I own FLO, and like it even more at these levels FWIW. My take on it, is that the 55% interest in Keebler equates to about the current FLO stock price; thus, you get Mrs. Smith's and Flowers Bakeries free of charge (obviously one needs to factor in debt issues in these calculations).
Mrs. Smith (darn her) is dragging down the whole boat, with, as I understand it, state of the art facilities being brought on, which have glitches, causing product being thrown out due to quality problems, etc. It is not a demand problem, rather a supply problem. The flip side of the coin, if and when these problems are ironed out, is that the Mrs. Smith's division (Mrs. Smith's still being one of the top names, if not the top name, in frozen desserts) will be a significant contributor to FLO's bottom line.
A caution is that Mrs. Smith's has also some issues with sales contracts and marketing promotions.
I'll quote to you from FLO's Q2 report, which I received yesterday (with the caveat that management is not always right):
"The current disappointing level of performance at Mrs. Smith's is not a reflection of its long term potential. When this realignment project is completed, it will improve Mrs. Smith's service and quality as well as reduce its production, distribution, and inventory costs. This will give Mrs. Smith's a competitive advantage in the $31-billion frozen baked foods category." |
