THOMASVILLE, GA. — Calling 2026 a “transition year,” Flowers Foods Inc. has begun an operational review to help spur profit and sales growth after fiscal 2025 brought a drop in earnings and only a modest gain in sales.

“Looking ahead, we anticipate ongoing category headwinds to pressure results in 2026,” said A. Ryals McMullian, chairman and chief executive officer. “In response, we are proactively conducting a comprehensive review of our operations aimed at positioning us to reignite top-line growth and expand margins. This review is focused on evaluating and optimizing our brand portfolio while targeting investments in the most promising areas. Additionally, we are evaluating supply chain enhancements and reassessing our capital allocation to ensure we can fund promising growth initiatives that drive long-term shareholder value.”

For the 53-week 2025 fiscal year ended Jan. 3, net income sank 66% to $83.8 million, equal to 40¢ per share on the common stock, from $248.1 million, or $1.17 per share, in the 52-week fiscal 2024 period. Thomasville-based Flowers attributed the decline primarily due to a $136 million non-cash impairment of intangible assets, though the acquired Simple Mills business also accounted for a loss of $14.4 million. Adjusted net earnings fell 15% to $231.6 million, or $1.09 per share, from $271.6 million, or $1.28 per share, a year earlier. Despite the decrease, adjusted earnings per share topped Wall Street’s high-end EPS estimate of $1.05.

The fiscal 2025 fourth quarter, covering 13 weeks, produced a loss of $67.1 million versus net income of $43.1 million, or 20¢ per share, for the 12-week quarter in fiscal 2024, reflecting the impact of the impairment charge and including a loss of $6.2 million from Simple Mills, Flowers said. Adjusted net earnings dipped 1.5% to $45.8 million, or 22¢ per share, from $46.4 million, also 22¢ per share, a year ago. Analysts’ top-end forecast was for adjusted EPS of 17¢.

“By strategically investing in key brands and segments, and enhancing our supply chain and advanced commercial capabilities, we are confident in our ability to drive above-category performance and deliver sustained value creation for our shareholders,” McMullian noted.

Anthony Scaglione, who became chief financial officer at Flowers on Jan. 1, said the impairment charge stems from the company’s brand portfolio and investment review, which began in the fourth quarter.

“As part of this review, we recognized that the long-term outlook for certain brands, while still part of our portfolio and supported, is lower than previously forecasted, resulting in an impairment,” he said. “In the short term, we do not expect any further impairments based on our outlook for the remaining portfolio. That being said, to Ryals’ earlier point, we will continue to focus our efforts on brands with the greatest opportunity to grow and gain share, while ensuring we satisfy our customers across various price points and needs.”

The brand evaluation came in the “early part of our review” and, combined with Flowers’ typical process around goodwill and intangibles, “led to a non-cash writedown of certain assets,” Scaglione said.

“Overall, our evaluation process is in its early stages, and I would say we are in the top of the first inning, for you baseball fans,” he added.

Flowers reined in its outlook for fiscal 2026, projecting adjusted EPS of less than $1 and flattish growth for its high-end sales forecast, which will cycle the addition of Simple Mills. Adjusted EPS for the 52-week period is pegged at 80¢ to 90¢, while net sales are estimated at down 1.8% to up 0.2% to between $5.16 billion and $5.27 billion.

“We expect 2026 to be an investment and transition year as we work to enhance our brands with increased marketing and innovation,” McMullian said. “We will share updates on these initiatives and their anticipated benefits as the year progresses. While these investments may create near-term margin pressure, they are essential for unlocking the full potential of our business.”

Fiscal 2025 net sales rose 3% to $5.26 billion from $5.1 billion, with lifts of 1.7% from the 53rd week and 4.1% from Simple Mills’ sales of $213.9 million more than offsetting a 2% decrease in volume and an 0.8% dip in price/mix, according to Flowers.

