Flowers Foods, Inc. (FLO) Earnings Call Transcript & Summary

Hi, everyone, and thanks for joining us to go over Flowers Foods' results for the first quarter of 2022. I'm J.T. Rieck, SVP of Finance and Investor Relations. Just a reminder that we posted our first quarter results on May 19, 2022. The earnings release and the related slide presentation, plus the transcript of these remarks from our CEO and CFO, are available in the Investors section of flowersfoods.com. Additional details are posted there as well. Before we begin, please note that what we present here may contain forward-looking statements regarding the company's performance. While we consider these statements reasonable, they carry risks and uncertainties that might make actual results differ materially. Beyond what you hear in these remarks, important factors concerning Flowers Foods' business are fully described in our SEC filings. Speaking today are Ryals McMullian, President and CEO, and Steve Kinsey, our CFO. Ryals, over to you.

Thanks, J.T. We're glad to have everyone join us for this first-quarter call. 2022 has begun with record results, as our leading brands keep gaining share and generating robust top-line growth. Sales for the first quarter climbed over 10% versus a year earlier, hitting all-time highs. Pricing that helped counter elevated commodity costs drove the bulk of that sales gain and, combined with efficiency measures, produced record adjusted EBITDA and adjusted EPS. Those results would have been even better were it not for inflation that came in above expectations, supply chain disruptions, and the intentional rationalization of our product line during the quarter, consistent with our portfolio strategy. In January we implemented a price increase designed to counter the inflation we anticipated as the year began. Since that time, commodity costs have risen substantially beyond what we initially projected, driven by multiple factors—most notably the conflict in Ukraine. Although almost none of our raw materials originate in Ukraine, the situation there still influences global markets for wheat and other commodities. To help counter this extra inflationary pressure, we have put in place an additional pricing measure that goes into effect in early June. In addition to inflation, supply chain disruptions constrained our capacity to obtain sufficient quantities of particular raw materials and packaging items. Packaging took the bigger hit—bread bags in particular—and those shortfalls caused us to trim output during the quarter. Our procurement group is working hard to lessen the effects of these shortages, and we anticipate the situation will be straightened out by the third quarter. I've talked on earlier calls about our portfolio strategy, which is meant to move our sales mix toward branded retail products that carry higher margins. In line with that strategy, we keep rationalizing the product line, discontinuing lower-margin items that aren't well differentiated. This effort, which weighed on sales in the quarter, also cuts complexity in our bakeries and frees up capacity for producing more of our higher-margin branded products—something that ought to lift sales and margins over the long run. Even with those challenges and tough comparisons to last year, our market share expanded, and that contributed to record quarterly sales. In tracked channels, Flowers' fresh packaged bread picked up 30 basis points of share, while Nature's Own, Dave's Killer Bread and Canyon Bakehouse each added 20, 20 and 10 basis points, respectively. That result gives us greater confidence in our 2022 sales outlook, which we are raising today. Next, I'll walk through our four strategic priorities that we believe will shape our results in 2022 and beyond: developing our team, focusing on our brands, prioritizing margins and pursuing smart M&A. Let me begin with the team. Let me express gratitude to everyone in our Flowers family for the effort and commitment they've shown, since that is what has enabled the results we've delivered over the past several years. Our team's execution has produced outstanding outcomes amid a fast-moving landscape marked by challenges unlike anything we've faced before. Having the correct team in place is essential to succeeding going forward. When handled well, nothing will accelerate our success to a greater degree—and when handled poorly, nothing will damage it more. That is why we established our agile innovation, transformation office, digital and change management teams: to take on the specific initiatives currently underway that are designed to power growth in the years ahead. Adding to the experience and knowledge that so many of our long-tenured team members bring, we've brought in talented new hires throughout numerous functions, people offering a diverse mix of experiences, backgrounds and capabilities that we previously lacked internally. That blend is proving extremely valuable as we work to improve how our company performs. Our second strategic priority centers on our brands. I discussed our portfolio strategy of moving sales toward higher-margin branded products and how the pandemic sped up that shift. At first, we assumed demand would ultimately fall back somewhat toward prepandemic levels; nevertheless, branded retail has stayed strong; and measured as a share of sales, it was in fact above the level seen in the first quarter of 2020 during this quarter. The pandemic drove substantial trial of our products, and we've managed to turn that trial into new, loyal customers. In fact, since 2019 we've added 5.2 million new households. Moreover, the growing prevalence of hybrid work arrangements, which encourage more at-home eating, appears to be lasting. Beyond that, we believe a significant portion of the momentum we're seeing comes from our efforts to reinforce our brands through our portfolio strategy — generating more profitable branded retail sales and improving the profitability of our nonretail and store-branded items. We've established leading positions in the low organic and gluten-free segments, and with our portfolio strategy as our guide, we intend to sustain that growth. Innovation has played a major role in this market success, and we continue to invest in new products. Some exciting recent launches include Nature's Own Hawaiian loaf, Nature's Own Perfectly Crafted sourdough, Dave's Killer Bread, Everything Breakfast Bread and Canyon Bakehouse brioche rolls. Our agile innovation team goes further by creating products that draw on our strong brands, enabling those products to extend beyond our main category. To date, we have brought to market three kinds of Dave's Killer Bread bars. Results from test markets have exceeded what we expected, so we are working to expand distribution for these items. We also have an exciting pipeline of more snack products under the DKB brand that we expect will reinforce our entry into the healthy snacking category. Innovation, particularly beyond our core categories, is an essential part of our portfolio strategy and our future growth story. The early results are very encouraging, and we are focused on growing in these new categories. We've also put more into marketing and advertising spend to raise awareness and penetration. Our portfolio strategy directs most of our spending to the highest potential brands, and returns on those investments have been positive. As I noted, our leading brands once again picked up market share this quarter. Those share gains contributed to sales growth for Nature's Own, Dave's Killer Bread and Canyon Bakehouse — rising 11%, 15% and 21%, respectively, in tracked channels. What's even more encouraging is that volumes for those brands also grew, despite higher prices and supply chain headwinds, climbing 1.7%, 5.3% and 13.1%, respectively. To meet that heightened appetite for what we sell, we added capacity — specifically, a Dave's Killer Bread line at the Henderson, Nevada bakery. Production on that line began late in the first quarter, and it improves how we serve the rapidly expanding West Coast market, while also freeing neighboring bakeries to operate closer to optimal capacity. Because this matters so much to the long-term growth targets we've set, I want to offer a little more perspective on how we approach our portfolio. In doing so, we placed every business cell into one of 4 portfolio roles, judged by our right to win and potential for growth. On slide 8 of the earnings presentation, you'll see four roles within the portfolio: speeding up growth, learning and proving, and balancing growth against maximizing profitability.

