Despite price increases, the company said there was a steady demand for its candy and chocolates and it expects full-year 2023 net sales to grow between 6% and 8%, compared with analysts' estimates of a 5.6% increase, according to Reuters.
In its 2023 Full-Year Financial Outlook Summary, Hershey said it expects net sales growth to be driven primarily by net price realization as consumer demand remains steady behind higher advertising levels and increased capacity.
Sales growth and gross margin expansion are expected to more than offset increased brand, capability and technology investments, as well as higher pension and interest expenses, to drive projected reported earnings per share growth of 11% to 15% and adjusted earnings per share growth of 9% to 11%.
"In 2022, the Hershey Company delivered one of its strongest years in history despite record inflation, continued supply chain disruptions and macroeconomic uncertainty for many consumers," said Michele Buck, The Hershey Company Chairman and Chief Executive Officer.
"It took tremendous hard work, perseverance, and agility from every one of our employees and partners, and I couldn't be prouder of what we have accomplished or more excited for what lies ahead. We expect to deliver another year of strong sales and earnings growth in 2023 as we invest in our amazing portfolio of brands, additional capacity and capabilities."
North America Confectionery
Hershey has seen little pushback to a cost-inflation-induced increase in prices in the United States, as consumers remain willing to pay more for their favourite candy brands instead of trading down to cheaper alternatives, Reuters reported.
Domestic confectionery segment net sales were $2,174.8 million in the fourth quarter of 2022, an increase of 9.7% versus the same period last year. Organic, constant currency net sales increased 10.2% primarily driven by net price realization, along with modest volume gains from strong consumer demand.
Hershey's US candy, mint and gum (CMG) retail takeaway for the 12-week period ended 1 January, 2023 in the multi-outlet combined plus convenience store channels (MULO+C) increased 10.7%.
Unit pricing was the primary driver of retail sales growth, while consumer demand remained resilient with volumes declining modestly. Growth was strong across segments, with chocolate retail sales growth of 10.6%, sweets retail sales growth of 12.8% and refreshment retail sales growth of 10.8%. Strong consumer engagement for the Halloween and Holiday seasons also contributed to this growth. CMG share declined by 54 basis points due to category mix headwinds and capacity constraints on seasonal products.
North America Confectionery segment income was $703.5 million in the fourth quarter of 2022, reflecting an increase of 12.9% versus the prior-year period. This resulted in segment margin of 32.3%, an increase of 90 basis points. Net price realization, volume gains and media cost efficiencies more than offset broad-based inflation, increased manufacturing and labour costs, and higher levels of brand and capability investments to drive segment income and margin expansion in the fourth quarter.
Fourth-quarter 2022 net sales for Hershey's International segment increased 11.1% versus the same period last year to $205.6 million. Organic, constant currency net sales increased 9.3% driven by strong consumer demand across geographies, along with modest net price realization.
Fourth-Quarter 2022 Financial Results Summary
• Consolidated net sales of $2,652.3 million, an increase of 14.0%.
• Organic, constant currency net sales increased 10.7%.
• The impact of acquisitions on net sales was a 3.6-point benefit2 while foreign currency exchange was a 0.3-point headwind.
• Reported net income of $396.3 million, or $1.92 per share-diluted, an increase of 18.5%.
• Adjusted earnings per share-diluted of $2.02, an increase of 19.5%.
2022 Full-Year Financial Results Summary
• Consolidated net sales of $10,419.3 million, an increase of 16.1%.
• Organic, constant currency net sales increased 12.0%.
• The net impact of acquisitions on net sales was a 4.3-point benefit4 while foreign currency exchange was a 0.2-point headwind.
• Reported net income of $1,644.8 million, or $7.96 per share-diluted, an increase of 12.0%.
• Adjusted earnings per share-diluted of $8.52, an increase of 18.5.