Hershey's Q3 Earnings Sour As Sales Dip And Outlook Darkens; CEO Pledges Aggressive Turnaround Amid High Cocoa Costs

The Hershey Company HSY shares are trading lower in the premarket session on Thursday.

The company reported third-quarter adjusted earnings per share of $2.34, missing the street view of $2.56. Quarterly sales of $2.987 billion (down 1.4%) missed the analyst consensus of $3.077 billion.

Organic net sales dropped 1.0%, as higher prices were offset by lower volume across segments and reduced inventory in North America Salty Snacks ahead of the ERP system rollout in the fourth quarter of 2023.

“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,” said Michele Buck, Hershey President and Chief Executive Officer.

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North America Confectionery unit gained 0.8% in the quarter under review, while North America Salty Snacks fell 15.5%, and International down 3.9%.

Adjusted gross margin was 40.3% in the quarter under review, down 460 basis points from the year-ago period.

This decline was due to higher commodity costs, timing issues, fixed cost increases, and unfavorable product mix, despite price hikes and productivity gains.

Adjusted operating profit was $654.0 million, down 13.2% in the year-ago period. This led to an operating profit margin of 21.9%, a 300 basis point decrease.

The company exited the quarter with cash and equivalents worth  $614.95 million, with net inventories worth $1.301 billion. Long-term debt as of quarter-end was $3.189 billion.

Dividend: The company announced quarterly dividends of $1.370 on the common stock and $1.245 on the Class B common stock. The dividends were declared November 6 and are payable December 16. 

Outlook: Hershey cuts FY24 adjusted earnings per share view to $9.00 – $9.10 versus $9.40 estimate (from $9.49 – $9.59). The company sees flat net sales in FY24, compared with the prior view of 2% growth.

Price Action: HSY shares are trading lower by 2.88% to $171.72 premarket at last check Thursday.

Image by Melissa from Pixabay

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