Strong Halloween helps Hershey overcome seasonal jitters as it raises sales outlook
Despite earlier fears of candy shortages and supply constraints, Halloween proved once more to be Hershey's busiest time of the year with its Third-Quarter 2022 Financial Results revealing retail sales rising by a high-single-digit percentage point.
"Third quarter results came in ahead of our expectations, as our increased brand investments and improved supply chain helped support resilient consumer demand and drove category growth across all business segments," said Michele Buck, The Hershey Company President and Chief Executive Officer. "Marketplace share and gross margin trends improved versus the second quarter, and we have strong momentum exiting the year. Given our performance to date and visibility into the fourth quarter, we are raising our net sales and earnings outlook for the year."
The candy maker said Halloween makes up approximately 10% of its annual revenue, with retailers placing early orders to stock up on Twizzlers, Jolly Ranchers and Kit Kat bars.
Hershey’s Halloween experience will be replicated throughout the US candy sector with The National Retail Federation (NRF) anticipating record-high sales of $3.1 billion in 2022 after two years of pandemic restrictions on trick-or-treating.
"We anticipate this category momentum to continue into the Holiday season, and product is already out in stores and selling well," Buck said in an earnings call last Friday (4).
Buck said that further price increases and new manufacturing lines were expected to boost Hershey's sales next year, but consumers are becoming more price-sensitive and warned demand for treats may slow down.
Despite higher selling prices this year, Hershey raised its 2022 net sales growth forecast to 14% to 15%, from 12% to 14%. It expects adjusted profit per share to grow by 14% to 15%, against the prior forecast of 12% to 14%.
The chocolate maker said its overall average selling prices increased by 7.7% in the third quarter to 2 October, while sales volumes rose 4.1%.
Hershey Q3 2022 Summary
- Consolidated net sales of $2,728.2 million, an increase of 15.6%.
- Organic, constant currency net sales increased 11.8%.
- The impact of acquisitions on net sales was a 4.1-point benefit2 while foreign currency exchange was a 0.3-point headwind.
- Reported net income of $399.5 million and $1.94 earnings per share-diluted, a decrease of 9.3%.
- Adjusted earnings per share-diluted of $2.17, an increase of 3.3%.