Hello, everyone, and welcome to the pre-recorded discussion of Flowers Foods Q1 2022 results. This is J.T. Rieck, SVP of Finance and Investor Relations. As a reminder, we released our Q1 results on May 19, 2022. Along with the transcript of these recorded remarks from our CEO and CFO, you can find the earnings release and related slide presentation in the investor section of flowersfoods.com. We will host a live Q&A session on Friday, May 20 at 8:30 A.M. Eastern. Further details are posted in the investor section of our website. Before we get started, keep in mind that the information presented here may include forward-looking statements about the company's performance. Although we believe these statements to be reasonable, they are subject to risks and uncertainties that could cause actual results to differ materially.
In addition to what you hear in these remarks, important factors relating to Flowers Foods business are fully detailed in our SEC filings. Providing remarks today are Ryals McMullian, President and CEO, and Steve Kinsey, our CFO. Ryals, I'll turn it over to you.
Thanks, J.T. It's a pleasure to welcome everyone to our Q1 call. We're off to a record start in 2022 as our leading brands continue to gain share and drive strong top-line growth. Sales were up more than 10% year-over-year in the Q1 to all-time highs. Pricing to help mitigate higher commodity prices drove the bulk of the sales increase, and combined with efficiency actions, produced record adjusted EBITDA and adjusted EPS. These results could have been even stronger were it not for higher than expected inflation, supply chain disruptions, and the deliberate rationalization of our product line during the quarter in accordance with our portfolio strategy. We implemented a price increase in January, which was intended to address the inflation we saw coming into the year.
Since then, commodity prices have risen meaningfully higher than our original expectations due to a variety of factors, not the least of which is the conflict in Ukraine. Although virtually none of our raw materials originate in Ukraine, the current events there do impact the world market for wheat and other commodities. To help mitigate this additional inflation, we have implemented another pricing action that will become effective in early June. On top of inflation, supply chain disruptions hampered our ability to procure adequate quantities of certain raw materials and packaging items. The impact was more heavily weighted to packaging, specifically bread bags, and the shortages resulted in production cuts in the quarter. Our procurement team is working diligently to mitigate these shortages, and we expect the impact to be resolved in the Q3 .
In prior calls, I've talked about our portfolio strategy, which aims to shift our sales mix to higher margin branded retail products. As part of that strategy, we continue to rationalize our product line, cutting less differentiated lower margin products. This process, which impacted sales in the quarter, has the benefit of reducing complexity in our bakeries and opening up capacity to produce more of our higher margin branded products, which should increase sales and margins over the long term. Despite these headwinds and difficult prior year comparisons, we grew market share, which helped drive our sales to a new quarterly record. Flowers Foods' fresh packaged bread sales gained 30 basis points of market share in tracked channels with Nature's Own, Dave's Killer Bread, and Canyon Bakehouse adding 20, and 10 basis points respectively.
This performance bolsters our confidence in our 2022 sales outlook, which we are increasing today. Now I'll address our four strategic priorities, which we expect to drive our results in 2022 and beyond, developing our team, focusing on our brands, prioritizing margins, and pursuing smart M&A. Starting with the team, I'd like to thank our entire Flowers family for their hard work and dedication, which has made our performance in recent years possible. In a dynamic environment with unprecedented challenges, our team's execution has driven exceptional results. Ensuring we have the right team in place is crucial for our future success. Nothing will make us more successful if we do it properly or less successful if we don't. That's why we've established our Agile Innovation, Transformation Office, Digital, and Change Management teams to address the specific initiatives we have in place to drive our future growth.
Complementing the experience and knowledge of our many long-term team members, we have added talented new hires across many functions who bring a diverse set of experiences, backgrounds, and capabilities that we didn't have in-house. That combination is proving invaluable as we seek to enhance the performance of our company. Our second strategic priority is focusing on our brands. I spoke about our portfolio strategy of shifting sales to higher margin branded products and how the pandemic accelerated that shift. Initially, we assumed demand would eventually revert somewhat back to pre-pandemic levels. However, branded retail has remained strong, and as a percentage of sales, it was actually higher this quarter than in the Q1 of 2020. The pandemic induced significant trial of our products, and we've been able to convert that trial into new and loyal customers.