The business cells in our accelerate growth and learn and prove portfolio roles are where we're prioritizing investment and growth, while the brands in the remaining 2 categories are meant to produce cash that supports that growth. We anticipate that our accelerate growth and learn and prove business cells will expand meaningfully faster than their categories. Balance growth business cells are profitable and have demonstrated an ability to win, but they've lost some consumer appeal, and we expect them to hold market share. Our last portfolio role covers business cells where the main goal is maximizing profitability or exiting in a thoughtful way. Put simply, over time our strategy is to shift our business as far as possible toward the right-hand side of the chart, where we think our top brands can grow at attractive rates and deliver improved margins for the company as a whole. Margins are our third strategic priority, and they remain a particular focus given the rapid inflation we've seen. Our playbook on this is unchanged. Beyond the margin expansion that comes from the mix shift driven by our portfolio strategy, we're rolling out cost savings programs and putting improved processes in place to run the business as efficiently as we can; we're also investing in digital robotics and automation and layering those capabilities on top of the improved processes. Last quarter, we noted that we expected to generate $25 million to $35 million of savings this year tied to operational efficiencies and procurement. Those initiatives are progressing well, and we believe we're on track to hit our savings target. Lastly, we expect our digital transformation initiative to deliver meaningful efficiencies over time. We've devoted significant resources, including standing up our transformation office and change management team, to make sure implementation doesn't negatively affect our operations. The process is proceeding as expected, and we're confident in our ability to implement it as planned. Smart M&A is our fourth priority. We keep watching the deal market, actively looking for potential acquisitions that would add capabilities, brands or products to our strong existing lineup. We believe our balance sheet puts us in a good position to act when we have financial, commercial and operational conviction. Portfolio fit is crucial, but the expected return on any potential deal matters just as much. We're not averse to paying a premium for high-quality assets, but we also require an attractive return. We won't stray from our disciplined approach if a potential deal fails to meet all of our required criteria; now I'll hand it over to Steve to review the details of the quarter, and then I'll come back a little bit later to discuss our outlook for the current business environment. Steve?