 The fourth quarter supplied a year-end boost. Net sales totaled $1.23 billion, up 11% year over year from $1.11 billion and aided by gains of 7.8% from Simple Mills’ $57.5 million in sales and 4.7% from the 13th week. Price/mix edged up 0.7%, while volume declined 2.2%.

“Our leading brands continued to perform well, even in a challenging demand environment,” McMullian said. “Flowers maintained unit share in the fresh packaged bread category for the year, led by robust performance from Dave’s Killer Bread (DKB), which gained 20 basis points, while Nature’s Own, Canyon Bakehouse and Wonder all held share.

Simple Mills sales of $213.9 million in fiscal 2025 lifted Flowers Foods' sales by 4.1% for the year.

Source: ©BLUEE - STOCK.ADOBE.COM

“Traditional loaf remained challenging, with unit sales declining 4% in the fourth quarter, one of the weaker areas in fresh packaged bread,” he pointed out. “That performance compares to a 2% decline for the bread category overall and a modest increase in overall food category units.”

Flowers’ branded retail net sales climbed 6.2% to $3.46 billion in fiscal 2025 on lifts of 6.4% from Simple Mills and 1.8% from the 53rd week, partially offset by decreases of 1.5% in volume and 0.5% in price/mix. Fourth-quarter branded retail sales jumped 16.6% to $811.6 million, aided by gains of 7.7% from Simple Mills and 8.3% from the 13th week on a 2.3% uptick in price/mix and a 1.7% volume decrease.

During the fourth quarter, Flowers’ saw fresh packaged bread sales decline in both dollars (down 3.4%) and units (down 3.7%). Dollar share decreased 110 basis points year over year in bread to 16%. For the year, organic bread sales rose 4.3% to $1.01 billion, with market share down 40 basis points to 73.7%, while gluten-free sales were up 1.7% to $157.5 million as share grew 70 basis points to 38.3%.

“Looking at fourth-quarter results, DKB was a standout, growing unit sales 3% overall and increasing dollar sales at each of its top 10 customers,” McMullian said. “The brand’s commitment to uncompromising taste and texture, along with its unique better-for-you attributes, has driven significant distribution gains in underpenetrated segments like sandwich buns and rolls and breakfast. And customers are proactively asking for more innovation from this leading brand. In specialty premium loaf, we gained 60 basis points of unit share — largely driven by DKB, which added 50 basis points. Canyon and Nature’s Own each contributed 10 basis points of unit share, helped by increased distribution.”

He called breakfast “an area of strength,” with quarterly gains of 40 basis points in unit share and 50 basis points in dollar share as Wonder and DKB turned in strong performances. In the sandwich buns and rolls segment, Nature’s Own, Wonder and DKB led a 3% increase in unit share, outpacing the overall category by 600 basis points.

“Nature’s Own played a crucial role in this success, with the addition of new keto buns, and particularly its Perfectly Crafted Brioche buns, which are among the fastest-growing products in the bun subcategory,” McMullian said.

The integration of Simple Mills is “progressing well,” he said, adding that the better-for-you brand “continues to resonate with today’s health-conscious consumers.”

“Fourth-quarter sales growth remained consistent with recent results, as Simple Mills outpaced both total and natural category growth while maintaining strong market share positions in key snacking categories like crackers and cookies,” McMullian said. “We anticipate continued progress into 2026 fueled by what is set to be the largest innovation year in Simple Mills’ history.”

Fiscal 2025 non-retail sales declined 2.7% to $1.79 billion on decreases of 2.6% in volume and 1.7% in price/mix, with the 53rd week providing a 1.6% lift. For the fourth quarter, non-retail sales were up 1.6% to $421.3 million, reflecting declines of 2.5% in price/mix and 2.7% in volume and a 6.8% boost from the extra week.

“From a top-line perspective, we expect total sales to be down 180 basis points to up 20 basis points,” Scaglione said. “The impact of one fewer week is anticipated to be a headwind of approximately 1.5% to annual net sales growth. We are assuming category headwinds across our portfolio of approximately 4% in 2026, a bit higher than what we would have expected having navigated a difficult 2025.”