Hershey ups the ante for the holidays

HERSHEY, PA. — Hershey Co. raised its full-year sales and earnings forecast after strong demand for Halloween candy is expected to continue into the holiday season.

The company saw “stronger-than-expected demand” in October and in the third quarter despite price increases, said Michelle G. Buck, chief executive. The company’s overall average selling price increased nearly 8% in the quarter, while sales volume rose 4%.

“We expect this category momentum to continue through the holiday season and the product is now in stores and selling well,” Ms. Buck said on a Nov. 4 call with financial analysts to discuss third-quarter results. “Daily trends are also expected to remain healthy as we exit the year, but with growth rates slowing as consumer behavior continues to evolve in response to high inflation.”

Net income for the third quarter ended Oct. 2 was $399.5 million, or $1.94 per common share, down 9.3% from $444.9 million, or $2.14 per share, in the same period a year ago. Excluding unusual items, including losses on mark-to-market derivatives, business realignment activities, acquisition-related activities and other miscellaneous losses, adjusted net income was $447 million, compared to adjusted net income of $434.9 million prior year.

Net sales were $2.73 billion, an increase of 15.6% from $2.36 billion a year earlier. Organic net sales at constant currency increased 11.8%.

Company executives now expect full-year net sales growth of 14% to 15%, up from previous guidance of 12% to 14%. Reported EPS growth is expected to be in the range of 11% to 13%, compared to previous guidance of 9% to 12%.

Hershey’s North American confectionery segment sales rose 10.4% to $2.2 billion in the third quarter, led by a 12.6% increase in chocolate sales. Chocolate’s strength is attributed to continued use on the go and at home, with retail sales of instant consumables up 11.2% and retail takeaway sales up 13.6%.

Investments to increase production in several confectionery brands and categories contributed to sales and volume growth. The Payday brand’s huge growth was driven by increased capacity, with retail sales of the peanut caramel bar growing 35% during the period. Two production lines for Reese’s products were brought online during the quarter, which contributed to a 16% increase in retail sales.

A new gum capacity also came online, producing the company’s first sealable box for Jolly Rancher gummies.

“This critical capacity will allow us to unlock growth in the gummy segment through Jolly Rancher Gummies and the recent launch of Twizzlers Gummies, which will be in stores nationwide starting in November,” said Stephen E. Vosquill, senior vice president and chief financial officer in Hershey.

Other new products hitting shelves in November include the Reese’s Big Cup filled with Reese’s Puffs, Reese’s Dipped Animal Crackers, Kit Kat Birthday Cake and Jolly Rancher Gummies Lemonade Stand.

Ice Breakers Mint Crystal Gum, a sweeter version of the brand’s Ice Cubes range, will launch this autumn amid a recovery period for the gum category. Sales of Hershey’s gum products rose nearly 15% in the quarter, led by less mask-wearing, while retail trends for Ice Breakers improved after supply chain challenges earlier in the year.

Hershey continued to make progress on its goal of becoming a “snack powerhouse” with offerings beyond candy, driving another quarter of the stock’s earnings for its growing North American salty snacks segment. Sales were $257 million, an increase of 87% over the same period last year. Sales from the acquisition of Dot’s Pretzels and Pretzels Inc. are with 65.5 points profit.

Retail sales of SkinnyPop and Pirate’s Booty were up 18% and 14%, respectively, with SkinnyPop growing 120 points in the ready-to-eat popcorn category. Both brands benefited from the back-to-school season, with group pack retail sales up 25% year-over-year.

Increased distribution, new shoppers and higher frequency among existing households led to a 34% increase in retail sales of Dot’s Pretzels. The brand gained another 200 points of share in the pretzels category, following an increase of 260 points of share in the same period a year ago.

“Dot’s core products remain strong and we have an exciting new limited edition Cinnamon Sugar flavor hitting stores now which will help us generate even more consumer interest,” Ms Buck said. “Despite higher retail prices, our savory snack volume trends remained incredibly resilient and consumer units grew over 7% in the quarter, well above category averages.”

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