Core Insights - Flowers Foods, Inc. (FLO) reported a 3% year-over-year increase in net sales to $1.227 billion, driven by the Simple Mills acquisition, but faced continued pressure on profitability with declining margins [1][8] Financial Performance - Adjusted EBITDA decreased by 11.4% to $118.1 million, with the adjusted EBITDA margin contracting by 160 basis points to 9.6% [2] - Adjusted net income fell by 29.8% to $48.7 million, and adjusted diluted earnings per share dropped by 30.3% year over year to 23 cents [2] - Gross margin declined by 190 basis points year over year to 47.9%, attributed to lower sales price mix, reduced production volumes, and increased outside purchases related to the Simple Mills acquisition [3] Cost Structure - Selling, distribution, and administrative expenses rose to 38.8% of net sales, an increase of 10 basis points from the prior year, driven by higher workforce-related costs and wage inflation [4] - Adjusted SD&A improved to 38.3% of net sales, a decrease of 30 basis points when excluding items affecting comparability [4] Strategic Actions - The company is taking steps to address margin pressure, including aligning the supply chain with changing demand, closing several bakeries, and converting others to higher-margin organic production [5][6] - Investments in innovation are expected to exert further pressure on margins in the near term [5] Market Performance - FLO's shares have declined by 49.9% over the past year, compared to a 19.4% decline in the industry and a 1.6% dip in the Zacks Consumer Staples sector [7] - The company currently trades at a forward 12-month P/E ratio of 9.96, below the industry average of 14.11 and the sector average of 16.02, indicating a discount relative to peers [10]