The Hershey Co (HSY, Financial) released its 8-K filing on November 7, 2024, detailing its financial performance for the third quarter ended September 29, 2024. The company reported a decrease in net sales and earnings, missing analyst estimates amid challenging market conditions.
Company Overview
Hershey is a leading confectionery manufacturer in the U.S., commanding around 36% of the domestic chocolate market. The company has expanded its brand portfolio over the years to include popular names such as Reese's, Kit Kat, Kisses, and Ice Breakers. While Hershey's products are available in about 80 countries, a significant portion of its sales is concentrated in the U.S. The company has also diversified into the snack segment with acquisitions like Amplify Snack Brands and Dot's Pretzels.
Financial Performance and Challenges
For the third quarter of 2024, The Hershey Co reported consolidated net sales of $2,987.5 million, a 1.4% decrease compared to the same period last year. This decline was primarily driven by decreased volume across segments and the impact of high cocoa prices. The reported net income was $446.3 million, or $2.20 per diluted share, reflecting a 12.7% decrease. Adjusted earnings per share came in at $2.34, down 10% from the previous year, missing the analyst estimate of $2.40.
These results highlight the challenges Hershey faces, including historically high commodity costs and a challenging consumer environment. The company's focus remains on controlling costs and delivering value to stakeholders, as emphasized by CEO Michele Buck:
“We believe in the resiliency of our snacking categories and the strength of our brands. 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 and are acting with immediacy to deliver value to customers, consumers and shareholders.”
Key Financial Metrics
Hershey's gross margin decreased to 41.3% from 44.9% in the previous year, impacted by higher commodity costs and unfavorable input cost timing. The operating profit margin also declined to 20.5%, down 380 basis points from the prior year. Despite these challenges, the company managed to reduce selling, marketing, and administrative expenses by 5.2%, reflecting cost-saving initiatives.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Sales | $2,987.5 million | - |
| Net Income | $446.3 million | $518.6 million |
| EPS - Diluted | $2.20 | $2.52 |
| Adjusted EPS - Diluted | $2.34 | $2.60 |
Segment Performance
The North America Confectionery segment saw a slight increase in net sales by 0.8%, driven by price realization, although volume declines were noted. The North America Salty Snacks segment experienced a significant 15.5% decrease in net sales, attributed to inventory adjustments and shipment delays. International sales decreased by 3.9%, impacted by competitive pressures and market softness in key regions.
Outlook and Strategic Initiatives
Looking ahead, The Hershey Co has adjusted its full-year outlook, anticipating flat net sales growth and a decline in adjusted earnings per share by mid-single digits. The company continues to invest in its core confectionery capacity and digital infrastructure, with capital expenditures projected between $575 million and $600 million. Hershey remains committed to its Agility & Automation Initiative, aiming for savings of approximately $100 million.
Despite the current challenges, Hershey's strategic focus on expanding its chocolate portfolio and maximizing seasonal strengths positions it to navigate the evolving market landscape effectively.
Explore the complete 8-K earnings release (here) from The Hershey Co for further details.
