Hello, everyone, and welcome to the pre-recorded discussion of Flowers Foods second quarter 2022 results. This is J.T. Rieck, SVP of Finance and Investor Relations. As a reminder, we released earnings on August 11, 2022. Along with the transcript of these recorded remarks, you can find the earnings release and related slide presentation in the investors section of flowersfoods.com. We will host a live Q&A session on Friday, August 12 at 8:30 A.M. Eastern. Further details are posted in the investors 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 will 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 second quarter call. We continue to execute well in the first half of 2022, driving second quarter sales to record levels. Effective implementation of our June price increase boosted sales and helped offset inflationary pressures. The faster than expected mitigation of the supply chain issues we discussed last quarter led us to raise the bottom end of our EPS outlook. Our leading brands performed quite well, despite the fact that consumers are increasingly feeling the strain of inflationary pressure. Nature's Own grew sales dollars during the quarter more than any other brand in the category, and both Nature's Own and Canyon Bakehouse grew market share. Dave's Killer Bread gained share in the organic category despite headwinds related to regional capacity constraints and packaging shortages. We've resolved both of those issues and remain supremely confident in DKB's growth potential.
The additional West Coast capacity that we discussed in our first quarter call will allow the brand to compete more aggressively in that market. Meanwhile, DKB continues to gain share in the strategically important Northeast market. Our breakfast products, which are a key area of focus for us, performed especially well in the quarter. The DKB brand resonates profoundly with consumers, and the purpose behind every loaf and unparalleled quality and taste engenders fierce loyalty. That loyalty gave us the confidence that it could move across categories and inspired the development of our DKB snack bars. As we mentioned last quarter, we're thrilled with the initial results of the bars in test markets, which continue to exceed expectations, and we are actively working to expand distribution.
The prospect of a snack item that adheres to the unique brand equities of Dave's Killer Bread excites retailers and consumers alike and expands our growth potential. Our core business is solid and growing, but we also intend to diversify and leverage the power of our number one brands to move into adjacent categories. In the second quarter, our overall market share declined slightly by 10 basis points due to several factors. The packaging shortages that impacted DKB, and which we spoke about last quarter, also impacted sales across our business, though we mitigated most of the effect midway through the quarter. SKU rationalization related to the execution of our portfolio strategy reduced sales largely in cake, food service, and private label.
Our price increases, which we took a bit earlier than usual in June to mitigate inflation, led to a temporarily less favorable competitive position, which also hampered revenues. Lastly, we were comping Hurricane Elsa in the prior year period. As you know, we typically outperform our competition during major weather events, so this timing also contributed to the share change on a year-over-year basis. Although top line results were impressive given the environment, performance could have been even stronger were it not for these discrete items that we believe are temporary. The supply chain issues we discussed on the last earnings call impacted results early in the second quarter, but strong execution by our procurement team minimized the impact of those headwinds later in the quarter. The June price increase also helped drive an EBITDA improvement in the latter part of the quarter.
Our product mix regressed slightly as the long-term trend of share losses in the private label category paused, and the price increases in that business exceeded other categories as we work to improve its profitability. Those efforts are paying off, and as a result, we expect such share shifts should they continue to be less dilutive to margins than in the past. 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. First, as always, I'd like to thank our Flowers team for their hard work and dedication, which has made our strong performance possible. I just mentioned the effort our procurement group made to minimize the impact of supply chain disruptions, and that is just one example of many demonstrating the extraordinary efforts of Flowers team members.
In an environment of unprecedented challenges, their execution continues to drive exceptional results. The labor market remains challenging, particularly in our bakeries. To mitigate these pressures and help build a stronger Flowers team, we've implemented a mentor program that supports our newest team members as they begin their career journey at Flowers. New hires are matched with a compatible mentor who meets with them regularly and checks in on their progress. Mentors act as a resource, provide encouragement and support, and intervene when a mentee faces a challenge that might lead them to leave their job. The program is relatively new, but early indications are that it is improving the onboarding process and reducing turnover. We believe it will ultimately help improve our efficiencies. Our second priority is focusing on our brands.
Last quarter, we detailed our portfolio strategy, which aims to shift our sales mix to higher margin branded retail products. Our results this quarter demonstrate the effectiveness of that approach. Our accelerated growth and learn-improve portfolio roles are driving continued growth. Tracked channel sales of our leading brands in the quarter were strong, with Nature's Own up 12.4%, Dave's Killer Bread up 9.8%, and Canyon up 22.2%. We've maintained many of the new consumers we gained during the height of the pandemic, and we're working to build upon that growth through continued elevated marketing and brand investments. Our 17.5% dollar share exceeded pre-pandemic levels in the second quarter of 2019 by 80 basis points.
