Hershey cut its annual profit forecast on Thursday and posted a near 17% drop in quarterly sales, highlighting cautious consumer spending for its products.
Hershey has been one of the few companies to gain market share even as it increased prices to offset the high cost of materials such as cocoa and sugar.
However, demand trends for Hershey have shifted as consumers across income groups turn more price conscious and seek cheaper alternatives.
Shares of the Hershey Kisses maker fell more than 3% in early trading.
‘Partially Offset The Significant Costs’
Speaking about the results, chief executive Michele Buck said, “Given what we know about 2025, we have taken a first step to cover some of the expected inflation with pricing.
“We will work closely with our retail partners to implement our announced pricing, including price pack architecture in the coming months to partially offset these significant costs.”
An analyst from RBC Nik Modi said, “In the near term, we now believe that the company will have to navigate significant cost inflation against the backdrop of a pressured consumer, which could limit its pricing opportunities.”
Packaged food peers such as Mondelēz and Kraft Heinz implemented double-digit price hikes over the past two years to counter the rising cost of commodities such as sugar and cocoa.
However, while price increases dented demand for Hershey’s confectionary products both in the US and internationally, selective price reductions in salty snacks perked up its North American volumes.
Results
Hershey’s net sale fell to $2.07 billion in the three months ending 30 June, compared with analysts’ expectations of $2.31 billion, according to data from the London Stock Exchange Group (LSEG).
Net sales for confectionary products in the North America segment, Hershey’s largest market that accounted for about 80% of its annual revenue, fell to $1.58 billion from $1.99 billion a year earlier.
Excluding items, it earned $1.27 per share, below LSEG estimates of $1.43.
The company’s organic price rose 1%, while organic volume slumped 18%.
Gross margins slipped to 40.2% from 45.5% a year previously, with Hershey expecting a full-year net sales growth of about 2% compared with a previous view of 2% to 3%.
Hershey forecasts adjusted earnings per share to be down slightly from prior expectations of it remaining flat.
Read More: Kraft Heinz Cuts Annual Organic Sales Forecast As Demand Tapers Off