In fact, we've added 5.2 million new households since 2019. Further, the increased prevalence of hybrid work arrangements, which encourage greater at-home eating, seems to be enduring. In addition, we believe a lot of the continued momentum is due to the work we're doing to strengthen our brands through our portfolio strategy, driving more profitable branded retail sales and increasing the profitability of our non-retail and store branded products. We've built leading shares in the loaf, organic, and gluten-free categories, and with our portfolio strategy as a guide, we intend to continue that growth. Innovation has been an important driver of this market success, and we're continuing to invest in new products. Exciting recently launched products include Nature's Own Hawaiian, Nature's Own Perfectly Crafted Sourdough, Dave's Killer Bread Epic Everything Organic Breakfast Bread, and Canyon Bakehouse Brioche-Style Sweet Rolls.
Our Agile Innovation group goes one step further by developing products that capitalize on our strong brands, which allow them to play outside of our core category. So far, we've commercialized three varieties of Dave's Killer Bread bars. Results in the test markets have exceeded our expectations, so we're working to expand distribution for these products. We also have an exciting pipeline of additional snack items under the DKB brand that we expect will bolster our entry into the healthy snacking category. Innovation, particularly outside of our core categories, is a crucial part of our portfolio strategy and our future growth story. The early results are very encouraging and we're focused on growing in these new categories. We've also invested in greater marketing and advertising spend to increase awareness and penetration.
Our portfolio strategy allocates the majority of our spending to the highest potential brands, and the returns on those investments have been positive. As I mentioned, our leading brands once again gained market share this quarter. Those share gains helped drive sales for Nature's Own, Dave's Killer Bread, and Canyon Bakehouse, which were up 11%, 15%, and 21% respectively in tracked channels. An even more encouraging note is that despite higher prices and supply chain headwinds, volumes for those brands increased as well, up 1.7%, 5.3%, and 13.1% respectively. To meet that higher demand for our products, we've added new capacity with the addition of a Dave's Killer Bread line at our Henderson, Nevada bakery.
This new line, which began production near the end of the first quarter, allows us to better serve the rapidly growing West Coast market and for other nearby bakeries to operate at a more optimal capacity. Because it's such a crucial driver of our long-term growth targets, I'd like to give a bit more insight into our portfolio strategy. As part of this process, we placed each business cell into one of our four portfolio roles based on our right to win and growth potential. Slide 8 in our earnings presentation illustrates these four portfolio roles, which are accelerate growth, learn improve, balance growth, and maximize profitability. Business cells within the accelerate growth and learn improve portfolio roles are priorities for investment and growth, whereas the brands in the other two categories are intended to generate cash to support that growth.
We expect our accelerating growth and emerging business units to grow meaningfully ahead of their categories. Balanced growth business units are profitable with a demonstrated ability to win, but have lost some consumer appeal and are expected to maintain market share. Our harvest portfolio role includes business units where our primary aim is to maximize profitability or thoughtfully exit. Simply put, our strategy over time is to evolve our business as much as possible to the right-hand side of the chart where we believe our top brands can grow at attractive rates and generate improved margins for the company overall. Our third strategic priority is margins, which remain a particular focus given the rapid inflation we've experienced. Our playbook here is unchanged.
In addition to the margin expansion from our portfolio strategy-driven mix shift, we are implementing cost savings programs and installing improved processes to run our business as efficiently as possible. We are also investing in digital robotics and automation and placing those capabilities on top of the improved processes. Last quarter we highlighted we expected to generate $25- 35 million of savings this year related to operational efficiencies and procurement. Those initiatives are coming along well, and we believe we're on track to achieve our savings target. Finally, we expect our digital transformation initiative to result in meaningful efficiencies over time. We devoted significant resources, including standing up our Transformation Office and change management team, to ensure that implementation does not negatively impact our operations. The process is coming along as expected, and we're confident in our ability to implement it as planned. Our fourth priority is smart M&A.
