Hershey raises full-year outlook | Food Business News

HERSHEY, Pa. — The Hershey Co. overcame persistent supply chain disruptions to deliver double-digit sales growth in each of its business segments in the latest quarter. Management raised its outlook for the full year to reflect continued strong demand and higher prices across its portfolio that are expected to more than offset higher costs and heightened levels of advertising and merchandising in the coming months.

Net income for the second quarter ended July 3 was $315.6 million, or $1.53 per share, compared to $301.2 million, or $1.45 per share, in the prior year period. Excluding unusual items, including mark-to-market losses, business realignment activities, acquisition activities and other miscellaneous losses, adjusted net income was $372.4 million, higher than adjusted net income of $305.8 million. in the quarter of the previous year.

Net sales totaled $2.4 billion, up 19% from $2 billion a year earlier. Excluding the benefit of last year’s acquisitions of Dot’s, Pretzels and Lily’s, as well as currency impacts, Hershey’s organic net sales grew 14% driven by price and volume gains.

“Second-quarter growth was broad, with each segment delivering double-digit sales growth, resulting in strong earnings per share,” Michele G. Buck, president and chief executive officer, said in pre-recorded remarks prior to July 28. . earnings call “Organic net sales growth of 14% was driven by price and volume gains, while acquisitions contributed another 5 points of growth. Despite persistent and widespread supply chain disruptions, our teams were able to increase production and inventory levels during the quarter. This not only fueled sales growth, but also fueled improvements in market share performance and will allow us to more fully activate our portfolio in the second half of the year.”

While inflation is putting pressure on many Americans, consumers are still buying brand-name snacks and candy over lower-priced private-label items in those categories, Buck said.

“I think across snacks, what we tend to see is that consumers really like their brands,” Ms. Buck said. “So if you look at total food, as budgets are tighter, certainly private brands have increased their share compared to snacks, private brands haven’t and consumers tend to like their brands.” .

In the second quarter, North America Confectionery segment revenue increased 12% to $618.9 million thanks to price and volume gains that were partially offset by higher supply chain costs, acquisition costs and higher trade show and travel expenses compared to the previous year. Segment net sales advanced 13% to $1.9 billion compared to the same period last year. Sales of candy, mints and gum in the United States increased 5%, driven by continued consumer demand and price increases.

“As we look into the second half, we expect our higher inventory levels and increased advertising and merchandising to drive strong daily sales and stock performance,” said Ms. Buck. “Chocolate media spending is projected to grow double digits in the second half, and quality marketing is also expected to increase.

“Seasonal consumer engagement is expected to remain high, and we expect high single-digit sales growth for both Halloween and the holiday seasons. Despite this strong growth, we will not be able to fully meet consumer demand due to capacity constraints.

“Since many of our daily and seasonal products are made on the same line, we have needed to balance production in recent months to improve daily shelf availability and build seasonal inventory at the same time. While this is likely to result in seasonal trading pressures in the second half, we expect our daily trading trends to remain strong behind higher inventory levels and more advertising and merchandising.”

North America Savory Snacks segment revenue increased 44% to $37.4 million, as price gains and higher volumes offset unfavorable mix, acquisition-related costs and higher acquisition costs. supply chain. Segment net sales soared 100% to $256.3 million, driven largely by the acquisitions of Dot’s and Pretzels, as well as, to a lesser extent, net price realization.

“Our savory snack brands continue to deliver tremendous growth and share gains,” said Ms. Buck. “Over the past 12 weeks, SkinnyPop retail sales grew 17% and ready-to-eat popcorn segment share increased 130 basis points to 24%. Growth is led by increased household penetration and stable purchase rates as new pack sizes have enabled us to capture incremental occasions.

“Pirate’s Booty also continues to win homes through distribution gains while speeds remain strong, resulting in retail sales growth of 32% in the latest 12-week period. And Dot’s Pretzels growth continues to significantly outperform the pretzel category, with retail sales growth of 45% and 340 basis points of share increase over the past three months.

“To support this sustained and elevated growth, we continue to advance our strategic planning to optimize our salty snacks supply chain for additional capacity and margin efficiencies.”

Hershey’s international segment profit was $30.7 million, an increase of $3.1 million from the prior year period, reflecting volume and net price realization gains partially offset by higher logistics and supply chain costs, ad spend, wage and benefit inflation, and higher travel expenses. International segment net sales increased 21% to $207.2 million from the prior year quarter.

“Consumer demand has remained strong in all markets, with distribution and innovation driving double-digit growth in each market during the quarter,” said Ms. Buck, highlighting Hershey’s Kisses in India and innovation better for you in Mexico as the best performers.

For the full year, executives now expect net sales growth of 12% to 14% for the year, versus previous guidance of 10% to 12%. Reported earnings per share growth is expected to be in the range of 9% to 12%, compared to previous guidance of 8% to 11%.

Hershey Co. shares traded on the New York Stock Exchange rose to $224.27 on July 28, up 2.8% from the previous close of $218.23.

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