Thank you, Ryals, and good morning to all of you. I want to second what you said about our amazing team and offer my heartfelt appreciation for everything they have done. As Ryals noted, we're quite happy with how the first quarter turned out. Sales overall rose 10.3% versus the same period a year ago. Better price/mix pushed the adjusted year-over-year gain up 13.5%, with price contributing more than mix. The main drivers were price hikes aimed at offsetting inflationary pressure and expansion in our higher-margin branded retail products. That sales improvement was partly offset by volume slipping 3.2%, mostly because our cake, fast food and store-branded business turned soft — a reflection in part of the supply chain issues Ryals mentioned in his opening remarks. In the first quarter, gross margin as a share of sales, leaving out depreciation and amortization, dropped 110 basis points to 49.5%. The year-over-year comparison felt the impact of higher ingredient and packaging costs, partially balanced by stronger sales and reduced outside purchases. Selling, distribution and administrative costs climbed by 10 basis points relative to sales, hitting 38.6% during the first quarter. The increase was driven by added consulting expenses and inflation in transportation costs, though it was mostly balanced out by beneficial price/mix, reduced workforce-related costs, and greater income from scrap dough. When you exclude the items impacting comparability that are outlined in the press release, adjusted SD&A expenses dropped 20 basis points to 38%, reflecting lower workforce-related costs and higher scrap dough income, partly counterbalanced by elevated logistics cost. GAAP diluted EPS for the quarter was $0.40 per share, compared with $0.34 in the same period a year earlier. Leaving aside the comparability items laid out in the release, adjusted diluted EPS for the quarter came in at $0.44 per share, which is $0.03 higher than the same period a year ago. A reduced tax rate stemming from a stock compensation windfall benefited adjusted diluted EPS to the tune of $0.01. Turning to the balance sheet, liquidity and cash flow: in the first quarter of fiscal 2022, operating cash flow increased $26.2 million, reaching $124.2 million. Capital expenditures were up $23.2 million to $50.5 million, driven primarily by the continuing ERP upgrade, digital investments and added production capacity. Dividends paid climbed $4.2 million to $46.7 million. Our financial position continues to be strong. When fiscal 2022's first quarter ended, our net debt relative to trailing 12-month adjusted EBITDA stood at about 1.4x—essentially the same leverage we carried at the conclusion of 2021's fourth quarter. As of quarter end, cash and cash equivalents totaled approximately $205 million, and roughly $692 million remained available under our credit facilities. Shifting now to how we see 2022 unfolding: we're lifting our sales guidance to reflect both the extra price increase taking effect in early June and volume and elasticities that came in better than we had anticipated. Compared with 2021, sales should now rise 10% to 12%, and the midpoint of that range works out to a 5.2% compound annual growth rate measured from the 2019 base. Compared with the 7.6% to 8.4% range we projected before, that is what the revised sales growth forecast now shows. Guidance for adjusted EPS is being reduced to $1.20 to $1.30, and the midpoint of that range equates to a 9.2% compound annual growth rate when measured from the 2019 base. The midpoint of this forecast is higher than our long-term financial targets, which envision sales growth of 1% to 2% and EPS growth of 7% to 9% from the 2019 base. As Ryals noted, we encountered substantial headwinds stemming from inflation and supply chain disruptions. In aggregate, those discrete headwinds are expected to reduce second and third quarter results by $0.05 per share, with the largest impact occurring in the second quarter. Regarding earnings cadence, Q1 results matched our internal plan. Our pricing actions from January will impact the entire year, whereas the June pricing will largely help the latter half of 2022. That schedule produces a headwind, owing to the delay between when inflationary pressures started and when the price increase kicks in. We anticipate offsetting the supply chain disruption impact—particularly the bag availability Ryals mentioned earlier—during the third quarter. With that timing, we expect the full extent of any added financial impact from these headwinds to be limited to Q2 and Q3. Gains from our growth and efficiency initiatives should mostly benefit the second half of the year. At the time we gave our first 2022 outlook, we said we anticipated cost growth in the high single digits and that about 70% of our major raw materials had been secured. Today our commodity coverage is roughly 95%, and we anticipate cost growth ranging from high single digits to low double digits. Up to now, we have succeeded in securing the elevated pricing needed to counter inflation. We stay hopeful that, together with steps taken internally, we will keep offsetting inflationary expenses, albeit with a delay. Thank you. I'll now hand things back to Ryals.