We continue to monitor the deal market, actively seeking potential acquisitions that add capabilities, brands, or products to our strong existing lineup. We believe our balance sheet positions us well to act when we have financial, commercial, and operational conviction. Portfolio fit is crucial, but just as important is the expected return on any potential deal. We're not adverse to paying a premium for high-quality assets, but we also require an attractive return. We will not stray from our disciplined approach if a potential deal does not meet all of our required criteria. Now I'll turn it over to Steve to review the details of the quarter, and then I'll come back a little bit later to discuss our outlook for the current business environment. Steve?
Thank you, Ryals, and hello, everyone. I'd like to echo your comments on our incredible team and express my sincere thanks for their outstanding efforts. As Ryals mentioned, we are very pleased with our first quarter performance. Total sales increased 10.3% from the prior year period. Improved price mix drove the adjusted year-over-year increase, up 13.5%, more heavily weighted to price than mix. The primary factors were price increases to mitigate inflationary pressures and growth in our more profitable branded retail products. Partially offsetting the sales increase was a 3.2% volume decrease, mostly driven by declines in our cake, fast food, and store-branded business, partly due to the supply chain disruptions Ryals mentioned in his opening commentary.
In the Q1 , gross margin as a percentage of sales, excluding depreciation and amortization, decreased 110 basis points to 49.5%. Comparisons were impacted by higher ingredient and packaging costs, partly offset by higher sales and reduced outside purchases. Selling, distribution, and administrative expenses increased 10 basis points as a percentage of sales to 38.6% in the Q1 , impacted by incremental consulting cost and transportation cost inflation, largely offset by favorable price mix, lower workforce-related cost, and increased scrap dough income. Excluding the items affecting comparability detailed in the press release, adjusted SD&A expenses decreased 20 basis points to 38% from lower workforce-related costs and increased scrap dough income, partially offset by higher logistics cost.
GAAP diluted EPS for the quarter was $0.40 per share compared to $0.34 in the prior year period. Excluding the items affecting comparability detailed in the release, adjusted diluted EPS in the quarter was $0.44 per share, up $0.03 from the prior year period. A lower tax rate caused by a windfall in stock compensation vesting benefited adjusted diluted EPS by $0.01. Turning now to our balance sheet, liquidity, and cash flow. For the Q1 of fiscal 2022, cash flow from operating activities increased by $26.2 million to $124.2 million. Capital expenditures increased $23.2 million to $50.5 million, largely due to the ongoing ERP upgrade, digital investments, and production capacity additions. Dividends paid increased $4.2 million to $46.7 million. Our financial position remains strong.
At the end of the Q1 of fiscal 2022, net debt to trailing twelve-month adjusted EBITDA stood at approximately 1.4x , comparable to the leverage at the end of the Q4 of 2021. At quarter end, we held approximately $205 million in cash and cash equivalents and had approximately $692 million of remaining availability on our credit facilities. Now turning to our outlook for 2022. We are raising our sales guidance to account for the additional price increase that will become effective in early June as well as better than expected volume and elasticities. Sales are now expected to increase 10%-12% versus 2021, which at the midpoint implies a 5.2% compound annual growth rate off the 2019 base.
The new sales growth guidance compares to our prior estimate of 7.6%-8.4%. We are reducing our adjusted EPS guidance to $1.20-$1.30, which at the midpoint implies a 9.2% compound annual growth rate off the 2019 base. The midpoint of this guidance exceeds our long-term financial targets of 1%-2% sales growth and 7%-9% EPS growth off the 2019 base. As Ryals mentioned, we experienced significant headwinds due to inflation and supply chain disruptions. These discrete headwinds are expected to impact second and Q3 results by a total of $0.05 per share, with the greatest impact in the Q2 . Regarding earnings cadence, our Q1 results were in line with our internal plan.
