Summary
Moody's Ratings has reaffirmed Flowers Foods' Baa3 long-term issuer and senior unsecured ratings while changing the outlook to negative from stable. The agency pointed to persistent elevated leverage following the company's acquisition activity and ongoing earnings pressure from category dynamics as key drivers of the outlook change.
Credit profile and leverage
Moody's said Flowers' debt-to-EBITDA ratio was in the mid-to-high-3x range for fiscal year 2025. That level is above the mid-3x ratio recorded at the time of Flowers' February 2025 acquisition of Simple Mills, and materially higher than the low-2x leverage range the company carried prior to the transaction.
The agency highlighted that deleveraging has been slower than expected because earnings have come under pressure amid category softness. Specifically, consumer shifts toward premium and value offerings have weighed on Flowers' volumes, given the company's greater exposure to traditional loaf bread.
Profitability and margin dynamics
Moody's noted that margins are being compressed by increased promotional activity and tariff-related cost increases. Despite Flowers' investments in productivity initiatives and product innovation, the agency expects volumes and EBITDA to continue declining in 2026 owing to persistent consumer headwinds and continued cost inflation.
As a result, Moody's projects that leverage will remain elevated in the 3.5x-4.0x debt-to-EBITDA range over the next 12-18 months, delaying a return to pre-acquisition leverage levels.
Cash flow, dividends and capital deployment
Moody's expects Flowers' free cash flow after dividends to remain positive, at approximately $50-$100 million in 2026, which would support modest debt reduction. The agency, however, anticipates lower free cash flow in 2027 because of the potential for higher capital spending and reduced working capital benefits.
Moody's also flagged the company's large dividend as a factor that limits the funds available for debt reduction, while noting that the dividend represents a potential source of flexibility if the payout were to be reduced.
Liquidity and near-term maturities
On liquidity, Moody's indicated Flowers has adequate resources to address a $400 million note maturing in October 2026. As of January 3, 2026, the company had $492 million available under its revolving credit facility and $130 million available under its receivables repurchase facility.
Governance and competitive position
The rating agency revised Flowers' governance issuer profile score to G-2 from G-1, citing execution risk even as management has expressed a commitment to maintaining an investment-grade rating and returning leverage to more conservative levels.
Moody's maintained that the Baa3 ratings reflect Flowers' scale as the second-largest participant in the U.S. packaged bread category and its portfolio of leading brands across mainstream, organic and gluten-free segments. At the same time, Moody's highlighted franchise challenges, including high portfolio concentration in bread products, limited pricing power, low growth in traditional categories and ongoing legal proceedings with independent distributors.
Bottom line
While Flowers retains an investment-grade anchor at Baa3, Moody's negative outlook signals that elevated leverage and continued earnings pressure could constrain the company's credit trajectory over the next 12-18 months.