Hershey reports double-digit increases in sales and profits for the first quarter.
According to Michele G. Buck, chairman, president, and chief executive officer of The Hershey Co., customer demand for sweets and snacks is still high despite price increases, even surpassing that of the packaged food sector as a whole. The company that makes Reese’s peanut butter cups and SkinnyPop popcorn was able to achieve double-digit growth in sales and earnings in the most recent quarter through a mix of volume gains and calculated pricing increases.
During an April 27 earnings call, Ms. Buck stated, “Certainly, consumer behavior continues to evolve, and we know that many consumers have made changes to their spending to respond to inflation in the marketplace.” “Food has continued to do well in comparison to other categories, particularly food consumed at home because it is a far more cost-effective option for customers than eating out.”
Additionally, we are aware that confectionery and snacks continue to outperform larger food groups and that elasticities in those categories are still rather high. And we do anticipate that those elasticities will only get stronger. We are constantly keeping a close eye on these trends to make sure that our media and in-store activations are truly optimized so that we can keep up with the trends that we are witnessing. We know that consumers are becoming more selective about where they shop and are searching for more affordable options, whether it be through private label, deals, or increased promotion.
Net income increased by 11% to $587.2 million, or $2.94 per share on common stock, for the first quarter that ended on April 2, compared to $533.5 million, or $2.66, for the same time last year. Pre-tax derivative mark-to-market losses came to $10.2 million in the current quarter, compared to a pre-tax gain of $27.4 million in the same quarter last year. Activities connected to acquisition and integration, as well as company realignment, had an impact on the reported results. Net income increased by 16% to $609.5 million from $523.5 million during the quarter on an adjusted basis.
Hershey’s North America Confectionery segment saw sales of $2.45 billion, up 11% from the same period last year, and income of $887.8 million, up 14% from the same quarter last year.
In pre-recorded remarks made public before to the call, Ms. Buck stated, “Seasons continued to be a growth driver with category sales for Valentine’s Day up double digits versus the prior year, and despite the shorter Easter season, category sales grew mid-single digits.” Even if customers are shopping on a more constrained budget, candies and snacks are still a reasonably priced method to provide joy to special occasions spent with loved ones.
After a period of declining demand, the gum and mints market is seeing a revival due to COVID-19. Retail sales of mints and gum rose by 20% to 25% in the first quarter, exceeding pre-pandemic levels. According to Ms. Buck, Hershey’s brands outperformed the category, growing by 30% and gaining 110 basis points of market share.
“This performance results in an overall refreshment share gain of 250 basis points versus pre-pandemic levels, building on previous share gains over the past several years,” a spokeswoman said.
Increased advertising and innovation investment for non-chocolate brands led to notable growth in two candy brands during the quarter: Twizzlers, up nearly 19%, and Jolly Rancher, up 15%.
To reach $46.8 million, Hershey’s North America Salty Snacks sector income climbed by 120%. Price hikes and volume gains were the main drivers of the $270 million rise in net sales over the previous year.
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According to Ms. Buck, “a 220-basis-point share gain in the ready-to-eat popcorn category was driven by SkinnyPop retail takeaway of over 23%.” “Dot’s Pretzels performance also continued to shine, with a quarter-over-quarter increase in retail sales of over 25% and a 100 basis point gain in the pretzel category share.”
The profit margin for Hershey’s International business increased by 19% to $55 million on sales of $265.5 million, a 31% rise over the same period last year.
During the call, Ms. Buck stated, “We saw a stronger Easter season in Brazil than we had anticipated.” “In Mexico, distribution improvements are still evident. Additionally, there is some strength overall in India. Although we do anticipate some reduction moving forward due to our rather strong laps, our demand has really
The management has projected 8% net sales growth, 15% reported earnings-per-share growth, and 11% adjusted earnings-per-share growth for the entire year.