THOMASVILLE, GA. — Citing a challenging business environment and wary consumers, Flowers Foods Inc. posted slack fiscal 2026 first-quarter results and announced a reduced dividend that executives said would bring more financial flexibility.

“While we remain optimistic in the power of our brands and the innovative products we are bringing to market, the overall demand environment for the traditional loaf segment, which is approximately 38% of our branded portfolio, remains soft,” said A. Ryals McMullian, chairman and chief executive officer. “Therefore, cost control is a top priority. The team made measurable progress in the first quarter and reduced SG&A as a percentage of sales. This improvement was driven by enterprisewide cost actions, including effective management of input costs, optimization of marketing expenses and a good overall expense management across corporate departments.”

For the 16-week first quarter ended April 25, net income dropped 21% to $42.1 million, equal to 20¢ per share on the common stock, from $53 million, or 25¢ per share, in the same period a year ago. Flowers attributed the decrease mainly to a difficult consumer environment and higher interest expense, partly offset by prior-year plant closure costs and moderating ingredient costs.

On an adjusted basis, net earnings fell 17% to $60.9 million, or 29¢ per share, from $73.7 million, or 35¢ per share, a year earlier. Analysts, on average, had forecast Flowers’ first-quarter adjusted EPS at 28¢.

“Increasing the mix of higher-margin branded retail products is a critical driver of long-term growth and margin expansion,” McMullian said. “Our portfolio review reaffirmed the strength of our brand leadership and reinforced our confidence in our strategy to extend that leadership over time. At the same time, we recognize the continued challenges in the consumer environment and remain disciplined in how we prioritize and deploy investments.”

That approach also applies to capital allocation, he said. To that end, Flowers is roughly halving its quarterly dividend to 12.5¢ per share, payable on June 26 to shareholders of record on June 12. Previously, the baked foods company’s quarterly dividend was 24.75¢ per share.

“We are resetting our dividend to an annual rate of 50¢ per share,” McMullian said. “This action allows us to reduce leverage and interest expense, enhance financial flexibility and create capacity to invest behind our leading brands and capabilities to drive above-category growth.”

Flowers said the upcoming payment will mark the company’s 95th straight quarter with a dividend.

The Wonder snack cakes line, launched last year, saw a 120-basis-point unit share gain in the first quarter, Flowers Foods said.

Source: Flowers Foods Inc.

“This action is expected to free up meaningful cash flow, which we intend to primarily direct toward debt reduction in the near term as we continue to manage our investment-grade profile,” said Anthony Scaglione, chief financial officer. “At quarter-end, net leverage was 3.2 times adjusted EBITDA. Our objective is to reduce leverage to below 3 times on a sustainable basis, and we expect the dividend reset to be an important lever in achieving that goal.

“Importantly, this action goes beyond improving leverage metrics. It creates incremental capacity to invest behind our most promising brands and growth initiatives, while enhancing overall financial flexibility. At the same time, it allows us to maintain an attractive current yield for shareholders during this period of strategic transformation.”

Flowers upheld its guidance for fiscal 2026. The company projects adjusted earnings per share of 80¢ to 90¢ and net sales to come in between down 1.8% and up 0.2%.

“From a macro perspective, we continue to closely monitor the impact of inflation on consumer behavior, as well as cost-related pressures across the business,” Scaglione said. “This includes potential impacts to import costs from tariffs, where we are collaborating with suppliers to mitigate increases. We are also monitoring key input costs such as diesel fuel, edible oils and packaging resin, and we are actively offsetting some of these pressures through productivity and other cost management initiatives.”

First-quarter net sales rose 1.1% to $1.57 billion from $1.55 billion in the prior-year 16-week period. Volume declined 3.3% but was more than offset by a gain of 2.1% in pricing/mix and a 2.3% sales lift from the Simple Mills acquisition, which cycled on Feb. 21.

Branded retail sales increased 3.4% to nearly $1.05 billion, as 4% growth in pricing/mix and a 3.6% contribution from Simple Mills overcame a 4.2% volume decrease. Non-retail sales fell 3.1% to $526.2 million on declines of 1.2% in pricing/mix and 1.9% in volume, which Flowers attributed to inflationary pressure on consumer spending and margin optimization strategies.

“A key strategic priority is sharpening our focus on our portfolio of leading, differentiated brands to unlock growth opportunities in an otherwise soft category,” McMullian said. “This focus is delivering encouraging results, particularly in premium loaf, buns and rolls, breakfast, cake and snacks, which are helping to offset continued softness in the traditional loaf category, where we underperformed in both dollars and units.”

In fresh packaged bread, Flowers said its retail sales were down 3% in dollars and 6.6% in units. Dollar share decreased 70 basis points year over year in bread to 16%. Organic bread sales edged up 0.4% for the latest 52 weeks, with market share down 50 basis points to 73.3%, while gluten-free sales were flat in the latest 52 weeks as share dipped 20 basis points to 38.6%.

Marketing investment shifts, macroeconomic pressure on consumers and “an intensely promotional” pricing environment impacted market share in the traditional loaf segment during the quarter, McMullian said.

“Elevated consumer costs, combined with heightened promotional activity, have driven increased trade-down behavior toward lower-priced offerings and value brands,” he said. “While the category remains pressured, we don’t view the current promotional environment as sustainable over the long term. In fact, in select markets, we are beginning to see early signs of improvement as pricing gaps have narrowed and our relative competitiveness has strengthened.”

McMullian noted that Flowers has begun the revitalization of Nature’s Own. This month, the clean label bread brand debuted a refreshed look and a simpler recipe, with 38% fewer ingredients. To promote the brand relaunch and new recipe, the company has tapped actor and former professional wrestler John Cena as the official “Breaducator.”

“With this relaunch, Nature’s Own becomes the largest Non-GMO Project verified loaf product in the market — a first at national scale — and reinforces our leadership in the better-for-you segment,” McMullian said. “The relaunch also includes half loaves, aligning more closely with evolving consumer preferences around fewer and simpler ingredients, freshness, portion size and affordability.”

In the first quarter, commercial cake retail sales climbed 6% in dollars and ticked down 0.9% in units. Still, Flowers’ cake market share was up 50 basis points sequentially and year over year, driven by a 120-basis-point unit share gain by the Wonder snack cakes line launched last year.

“With incredibly strong brand recognition, Wonder’s line of cake products has continued to revitalize performance in the category,” McMullian said. “Additionally, profitability in our cake business improved meaningfully year-to-date, driven by disciplined pricing, mix shifts toward higher-margin branded items and ongoing operational efficiencies in our bakeries.”

Though Simple Mills sales declined 1.2% year over year on a comparable basis, Flowers said, retail sales for the business rose 6% on growth of 43% in cookies and 3% in crackers in the quarter.

“This performance was driven by a combination of distribution expansion and velocity gains across both food and mass channels,” McMullian said. “Importantly, our recent innovation launches are performing at or above expectations, providing additional confidence in the sustainability of Simple Mills’ growth trajectory, which we are forecasting to accelerate in the balance of 2026 as the innovation items gain momentum.”