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Hershey raised its full-year earnings outlook Thursday after price increases helped more than double quarterly profit, even as the chocolate and snack maker reported a sharp decline in sales volume.
The company said third-quarter net sales rose 3% to $3.276 billion. Organic sales on a constant-currency basis increased just 0.8%, with approximately 11 percentage points of price realization largely offset by an approximately 10-point decline in volume.
Hershey attributed the volume decline to consumers’ response to higher prices, shipment timing and planned international product changes, partly offset by growth in North American salty snacks. Chief Executive Kirk Tanner said consumers were becoming more cautious.
Profit recovers as prices and refunds help margins
Reported net income was $580.8 million, or $2.88 per diluted share. Diluted earnings per share rose 111.8%. Adjusted earnings per share, a non-GAAP measure, increased 103.1% to $2.64.
Reported gross margin increased to 46.1% from 32.6%, while adjusted gross margin rose to 42.7%, an increase of 10.9 percentage points. Hershey said higher prices, productivity savings, tariff refunds and lower net commodity costs helped offset weaker volume and higher freight and logistics expenses. Reported results also benefited from derivative mark-to-market gains.
The company now expects full-year adjusted earnings per share to grow 36% to 38.5%, up from its previous forecast of 32.5% to 35%. The outlook includes about $0.22 per share from tariff refunds received in the third quarter and $0.03 from the second quarter, but excludes potential future refunds.
Hershey now expects full-year net sales growth of about 5%, compared with a previous range of 4.5% to 5%. It expects organic sales growth of about 3%, versus the previous range of 3% to 3.5%.
Confectionery volume falls despite seasonal shipments
North America Confectionery sales increased 1.6% to $2.657 billion. Approximately 13 points of price realization were partly offset by an approximately 11-point volume decline. Hershey said price sensitivity and normal shipment variability more than offset strong seasonal shipments.
North America Salty Snacks sales rose 22.3% to $392.7 million, but the LesserEvil acquisition accounted for approximately 20 percentage points of that growth. Organic sales increased 2.3%.
International sales fell 7.5% to $226.4 million, and the segment reported a $30 million loss. Hershey cited lower volume and higher input and manufacturing costs.
The company said its live investor question-and-answer session would begin at 8:30 a.m. Eastern on Thursday.
JBizNews Desk | Hershey, Pennsylvania
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