- The Hershey Company reported Thursday that its third-quarter income rose 2.3% to $283.65 million, or $1.33 per share, compared with $277.35 million, or $1.29 per share, in the same period last year. Sales were up 1.5% to $2.03 billion, compared to $2 billion for the third quarter of 2016.
- The Pennsylvania-based company also announced Thursday that its board had approved a $100 million stock repurchase authorization. "Hershey's solid balance sheet and strong cash flow generation gives the company continued flexibility against its cash priorities, including returning cash to shareholders in the form of buy backs and dividends while also being able to participate in opportunistic merger and acquisition activity," according to the company's statement.
- "We're executing against the right strategies and investing in the brands and channels that will continue to drive our business forward," President and CEO Michele Buck said in the report. "Hershey's solid third-quarter results were in-line with our expectations and we are on track to deliver on the goals we established earlier this year, including, core brand growth, the launch of successful innovation and progress against our multi-year productivity and cost savings initiatives."
Snack products continue to be the sweet spot for Hershey in its latest earnings report. The company noted that net sales growth in the third quarter was driven by a 1.6% bump in its North America segment, particularly brand innovations such as Hershey's Cookie Layer Crunch and the launch of Hershey's and Reese's Popped Snack Mix and Chocolate Dipped Pretzels.
Buck, who became president and CEO in March of this year, has advocated innovations and new product measures as keys to the iconic brand's growth, and her strategy appears to be working. At the same time, she noted that investments in the company's core chocolate brands — Reese's, Hershey's, Kit Kat and Kisses — are resonating with consumers.
The company has had to adjust to higher freight rates and manufacturing and distribution costs, which it said more than offset some supply chain productivity and cost saving initiatives. Transition to new packaging formats, such as stand-up bags to increase shelf visibility, has also pressured the company's gross margin. Hershey earlier announced plans to deliver all its packaged chocolate candy brands in display-ready cases by the end of July to make packaging simpler for retailers to handle both during the shipping and stocking process.
Hershey has also zeroed in on cost-cutting measures at a time when retailers are shrinking their center store sections and consumers are shifting to healthier products. The company’s “Margin for Growth” restructuring initiative plans to boost profit margins by trimming administrative expenses and streamlining the supply chain. Hershey announced in March it would cut 15% of its global workforce over three years, with most being part-time workers in the international division. Thursday's report made no mention of progress in this initiative.
In the fourth quarter, the company plans to launch a new Hershey's Gold product, which is a caramelized crème with peanuts and pretzels. That, along with Halloween and Christmas seasonal plans, should deliver on its net sales growth target of about 1.25% for this year and an increase of about 25 basis points in its adjusted gross margin.
While Hershey has been mentioned as a potential bidder for Nestlé's candy business, it hasn't made plans public, although the report indicates M&A activities could be forthcoming. Mondelez International and Godiva's parent company Pladis have already passed on the potential purchase.
It's more likely Hershey will look around for smaller acquisitions to complement Buck's stated goal of diversifying the company's portfolio and helping it continue to become an "innovative snacking powerhouse."