’ “other” business segment, net sales grew 0.7% to $430 million in the third quarter. A 4.9% gain in price/mix reflected efforts to optimize non-retail business, namely in foodservice, while a 4.2% volume decrease was concentrated in vending, foodservice and institutional sales, the company said.

“Strong execution of our portfolio strategy drove improved performance in our ‘other’ category,” McMullian said. “Sales benefited from pricing, which more than offset lower volumes across the business. The impact from business exits diminished in the quarter and is now largely complete. Headwinds in certain end markets, particularly QSR, are expected to continue as consumers shift more of their consumption to at-home occasions.”

Sequentially, Flowers saw its dollar market share rise 10 basis points to 16.9% in bread but tick down 10 basis points to 5.8% in cake during the third quarter. The company said market share and sales are up year over year in the gluten-free segment, while sales are up and market share has held in the organic segment.

“In a category where units and dollars declined, each of our primary bread brands grew dollars and units in tracked channels,” McMullian said of the third-quarter results. “For example, Nature’s Own units increased 2%, DKB (Dave’s Killer Bread) 4%, Wonder 3% and Canyon (Bakehouse) a stunning 11%. That performance translated to market share gains, as each of these brands grew unit and dollar share. Canyon’s performance was particularly noteworthy, expanding its leadership position in the gluten-free category by 360 and 340 basis points of unit and dollar share, respectively.”

He noted that Flowers’ innovation efforts show “tremendous potential,” with new items already “contributing to our strong performance.”

“Nature’s Own Keto loaf maintained its tremendous momentum, gaining 730 and 770 basis points of unit and dollar share, respectively,” he said. “Despite launching only last year, it is rapidly approaching No. 1 market share in its subcategory. We are building on that momentum as we execute a national launch of keto hamburger buns and plan for the upcoming launch of keto hot dog buns next spring.”

Besides Wonder sweet snacks, other Flowers brands are primed for extensions, including into adjacent and new categories, McMullian said, citing Dave’s Killer Bread.

“Our DKB snack products are one example of that strategy,” he said. “Having moved DKB successfully into breakfast, buns and rolls, we further expanded into snacking. Our (DKB) snack bars are making good progress, growing dollars and units as we apply best practices throughout our network. And we are ramping up distribution of our snack bites as we prepare for the national launch in 2025.”

Looking ahead, Flowers narrowed its fiscal 2024 earnings and sales guidance. The company now expects adjusted EPS (diluted) of $1.24 to $1.28, compared with the previous outlook of $1.20 to $1.30. Also receiving a trim at the bottom and top ends was Flowers’ full-year projection for net sales growth, now pegged at 0.5% to 1.1% versus flat to 1.6% previously.

“Key factors that could shift results within our guidance range include the consumer and promotional environment, the speed at which new business wins ramp up, the transition of our California distribution and implementation of our savings initiatives,” said R. Steve Kinsey, chief financial officer.

Flowers has covered roughly 100% of its key raw material needs for 2024, he added.