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Hershey Melts: Shares Fall On Missed Expectations

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The Hershey Company (NYSE: HSY) on Thursday announced first quarter results before the market opened.

President and CEO John P. Bilbrey commented, "The profile of Hershey's results for the first quarter was slightly below our expectations. Given U.S. Brookside distribution gains in the year ago period, the timing of our more meaningful innovation later this year, and softness in Latin America, first quarter organic net sales growth was pressured.

"Additionally, U.S. retail trends varied and were impacted by lower consumer trips in the instant consumable channels and irregular purchasing patterns within the traditional food and mass channels. However, towards the end of the first quarter, consumer trends began to normalize and, while preliminary, April Nielsen data indicates a good sell through for the Easter season and a sequential improvement in non-seasonal candy."

Summary of First Quarter Results

  • The company reported first quarter adjusted EPS of $1.15 versus the estimated $1.14. Earnings per share were up six percent from the same quarter last year.
  • Revenue rose 2.4 percent year-over-year to $1.87 billion versus the estimated $1.91 billion.
  • Net sales reached $1,871,813,000 compared with $1,827,426,000 from the first quarter of 2013.
  • Net income was $1.11 per share diluted versus $1.06 per share diluted in 1Q13.
  • U.S. candy, mint and gum (CMG) takeaway for the quarter, excluding the impact of Easter seasonal activity from last year, increased 1.4 percent. Including the Easter activity impact, the U.S. CMG market share fell 0.1 points.
  • Hershey saw an unexpected decline in chocolate market share in the first quarter. The press release reported that this decline was due to the "timing of new product launches and related advertising and consumer marketing."
  • The company noted that U.S. retail trends and softness in Latin America impacted net sales for the quarter. The press release stated that business in Mexico saw macroeconomic challenges and new tax legislation on certain foods in Brazil was "off due to volume elasticity related to a price increase."

Company's Outlook

  • Management sees in-line guidance for FY14. Hershey estimates adjusted earnings per share will grow 9 to 11 percent to reach the range of $4.05 to $4.13 versus the estimated $4.13 estimate.
  • Hershey expects reported earnings per share diluted in 2014 of $3.99 to $4.08, including record net GAAP charged of roughly $18 million to $20 million, or $0.05 to $0.06 per share diluted.
  • The company sees sales growth of five to seven percent, driven mainly by volume.
  • Hershey expects charges associated with the Project Next Century program to be $0.01 to $0.02 per share diluted.
  • The company expects net acquisition and transaction costs, primarily with Shanghai Golden Monkey, to reach $0.05 to $0.06 per share diluted.

Shares of Hershey closed at $100.15 on Wednesday. Following the miss on quarterly revenue, the stock has taken a hit falling as much as 4.65 percent to $95.70 in Thursday's trading.

Disclosure: At the time of this writing, Erika Janowicz held shares of The Hershey Company.

Posted-In: Earnings News Guidance Retail Sales Management


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