New York — Interstate Bakeries Corp., the country's largest wholesale bakery, surprised the market Wednesday by suspending its dividend, citing weak sales of bread.
Interstate, whose brands include Wonder bread and Hostess cakes, said it would stop paying its quarterly 7-cent common stock dividend because of a cash shortfall due to what it called an industrywide slump in bread sales.
Interstate shares fell $1.30, or 10 percent, to close Wednesday at $11.37 on the New York Stock Exchange.
The Kansas City, Mo.-based company will review its dividend policy quarterly, it said.
Mitchell Pinheiro, an analyst at Janney Montgomery Scott, said he was "a little surprised" by Interstate's move to suspend its dividend.
"Apparently things are worse than anticipated there," he said.
He called Interstate's characterization of its sales weakness as an industrywide phenomenon as "a little misleading."
"There are fresh bread companies that are growing their sales and growing earnings," Pinheiro said. "So, to some extent they're trying to deflect some of their shortcomings on the industry."
Company officials could not be reached.
Pinheiro, who maintains a "hold" rating on the stock, cited Interstate's high cost structure, which he blamed on a unionized work force and an expensive distribution network.
Also, "there are strong competitors out there, so as much as they continue to improve, so does their competition," Pinheiro said.
In December, Interstate posted a 39 percent plunge in profit for its second quarter, pressured by sluggish sales.