Investments in innovation are delivering promising results from recent launches, including DKB Epic Everything Organic Breakfast Bread, Nature's Own Hawaiian Loaf, Canyon Bakehouse Brioche-Style Sweet Rolls, and Nature's Own Perfectly Crafted Sourdough Bread. We remain focused on improving profitability and our balanced growth- and profitability-maximizing portfolio roles, which I will detail shortly. Our third strategic priority is margins, which remain a particular focus given the inflationary environment. In addition to the margin expansion we expect from our portfolio strategy-driven mix shift, we're implementing cost savings programs and improved processes to run our business as efficiently as possible. The $25 million-$35 million of savings from operational efficiencies and procurement that we are targeting for this year are on track, and those are on top of the $60 million in additional cost savings we achieved in the two prior years.
Last quarter, we discussed the Dave's Killer Bread capacity we added in the West and the benefits that would have in meeting growing demand and improving efficiencies at nearby bakeries. In conjunction with that move, we recently announced the pending closure of our bakery in Phoenix, which is planned to occur in the fourth quarter. In keeping with our portfolio strategy, we expect this closure of an older, less efficient bakery to reduce lower-margin private label and food service production in the region, while nearby bakeries will service the remaining branded retail needs. We'll maintain ample capacity to service future growth in this important market. Our portfolio strategy calls for us to improve the profitability of our balanced growth and maximize profitability portfolio roles. Consistent with that objective, as private label demand is showing initial signs of stabilizing, we're focused on enhancing the profitability of that business.
We implemented price increases to mitigate inflation and continue to work with our retail partners to drive efficiencies. Our digital transformation initiative remains on track, and we're confident in our ability to implement it as planned. We believe the investments we're making in digital technology will help drive meaningful efficiency improvements in our bakeries, and as we've emphasized, will be a key driver of improved margins over time. Our fourth priority is smart M&A. We hope you noted our recent investment in Base Culture, a fast-growing female founded and led baked foods company offering better for you gluten-free and grain-free sliced breads and baked goods. The products are both paleo and keto certified and are on trend with consumers seeking those attributes.
We expect our investment will allow Base Culture to grow distribution, scale marketing, and bolster its existing manufacturing capabilities to offer its products to more consumers than ever before. We've been considering venture type investments for some time as we seek to enhance our internal agile innovation efforts, and we believe this is a great first move into that space. This small investment may serve as a model for future investments in other leading-edge companies. In addition, 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, and we remain committed to our disciplined approach.
Now I'll turn it over to Steve to review the details of the quarter, and then I'll come back a 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 second quarter performance. Total sales increased 11% from the prior year period. Improved price mix drove the adjusted year-over-year increase up 14.4%, primarily due to price increases to mitigate inflationary pressures. That increase was partly offset by a shift in sales mix from branded retail to store branded retail. Volume decreased 3.4%, mostly due to SKU rationalizations in cake, food service, and private label. Other volume headwinds included the supply chain issues related to packaging and the temporary impact of price increases on our competitive position. Overall elasticities were in line with our expectations.
In the second quarter, gross margin as a percentage of sales, excluding depreciation and amortization, decreased 240 basis points to 48.1%. Comparisons were impacted by higher ingredient and packaging costs, partly offset by higher sales that leveraged labor expenses and timing differences in the sell-through of product inventories. Selling distribution and administrative expenses decreased 130 basis points as a percentage of sales to 38.8% in the second quarter, benefiting from price increases and lower labor and marketing expenses and distributor distribution fees, partially offset by higher logistics expenses. Excluding the items affecting comparability detailed in the press release, adjusted SD&A expenses decreased 90 basis points to 37.5%. GAAP diluted EPS for the quarter was $0.25 per share, compared to $0.26 in the prior year period.
Excluding the items affecting comparability detailed in the release, adjusted diluted EPS in the quarter was $0.31 per share, down $0.01 from the prior year period due to the factors mentioned above, as well as lower interest income and a higher tax rate. Turning now to our balance sheet liquidity and cash flow. For the first half of fiscal 2022, cash flow from operating activities decreased $39.6 million- $183.8 million. Capital expenditures increased $39.6 million- $97.9 million. Largely due to the ongoing ERP upgrade, digital investments and production capacity additions. Dividends paid increased $6.4 million- $93.4 million. In the first quarter, our board increased the company's share repurchase authorization by 20 million shares.
Year to date, we repurchased shares for $16.5 million and invested $9 million in Base Culture. We intend to continue to use our strong balance sheet to capitalize on similar opportunities as they present themselves. Our financial position remains strong. At the end of the second quarter of fiscal 2022, net debt to trailing twelve-month adjusted EBITDA stood at approximately 1.5 X. At quarter end, we had approximately $163 million in cash and cash equivalents and had approximately $690 million of remaining availability on our credit facilities. Now turning to our outlook for 2022. We are raising the bottom end of our adjusted EPS outlook by $0.05 - $1.25.
