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Hershey sweetens annual profit forecast even as demand wavers

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© Reuters. FILE PHOTO: An employee shows a Hershey’s chocolate bar made in USA in the “American lifestyle” store in Berlin, Germany, August 13, 2018. REUTERS/Fabrizio Bensch/File Photo

By Mehr Bedi

(Reuters) -Hershey raised its full-year adjusted profit forecast on Thursday, bolstered by price increases for the Reese’s peanut-butter cups maker’s chocolates and candy even as demand starts to falter.

Big names in the packaged food industry, including Kellogg (NYSE:), Coca-Cola (NYSE:) Co and Hershey, have hiked product prices multiple times over the past year to counter a jump in costs of everything from ingredients to transportation caused by supply chain snags that were compounded by the Russia-Ukraine war.

Hershey has benefited from the price increases, boosting the chocolatier’s bottom-line and margins, but it also saw a 2.7% decline in volumes in the second quarter.

“As we look at volume in the back half, year-over-year, we expect it to be down, but it really is price driven,” Chief Financial Officer Steven Voskuil said on an earnings call.

Amid pushback from the price increases, the candy maker is making efforts to appeal to budget-conscious shoppers. The company is in discussions with dollar stores to introduce Dot’s Pretzels as part of an effort to grow the brand beyond its core Midwestern base.

“The quarter wasn’t quite as strong as the EPS beat implied,” JP Morgan analyst Ken Goldman said, flagging a weaker performance in the Salty Snacks division than what the company anticipated.

Shares of Hershey, which also increased its quarterly dividend by 15%, fell 1.5% in early morning trade.

Net sales of $2.49 billion in the quarter fell short of analyst expectations of $2.50 billion, but the company still expects to meet its previous forecast of approximately 8% net sales growth in 2023.

The Pennsylvania-based company now expects full-year adjusted profit per share to increase to between $9.46 and $9.54, compared with its prior forecast of about $8.52.

Excluding items, it earned $2.01 per share for the quarter, above estimates of $1.91 per share.

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