While our January pricing initiatives will impact the full year, our June pricing will largely benefit the H2 of 2022. This timing will result in a headwind due to the lag between the onset of the inflationary pressures and the implementation of the price increase. We expect to mitigate the supply chain disruption impact, specifically related to bag availability that Ryals referenced earlier in the Q3 . Based on this timing, we expect the entirety of any additional financial impact from these headwinds to be limited to the second and Q3 . The benefits from our growth and efficiency initiatives are expected to contribute primarily to the H2 of the year. When we issued our initial 2022 guidance, we noted our expectation was for high single-digit cost increases and that 70% of our key raw materials were covered.
Our commodity coverage is now approximately 95%, and we expect cost increases of high single digits to low double digits. Far, we've been successful in obtaining the higher prices necessary to offset inflation. We remain optimistic that combined with our internal actions, we should continue to be able to mitigate inflationary cost, though with some lag effect. Thank you, and now I'll turn it back to Ryals.
Thank you, Steve. You've just heard Steve detail how our ability to execute on our initiatives has driven strong financial results despite market volatility. I'd like to address some of the key factors impacting the current environment. Inflation is top of mind for everyone right now with commodity prices surging near historical highs in many categories, and Steve talked about how those costs have increased beyond our initial expectations for the year. As I mentioned, we have implemented another pricing action that will become effective in early June, and we stand ready to take more actions to protect our margin dollars should inflationary pressures increase further. The current environment also underscores the importance of our leading brands. We believe consumers continue to see value in the differentiated attributes of our products, and recent results seem to confirm exactly that.
Even with price increases of 9.8% in track channels compared to the year ago period, our volumes were down just 0.1%. Recall that this slight volume decline includes the impact of supply chain disruptions and SKU rationalization. We outperformed the category overall, which posted a 10.1% price increase with a volume decline of 1.8%. Importantly, we've seen less elasticity in the most premium products in our portfolio. In addition to inflation, acute supply chain disruptions are increasing distribution costs and, in some instances, resulting in a shortage of materials. Those shortages may persist into the H2 of the year, but we are actively working to mitigate them and expect the issues to be resolved in the Q3 .
We're also keeping a close eye on possible demand reversion related to the waning pandemic and a potential economic recession. Earlier, I discussed the enduring strength of branded retail despite a decline in COVID cases, but I do want to provide more color on a potential recessionary impact. The last period of significant inflation coincided with the financial crisis and after effects that occurred roughly from 2007 to 2012. The common perception is that recessions encourage consumers to trade down to lower price products, particularly private label. However, what we found during this period was that despite the severe economic hardships, including high unemployment and low consumer confidence. Private label did not gain meaningful share, though we did see a shift from food service to branded retail as consumers cut back on more expensive restaurant visits. Further differentiated products held up better than more commodity-like products.
I would also note the significant changes we've seen in the competitive environment since that period. The industry was much less consolidated and some larger players were under financial distress, which led to pricing pressure. Our product portfolio was also less differentiated, as we had not yet acquired Dave's Killer Bread or Canyon Bakehouse, nor had we yet developed the Nature's Own Perfectly Crafted line. Today, we operate in a much more consolidated industry with a much stronger portfolio of brands that is even more differentiated compared to private label. Given the evolution of the industry and Flowers, that earlier period suggests that our products should hold up well in a potential recessionary environment. Moving forward, our four strategic priorities, team, brands, margins, and M&A guide our focus. We continue to strengthen our industry-leading team to ensure we have the right capabilities to meet today's challenges.
We're investing in our leading brands and driving initiatives to increase efficiencies and margins. Our strong balance sheet and cash flow position us well to bolster our brands and capabilities through M&A. In closing, although we are lowering our adjusted EPS guidance, I want to emphasize that the reduction is due to discrete issues that we expect to be resolved in the Q3 . Barring these items, we would be on track to meeting our original guidance. I am truly excited about our prospects. The fundamentals of our business remain strong as our portfolio strategy drives increased sales of our leading brands and expanding margins. I've never been more optimistic about the initiatives we have in place to ensure our future success.
The entire Flowers team is working hard to enhance shareholder value, and we expect to continue to deliver results in line with or better than our long-term financial targets. Thank you very much for your time. This concludes our prepared remarks.