Fitch Downgrades Flowers Foods to BB+ Following Bread Volume Declines

Fitch Ratings has downgraded the long-term issuer default rating of Flowers Foods, Inc. to 'BB+' from 'BBB-'. The agency cited persistent volume declines in the company's core bread business and elevated leverage. This downgrade moves the company's credit profile into non-investment grade territory due to ongoing operational difficulties.

"The downgrade reflects the company's inability to stem the consistent erosion of its core bread volumes, which has pressured overall profitability and kept leverage metrics higher than historical norms," analysts noted in the Fitch Ratings report.

Accelerating Sales Declines

The company faces a steady decline in unit sales within its fresh packaged bread segment. Data provided by Fitch shows the trend worsened over the past three quarters:

• 4Q25: 3.7% decline in unit sales
• 1Q26: 6.6% decline in unit sales
• 2Q26: 9.5% decline in unit sales

This trend shows an acceleration in volume loss. This loss has complicated efforts by management to maintain margins through pricing actions.

Leverage and Capital Allocation

Fitch projects that Flowers Foods' EBITDA leverage will remain in the mid-3x range throughout 2026 and 2027. This departs from the company's historical leverage, which typically hovered closer to 2x. For context, the company reported a leverage ratio of 3.1x in 2025.

To address this debt burden, Flowers Foods is implementing a 50% reduction in its dividend. The company anticipates that this move will generate approximately $100 million in annualized cash flow. These funds are earmarked for debt reduction.

What Is at Stake

The 'BB+' rating indicates a higher credit risk compared to investment-grade securities. For Flowers Foods, this change potentially increases the cost of future debt issuance. It signals to the market that the company's cash flow generation is currently insufficient to deleverage at a pace consistent with its previous 'BBB-' rating. The company faces pressure to stabilize its core business while executing a balance sheet repair strategy via the dividend cut.