Thank you, Steve. You've just heard Steve explain how executing on our initiatives has produced strong financial results even with volatility in the market. I want to speak to several key factors shaping the current environment. Right now inflation is on everyone's mind, with commodity prices climbing close to record highs across many categories. Steve also covered how those costs have risen more than we originally expected for the year. As I noted, we've put in place one more pricing move taking effect in early June, and we're prepared to act further to safeguard our margin dollars if inflationary pressures mount. Today's environment also highlights how much our leading brands matter. We think consumers still find value in the distinctive attributes of our products, and recent results appear to bear that out. Despite price increases of 9.8% in tracked channels versus the year-ago period, our volumes declined only 0.1%. And keep in mind that this modest volume decrease reflects the impact of supply chain disruptions and SKU rationalization. We beat the category overall, which recorded a 10.1% price increase alongside a volume decline of 1.8%. Importantly, we've observed less elasticity among the most premium products in our portfolio. Beyond inflation, severe supply chain disruptions are pushing distribution costs higher and, in certain cases, causing material shortages. Those shortages could last into the second half of the year, but we're working hard to mitigate them and expect resolution in the third quarter; we're also watching closely for possible demand reversion tied to the waning pandemic and a potential economic recession. Earlier, I discussed the enduring strength of branded retail despite a decline in COVID cases, but I do want to offer more color on a potential recessionary impact. The last stretch of significant inflation overlapped with the financial crisis and its aftermath, roughly from 2007 to 2012. The common perception is that recessions push consumers to trade down to lower-priced products, particularly private label. Yet what we found during that period was that despite severe economic hardships, including high unemployment and low consumer confidence, private label didn't gain meaningful share. But we did see a shift from foodservice to branded retail as consumers cut back on more expensive restaurant visits. Further, differentiated products held up better than more commodity-like products. I'd also point out the significant changes in the competitive environment since that period. The industry was far less consolidated, and some larger players were under financial distress, which created pricing pressure. Our product portfolio was also less differentiated, since we hadn't yet acquired Dave's Killer Bread or Canyon Bakehouse, nor had we yet developed the Nature's Own Perfectly Crafted line. Today, we compete in a far more consolidated industry with a much stronger portfolio of brands that is even more differentiated compared to private label. Considering how the industry and Flowers have developed, that prior stretch indicates our product ought to perform strongly if a recession hits. Going forward, four strategic priorities—team, brands, margins and M&A—steer where we put our attention. We keep making our industry-leading team stronger so we possess the right capabilities for today's difficulties; we are putting money into our leading brands and pushing efforts that raise efficiencies and margins. Moreover, our solid balance sheet and cash flow leave us well placed to reinforce our brands and capabilities via M&A; to wrap up, even though we are reducing our adjusted EPS guidance, I want to stress that this cut stems from discrete issues we anticipate resolving in the third quarter. Absent those items, we would be on pace to hit our initial guidance. I am genuinely enthusiastic about what lies ahead for us. Our business fundamentals stay solid, since our portfolio strategy fuels higher sales of our leading brands and growing margins. I have never felt more confident regarding the initiatives now in place to secure our future success. Everyone at Flowers is putting in hard work to boost shareholder value, and we anticipate continuing to produce results at or above our long-term financial targets. Our team's performance in a challenging environment makes me very proud. Their perseverance produced record quarterly results in sales and adjusted EPS. Our leading brands keep picking up share, and we are successfully rolling out strategies to extend that growth. Inflation and supply chain disruptions are hitting practically every company, and we are not shielded from that. Our team is working tirelessly to counter those pressures. And we do highlight a $0.05 impact on our '22 results, yet we anticipate those headwinds being resolved in the third quarter. The business fundamentals are strong, and I have never felt more optimistic about our prospects. And regardless of the environment, our team stays focused on delivering results at or above our long-term financial targets. So with that, Shannon, we are ready to begin the Q&A, please.

Regarding the price/mix you've got, could you potentially break out some of what's driven by pricing versus what comes from mix? And then on consumer elasticities — those seem to have held up quite well. The market's next round of pricing is landing on a consumer who's feeling a bit more pressure. So any perspective you could offer on that would be great.

