Hershey beats profits forecast after raising prices and strong holiday demand
The confectionery giant said in its Full-Year 2021 Financial Results it expects an annual adjusted profit of between $7.84 and $7.98 per share, compared with estimates of $7.57 per share.
Net sales rose to $2.33bn in the quarter ended 31 December, from $2.19bm a year earlier, compared with estimates of $2.27bn, according to Reuters’ data.
Net income attributable to the company rose to $355.6m, or $1.62 per share, in the fourth quarter, from $291.4 million, or $1.39 per share, a year earlier.
"In 2021, we delivered a record year of production and double-digit sales and earnings growth, with a strong finish and momentum heading into 2022,” said Michele Buck, The Hershey Company President and Chief Executive Officer.
“While the environment remains volatile, we are confident in our ability to continue to respond to the changes in the world around us and deliver another year of advantaged performance in 2022.”
"I could not be prouder of the entire Hershey organization for the way they continue to unite to overcome obstacles, show courage and adaptability, and persevere to deliver for consumers, partners, shareholders and each other during unprecedented times."
In order to offset rising materials and production costs in its supply chain, Hershey has increased product prices.
"Pricing will be an important lever for us this year and is expected to drive most of our growth," said Buck.
North America confectionery
North America Confectionery segment income increased 6.3% to $623.2m in the fourth quarter of 2021, compared to $586.2m in the fourth quarter of 2020.
This increase was driven by pricing gains and reductions in advertising on select brands in response to sustained consumer demand and capacity constraints, which was partially offset by gross margin declines driven by logistics, labour and packaging inflation.
Strong consumer engagement during the Halloween and Holiday seasons also led to increased sales of Hershey's confectionery products. Combined seasonal and everyday take-home products reported retail sales growth of 13.2% during this time period.
Buck cautioned that a surge in Omicron cases has hit the company's facilities as well as its suppliers due to higher absenteeism, and has pressured production at the facilities.
Earlier a Hershey company spokesperson confirmed that a small number of corporate office employees have been ‘separated from the company’ after refusing to be vaccinated against COVID-19.
In a statement to the media a spokesperson said:
“Hershey is committed to maintaining a safe and healthy environment for our employees and our customers. We believe that the best way to protect the health and safety of our employees, their families and our various business partners is to ensure that our salaried employees are vaccinated against COVID-19. This is to reduce the spread of the virus and the potential for serious disease or death.
“A small number of individuals who did not get vaccinated were separated from the company”
The Pennsylvania-based company expects an annual adjusted profit of between $7.84 and $7.98 per share, compared with estimates of $7.57 per share.
A Nasdaq analyst said: “It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $2.03 on $2.39bn in revenues for the coming quarter and $7.68 on $9.41bn in revenues for the current fiscal year.”
New Reportable Segments
Since December 31, 2014, Hershey has reported its operations through two segments, (i) North America and (ii) International and Other. After the completion of the Dot's and Pretzels acquisitions in December 2021, the company said the management elected to begin reporting its operations through three reportable segments. Therefore, in the fourth quarter of 2021, Hershey realigned its former two reportable segments into three reportable segments: (i) North America Confectionery, (ii) North America Salty Snacks and (iii) International.