THOMASVILLE, Ga. (AP) — Bakery company Flowers Foods Inc. said Wednesday that its fiscal second-quarter net income fell 17 percent, hurt by increased ingredient and packaging costs.
The maker of brands including Nature's Own and Tastykake also lowered its full-year earnings per share outlook.
"A prolonged and slow economic recovery, compounded by higher costs, has continued to pressure consumer buying as well as business operations," Chairman and CEO George Deese said in a statement.
Flowers earned $28.2 million, or 21 cents per share, for the period ended July 16. That's down from $33.8 million, or 24 cents per share, in the prior-year period.
The current quarter accounts for a 3-for-2 stock split that was effective June 24.
Analysts predicted earnings of 26 cents per share, according to a FactSet poll.
The company's stock dropped $1.31, or 6.2 percent, to $20 in premarket trading.
Flowers said it is dealing with the economic pressures by lowering costs and raising prices so that it can reach its desired margins.
Profit margin dropped to 46.8 percent from 47.6 percent mostly because of higher ingredient and packaging costs. Costs rose for ingredients such as flour, sweeteners, shortening and cocoa.
Revenue rose 6 percent to $642.6 million from $607.7 million, benefiting in part from the Tasty Baking Co. acquisition and higher prices.
This topped the $640.4 million Wall Street forecast.
Flowers Foods said it completed its Tasty Baking Co. buyout during the quarter. The company announced in April that it would acquire Tasty Baking, the maker of Tastykakes and other packaged sweets, for $165 million, including taking on the company's debt.
Flowers now anticipates fiscal 2011 earnings per share will be flat to up 5 percent. The Thomasville, Ga., baker previously predicted a 5 percent to 10 percent increase. Revenue is expected to climb 7 percent to 11 percent, including the Tasty acquisition.
Analysts expect full-year earnings of $1.07 per share on revenue of $2.75 billion.