Yes. Thanks for the question, Ryan. I'll handle the elasticities piece and then hand it to Steve for price/mix. So far this year, what we've seen has really encouraged us. Our elasticities came in lower than even we expected. I think we noted in the prepared remarks that the most encouraging thing is that, despite a significant amount of price increases in January, we actually grew units as well with our top brands — Nature's Own, Dave's and Canyon. So I view that as a really good sign going forward; now, as we said, we were putting through another price increase in June, so there's a bit of wait and see on how the consumer responds to that second round of pricing. We all know the consumer is under quite a bit of pressure, though I'll say much of the information out there is somewhat conflicting. You know, there have been some indications out there that the consumer might be hunting for bargains more than before, or making choices that are somewhat different. I believe we all saw a handful of retailer reports this week that showed a bit of that, although it appeared largely confined to general merchandise and didn't seem to apply as much to food. Still, we're all aware of what this inflationary climate looks like, and there very well could be a behavioral shift when this next round of pricing arrives. But we simply won't know until we get there. What matters is that, so far, the consumer has looked pretty healthy. Steve, would you like to address price/mix?

Absolutely. Ryan, as you’re aware, we normally don’t break out price versus mix in what we report; however, as noted in our prepared remarks, most of that gain—the vast majority, in fact—on the price/mix line came from pricing. So I’d say it’s reasonable to assume that pricing accounts for the vast majority.

Now, on the EPS guidance being reduced somewhat — which makes sense with all the inflationary pressure and supply chain problems — you mentioned the effect hitting 2Q harder than 3Q. Could you give us any detail on that?

Absolutely, Ryan. That price increase we're putting through doesn't take effect until June 6, yet we're already seeing the higher cost, plus we have the packaging disruption we talked about. The bigger share of the impact comes from the pricing lag rather than the packaging effect. But starting June 6, through the rest of the quarter, we'll get the benefit of that extra pricing; so it really stems from a mix of the price lag and the packaging disruption we mentioned.

And my final question is about getting a handle on just how much incremental volume has come from people working at home — have you carried out any survey research to gauge how much larger the breakfast or lunch occasion has become that your products can now serve?

Yes. What we have observed, Ryan, is a change taking place inside the category — and I believe we have talked about this on a few earlier calls — toward specialty buns and enrolled-type products at breakfast, much of it pushed by work from home, plus a move toward more premium items and away from that traditional segment of roughly 20-ounce loaves. Even though we remain strong there and are still quite large there, clearly, with Nature's Own, we have watched the category move out to those items that are more premium and more differentiated. And the encouraging part is that this has held up, at least, so far even in this difficult environment.

All right. So Ryals, I'd like to follow up on that first question. Could you just verify that the latest pricing round has been accepted across the board? And also confirm whether your guidance assumes a worse reaction to the next pricing round than what we've perhaps witnessed up to now? Then I wanted to circle back on — following Walmart and Target this week. As you sort of mentioned, there's been enormous attention on not just heightened worries about weakening demand and elasticity, but sort of baked into my question are worries about growing retailer resistance to additional price hikes and the favoring of private label assortments across a number of categories. And set against that background, your results and your forward commentary sort of contradict those worries; so could you perhaps offer some perspective on that? And bearing in mind past trends right through this first quarter, just what makes you confident that you can sort of sustain and really lean harder into that premiumization momentum as we head into what I believe increasingly, people sense as a — perhaps everyone senses, a far more uncertain future?

Sure. Steve, thanks for the question. So regarding pricing acceptance, we haven't encountered any problems there. The bulk of our pricing is in and planned — that was planned for June 6. From our perspective, that area is genuinely fine. We have confidence that we'll be able to fit everything in, so that's point one. Second, on the subject of private label, going back to a few things we discussed previously, private label in our category has been falling for quite some time, as you're aware, and the decline continues. That said, the drops aren't as steep as those in earlier quarters, though it's still been negative. I'm aware there's been some private label growth across food more broadly, but at present that isn't showing up in our category. I keep coming back to the matter of differentiation in our category. Store brands tend to be pretty bare-bones products; what we provide spans multiple price levels and selling channels, and that mix looks quite different from private label. I'm certainly not claiming that a downturn or similar scenario wouldn't bring some degree of customers trading down. Still, as our prepared remarks showed, when we examined the prior recession, we saw relatively little of that behavior in our segment. Beyond that, our sector today looks very unlike what it was during that stretch from 2008 through 2011 or '12, correct? The industry is far more consolidated now, and the category has seen considerable innovation. Today we have Dave's, plus Canyon and Nature's Own Perfectly Crafted, and others — options that just weren't around in those earlier days. Our market share today is well above what it was back then. So if some trading down does happen, I'm still very confident we can handle any demand environment that comes our way. Remember, this is a stable category — an extremely stable one. For a large number of shoppers, it's a weekly purchase, again and again. And then there are the work-from-home patterns that continue, as we're seeing. I'd say the backdrop looks favorable for ongoing solid results. When it comes to retailers giving priority to private label, that isn't something we've observed. I've come across a few remarks from retailers indicating they aren't taking that approach. And once more, we definitely haven't witnessed it. Attention still appears to be on branded products within the category, and fortunately, we have strong brands ready to occupy that space.

