Away-from-home food service business remained weak, contributing to softness in the unbranded/private label segment.
Flowers Foods faced pressure on end markets due to a challenging economic environment and shifting consumer trends impacting recent results.
Gross margin management included bakery closures and portfolio optimization to higher margin businesses, partially offsetting volume declines.
Promotional activity increased, especially around differentiated products, contributing to some positive performance in segments like Dave's Killer Bread (DKB).
Simple Mills continued to grow distribution points and performed well despite a cyber attack at UNFI affecting the second quarter.
Traditional loaf bread sales were pressured by new lower-priced entrants and a bifurcated market with strong performance at both premium and value ends.
Impact of Hardie's Business Attrition on Volume and Profitability
Hardie's protein and produce programs were partially or fully exited during Q2, impacting reported case growth and volume metrics.
Excluding these programs, specialty case growth was 5.8%, and center-of-the-plate pounds increased by 5.8%.
The company expects continued impact on reported volume numbers until the second half of 2026, as they fully cycle out these high-volume, low-margin programs.
Management emphasizes that shedding non-core business improves overall profitability and aligns with their long-term strategic focus.
Papa John's Strategic Transformation and Leadership Initiatives
Todd Penegor highlighted the substantial progress made in transforming Papa John's over the past year, emphasizing leadership additions and strategic planning.
The company has focused on five key priorities, including core product innovation, marketing, technology, customer experience, and franchisee partnerships.
Leadership's emphasis on building a consumer insights-driven team with industry veterans signals a strategic shift towards customer-centric growth.
The CEO expressed confidence that the ongoing transformation is positioning Papa John's for profitable growth and long-term value creation.
The company is actively making strategic moves such as refranchising and supply chain optimization to support its transformation goals.
Consolidated adjusted EBITDA declined modestly to approximately $53 million, impacted by $9 million incremental loyalty and marketing investments and higher costs.
Domestic Company-owned restaurant segment EBITDA margins declined about 220 basis points due to labor inflation, aggregator fees, advertising, and food costs, partially offset by average ticket growth.
Global system-wide restaurant sales were $1.26 billion, up 4% in constant currency in Q2 2025.
International comparable sales grew 4%, reflecting progress in transformation initiatives.
Net cash provided by operating activities was approximately $67 million for the first half of 2025, with free cash flow of $37 million, up $24 million primarily due to timing and working capital improvements.
North America commissary segment adjusted EBITDA margins improved by 130 basis points to 7.3%.
North America comparable sales increased 1%, with transaction comps also up 1%, driven by strategic investments and initiatives.
Total available liquidity was approximately $500 million with a gross leverage ratio of 3.4x at quarter end.
Total revenues increased 4% to $529 million, driven by higher commissary revenues despite declines in Company-owned restaurant revenues due to refranchising.
Top 4 DMAs (Los Angeles, San Francisco, Houston, Phoenix) experienced outsized macroeconomic pressures in Q2, contributing to a 30 basis point reduction in system-wide same-restaurant sales.
Markets affected by macro pressures saw a significant downturn starting mid-June, punctuated by headlines and macroeconomic news.
Management remains optimistic that consumer sentiment volatility will moderate over time, which could stabilize sales.
Dafinchi