Our new guidance of $1.25-$1.30 implies a 9.9% compound annual growth rate off the 2019 base and reflects faster than expected mitigation of the supply chain issues we detailed last quarter. 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. Regarding earnings cadence, our second quarter results exceeded our expectations due to the faster than expected mitigation of the bread bag shortage. As Ryals mentioned, inflation remains a headwind, and we expect its impact to peak in the third quarter. We believe the pricing actions we have taken to date are sufficient to mitigate those costs for the remainder of 2022.
Benefits from our growth and efficiency initiatives are expected to contribute primarily to the second half of the year. At the end of the second quarter, 97% of our key commodities were covered. As always, we will execute our hedging strategy to minimize volatility and provide adequate forewarning to allow for price adjustments. We remain optimistic that combined with our internal actions, we should continue to be able to obtain the higher prices necessary to mitigate inflationary costs. Thank you, and now I'll turn it back to Ryals.
Thank you, Steve. You just heard detail on how our strong execution translated into better than expected financial results. Now I'd like to address some of the key factors impacting the current environment, including the economy, inflationary pressures, and the state of the U.S. consumer. Consumer sentiment has fallen to its lowest level in recent history. Following the 2020 recession brought on by the pandemic, sentiment initially recovered, but unprecedented inflationary pressures have continued to strain consumer confidence. Government stimulus money blunted the downturn and kept consumers flush. But now, with savings eroding, the Consumer Price Index indicates food at home costs rose more than 10% in the last 12 months into June. Gas grew 60% and home energy increased almost 20%. Clearly the average American consumer is feeling the effects of inflation.
While job growth has been surprisingly strong, as indicated by last week's Labor Department report, the participation rate remains below pre-pandemic levels and hiring rates are falling. This conflicting data makes it somewhat difficult to predict the consumer outlook. Recent commentary from retailers suggests that consumers are cutting back spending in other more discretionary areas, such as general merchandise. In addition to altering what they buy, consumers also have been shifting where they shop, making more of their food purchases at value-oriented merchants such as mass, dollar, and club stores. As you might expect, purchasing decisions vary significantly based on household income. Lower income consumers have tended to trade down to less expensive products more than those with higher income. This behavior has been particularly stark in the premium category, where higher income consumers have actually increased purchases of some products, including DKB.
On the other hand, we have seen lower income households reduce their number of purchases. We're closely monitoring these developments and maintaining our marketing investments to keep our brands top of mind and entice these consumers back when that economic pressure is relieved. In short, we believe the premiumization of the category remains a long-term trend despite some shorter term challenges. Flowers is well positioned to support consumers in this unique environment. Our broad product lineup offers options at all price points for a variety of occasions. In retail, we distribute everywhere from discount stores to high-end grocery, with a similarly wide range of distribution in food service. Like other companies, we came into the second quarter pressured by inflation and supply chain issues. Our June price increases to mitigate inflation led to a temporarily less favorable competitive position.
That dynamic, combined with supply issues that limited capacity of some products, including Dave's Killer Bread, temporarily hampered share gains. More recently, due to widespread inflationary pressures affecting virtually all companies, our prices are more competitive and we expect our share performance to continue to improve. One area of note this quarter is a pause in the long-standing decline in private label market share. On the surface, this change seems to indicate that inflationary pressures are encouraging consumers to trade down. However, those aggregate results have been driven by concentrated activity in the mass merchandise channel, where private label retail prices have not adjusted to reflect recent inflationary pressures. The resulting wide price gaps to branded products seem to be driving much of the stabilization in private label share.
Areas of retail that reflect price gaps more in line with historical levels, such as in the grocery channel, show continued private label share losses. Considering the margin pressure retailers are facing in some categories outside of food, investors have speculated that future food price increases will be harder to come by. It's important to note that all three of our recent price increases were the direct result of significant measurable inflationary pressures that impacted virtually all companies in the food industry and beyond. Although retailers are always reluctant to accept price increases, there was a general acceptance that such increases were necessary given the environment. Should we encounter future inflationary pressures, we believe we will have similar success in implementing additional price increases to mitigate those pressures. We're keeping a close eye on changes in inflation and the consumer response.
So far, the impact of our price increases on demand has been in line with our expectations, with elasticities remaining below historical levels. It's important to note that in our more than one hundred years in operation, Flowers has experienced numerous periods of inflation in a variety of economic environments. Every period is different, but we are confident that by focusing on our four strategic priorities, team, brands, margins, and M&A, we will be able to weather any environment and emerge stronger. 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.