Okay. That's really useful. Could you maybe just — can you verify, or sort of lay out for us, what amount of, I suppose, a deteriorating backdrop is baked into your guidance? And then, I suppose, I took away from your prepared remarks — you were quite explicit about the sort of 2Q, 3Q pattern, inflationary pressures mounting, supply chain disruption, and the pricing that's coming through, producing that $0.05 impact. But I suppose it's less clear to me where you see the year finishing. I suppose I'm really approaching it through a gross margin lens. Since you'll likely have complete pricing set by Q4 and supply chain problems resolved, expenses will most likely keep rising anyway. So how ought we to think about the margin profile of the business as we exit '22?

Certainly, Steve. Steve here. Looking at it, perhaps I'll go through it following the rhythm of guidance. We mentioned this at the start of the year, and it's now fully incorporated into our forecast since our coverage levels have increased, but our costs continue to rise and escalate primarily through Q3, after which they level off somewhat, although they'll remain at an elevated level in Q4; then from a comparison perspective, the comp will be easier by the time you get to the latter part of the year. So as the year progresses, you'll very likely see some margin pressure. As Ryals mentioned, we think our pricing is set up to counter and reduce as much of that impact as possible; on top of that, there are the cost programs we've been talking about for the last two quarters or so. Those efforts also help us counter part of the inflationary strain we're experiencing. Many of these programs land in the second half, so the ramp really won't begin until Q2 is behind us. And on the nickel specifically, when it comes to pricing and packaging, as we've noted, things should improve somewhat on the packaging side. Heading into Q3, we believe we have a strong plan ready to address it. Up to now, that plan is being executed, and conditions are beginning to improve somewhat, so we remain comfortable — from a guidance perspective, we've allowed ourselves the room needed to work through that issue. The reality is that this will be a challenge spanning the entire year, with everyone fully engaged. Still, we believe the manner in which we forecast, the manner in which we planned, and the manner in which we've accounted for elasticities as prices continue climbing are all incorporated into our guidance.

So, to start with the supply chain problems. I know you've mentioned plastic bags and similar things. But which particular problems are you encountering pressure on, or disruptions from, that are causing inefficiencies?

Mitch, for us it's mainly been packaging. We did have a few issues with raw materials, though nothing I'd describe as very significant; the main thing has really been the bags, obviously for our bread items and then a couple of items in cake. But again, we're working our way through that. I'm fully confident we'll be past it in the third quarter. Which is, again, why we called out the nickel impact.

And when it comes to the bag, I mean, is this a case where your suppliers — obviously there are issues with your suppliers? I mean, is it — how — why is there a bag shortage?

Yes. It was kind of a mix of things. But let me just say, there's ample inventory, or capacity rather, in the system that we've pinpointed and are shifting toward; so we'll actually be distributing our risk more widely than before. So we'll be — we'll actually emerge from this in far better shape than when we entered it; a range of factors caused the backups. I can't single out any one of them. But once more, given the steps we're taking, we'll be — from the standpoint of supplier diversification, we'll be in much better condition than we were before.

Alright, and then—so as we maybe see inflation pressure come to an end and you've made all your pricing moves, and I know we've discussed—a lot of the questions here concern elasticity. But once we reach the other side of this stretch, do you expect that price—that your list pricing holds and we move toward a somewhat more promotional setting, or—and would you favor that, since you can—your promotions can push faster volume? Or would you prefer it be a relatively steady list environment with limited promotional activity? How—what works best for Flowers?

Yeah. Look, in my view—that's a great question, Mitch. In my view, I'd prefer that the promotional environment stay steady; and we've needed to lift our margins in this business for a long time, as you're well aware. And so my hope would definitely be that consumers can accept the price increase, that the price increase sticks and that the promotional environment stays rational; that would be ideal for our business.