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Flowers Foods Temporarily Shuts Bakery as COVID-19 Cases Rise

Zacks Equity Research
·3 min read

Although restrictions related to the coronavirus pandemic are being gradually lifted, rise in number of cases seems to be affecting operations of companies across several industries. One such company falling prey to the crisis is Flowers Foods, Inc. FLO. The company announced that it will temporarily cease production at its bakery located in Savannah, GA. Increase in coronavirus cases among the bakery’s production employees as well as those who were in self quarantine compelled the company to make this decision.

Although Flowers Foods has temporarily furloughed 115 production staff amid this crisis, it will continue to provide them compensation for this period.   

The said bakery, which provides fresh baked items like bun and bread in Georgia and South Carolina regions, is expected to resume production by Jul 17. The decision to pause production at the bakery is not likely to have a major impact on the company’s ability to cater to the aforementioned markets. This is because Flowers Foods’ other bakeries are expected to compensate for the lost production for now. Moreover, the bakery’s sales group as well as distribution channels still remains operational amid the temporary closure.


 

Notably, Flowers Foods has been implementing advanced deep cleaning and sanitizing at its facilities. The company is undertaking various practices like social distancing, wearing masks as well as temperature screening as precautionary measures in its bakeries. Moreover, management then notified that the infections in the company’s bakeries will not likely impact food quality or safety, as the U.S. Food and Drug Administration believes that there is no proof linked to the transmission of coronavirus infection through food or its packaging.

On Apr 14, Flowers Foods had temporarily closed production at its bakery in Tucker, GA, which mainly produces frozen, non-retail specialty, and foodservice bun and bread items. Higher number of confirmed cases of COVID-19 at the bakery along with a decision to go under self-quarantine had led to this move.

Meanwhile, this Zacks Rank #2 (Buy) stock is witnessing solid demand due to the coronavirus-led stockpiling and higher at-home consumption. The trend was witnessed when the company reported robust first-quarter 2020 results, with the top and the bottom line increasing year over year and beating the Zacks Consensus Estimate. Notably, higher demand induced by the pandemic contributed to sales growth in the range of 6.5-7.5% in the quarter.

Other consumer staple companies like B&G Foods, Inc. BGS, General Mills, Inc. GIS and United Natural Foods, Inc. UNFI, to name a few, are also gaining from burgeoning demand, courtesy of higher at-home consumption trend amid the coronavirus outbreak.

Coming back to Flowers Foods, shares of the company have dipped 0.2% year to date compared with the industry’s decline of 9.6%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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