Hershey sweetens Q2 results with snacking innovations and cost cutting
27 Jul 2017 --- The Hershey Company has announced sales and earnings for the second quarter ended July 2, 2017, with net sales of US$1,663.0 million compared with US$1,637.7 million for the second quarter of 2016 and net income up 39 percent to US$203.5 million.
Reported net income for the second quarter of 2017 was US$203.5 million or $0.95 per share-diluted, compared with US$146.0 million or $0.68 per share-diluted for the comparable period of 2016.
The confectionery giant saw the returns on its internal cost-cutting measures aimed at trimming down underperforming segments, while innovation was a key driver in pushing up company sales.
Hershey’s footprint has grown beyond candy with new product launches such as Krave, which combines dried fruit and quinoa with turkey, beef or pork, and barkThins, a dark chocolate snack.
It has also concentrated on innovations within its core brands with other releases like Hershey’s Cookie Layer Crunch and Reese’s Crunchy Cookie Cups.
President and CEO, Michele Buck, took over the role earlier this and aims to transform the company into a “snacking powerhouse”. She advocates new product developments were key to Hershey’s future alongside innovation.
“Second-quarter results were solid and we're making progress against our strategic initiatives in a rapidly changing marketplace,” she said.
“I am pleased with our innovation performance and second-quarter US retail takeaway of 4.0 percent driven by our core brands at Easter, where we gained 1.6 market share points in this important season.”
“Non-seasonal candy, mint and gum (CMG) category growth was impacted by retail trips that continue to be choppy and pressure total sales within the box.”
Buck, who was appointed in March, adds how the company plans to increase investments and leverage Hershey's competitive advantages to strengthen and expand its CMG and snacks businesses, while delivering strong gross margin expansion and operating profit growth.
“I'm also pleased to announce that the Board of Directors has approved a dividend increase of 6 percent,” she said. “The company continues to generate steady free cash flow and has a strong balance sheet. This dividend increase reflects our confidence in Hershey's marketplace position and long-term growth potential.”
Growth forecast
The company forecasts growth in US retail takeaway and market share in the second half of the year, despite the broader retail industry challenges that are expected to persist. Therefore, the company now expects full-year net sales growth to be around 1 percent, while adjusted earnings per share-diluted growth are expected to remain at the high-end of the range.
In March, Hershey’s announced it was to cut around 15 percent of its global workforce in a jobs cull that was expected to help the company’s new “Margin for Growth” program. This program was aimed at boosting profit margins by reducing administrative expenses and improving the supply chain.
Additionally, the company has solid Halloween and Holiday plans and advertising and related consumer marketing expense are expected to be higher over the remainder of the year, according to a company statement.
Hershey’s estimates full-year 2017 net sales growth to be around 1 percent which is lower than the previous forecast for full-year net sales growth around the lower end of the 2 percent to 3 percent range.
