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Flowers Foods Temporarily Shuts Tucker Bakery Amid Coronavirus

Zacks Equity Research

With coronavirus cases increasing each day, companies are taking all measures to stay safe and contain the spread. Keeping in these lines, Flowers Foods, Inc. FLO informed that it has temporarily closed production at its bakery in Tucker, GA, which mainly produces frozen, non-retail specialty, and foodservice bun and bread items.

The facility is expected to restart production around Apr 27, 2020. Incidentally, an increased number of confirmed cases of COVID-19 at the bakery along with a decision to go under self-quarantine led to this move. We note that this bakery is housed in DeKalb County, which presently has the third-highest number of confirmed cases in Georgia — per the Georgia Department of Public Health.

However, this is not likely to impact food quality or safety, as even the U.S. Food and Drug Administration has not found any evidence of food packaging being associated with virus transfer. Further, the temporary halt in production will have a limited impact on the service to markets, as the company anticipates its other bakeries to compensate for the lost production over the near term.

Flowers Foods further stated that it will pay its furloughed production workers and take all measures to enhance safety and sanitization. In fact, the company recently informed that it has adopted some concrete steps to offer bonuses and protection to its employees as the world continues to strive against coronavirus. The company, which has been witnessing a major surge in food demand due to the coronavirus-induced stockpiling, announced on Apr 9 that it had paid nearly $5.6 million as an appreciation bonus.

We note that the coronavirus outbreak is spreading at an alarming rate. The pandemic has infected more than 1.5 million people worldwide and the death toll has crossed 100,000. As complete physical isolation is the sole method to flatten the curve, governments across several countries are imposing lockdowns and curfews. With community transmission increasing in scale, people are hoarding essentials so that they do not have to venture out for daily supplies.

Certainly, the stockpiling works well for consumer staple players like Flowers Foods. Also, this is leading to heavy demand at departmental stores, discount store retail chains and supermarkets. Consequently, retailers like Dollar Tree, Inc. DLTR, Target TGT and Walmart Inc. WMT are refilling shelves faster than usual to cater to customers’ burgeoning demand for essentials and deliveries.

Meanwhile, Flowers Foods has also been undertaking various practices like restricting admission of non-essential visitors in its bakeries, warehouses and offices along with limitations on business travel for employees, among other moves, to contain the spread of the deadly coronavirus. We note that this Zacks Rank #3 (Hold) stock has gained 6.7% year to date against the industry’s decline of 16%.

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

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