Hershey Trims Annual Forecast As Higher Prices Hurt Demand

By Reuters
Hershey Trims Annual Forecast As Higher Prices Hurt Demand

Hershey trimmed its annual revenue and profit forecast on Thursday after missing Wall Street estimates for the third-quarter, as price hikes hurt demand.

Along with other branded food companies, Hershey has seen price increases hurt volumes for its chocolates, confectionery and salty snack products as customers balked at high prices and opted for cheaper, private-label alternatives.

Companies such as Hershey and Nestlé raised prices in order to maintain profit margins as raw material costs – especially cocoa – drove up production prices.

Packaged food company Kraft Heinz also cut its annual forecast last week – despite a third-quarter profit lift – as customers shifted to cheaper, private-label alternatives.

Additionally, shifting trends – such as a generational pivot to non-chocolate confections – have eroded Hershey’s chocolate-dependent sales.

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Shares for the company fell about 2.5% in premarket trading.

Looking Ahead

Hershey aims to generate $300 million in savings by 2026 through cost-cutting measures and price hikes to offset cocoa prices and boost margin growth.

Speaking about the results, the chief executive of Hershey Michele Buck said, “While year-to-date results have been affected by historically high cocoa prices and a challenging consumer environment, we are laser-focused on controlling what we can.”

The company – which is one of the largest chocolate manufacturers in the world – anticipates full-year net sales growth to be flat.

This is a revision from its previous estimate of about 2% growth.

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Hershey forecasts annual adjusted earnings per share to decrease by mid-single digits, rather than the slight decline previously expected.

In the third quarter, organic prices rose 2% while organic volume decreased by 3% and total net sales fell 14% to $3 billion, missing analysts’ average estimate of $3.08 billion, according to data from the London Stock Exchange Group.

Excluding certain items, the company earned $2.34 per share in the third quarter, below estimates $2.56.

Read More: Kellanova Beats Quarterly Sales And Profit Estimates On Steady Demand

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