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Hershey Cuts Annual Forecast As Higher Prices Dent Demand

By Reuters
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Hershey Cuts Annual Forecast As Higher Prices Dent Demand

Hershey trimmed its annual revenue and profit forecasts after missing Wall Street estimates for third-quarter, as repeated price hikes have dampened demand for its chocolates, confectionery, and salty snack products.

Chocolatiers, including Hershey, have raised prices to maintain profit margins amid rising raw material costs, particularly cocoa leading to a consumer pushback.

Additionally, shifting trends, including a generational pivot to non-chocolate confections, have eroded the Pennsylvania-based company's chocolate-dependent sales.

Packaged food peer Kraft Heinz also cut its annual forecast last week, despite a third-quarter profit beat, as consumers shifted to cheaper, private-label alternatives.

Hershey aims to generate $300 million in savings by 2026 through cost-cutting measures and price hikes to offset rising cocoa prices and boost margin growth.

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'Challenging Consumer Environment'

"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," CEO Michele Buck said.

The company, one of the largest chocolate manufacturers in the world, anticipates full-year net sales growth to be flat, a revision from its prior estimate of about 2%.

Hershey forecasts annual adjusted earnings per share to decrease by mid-single digits, rather than the slight decline previously expected.

In the third quarter, organic prices rose 2%, while organic volume decreased by 3%, while total net sales fell 1.4% to $3 billion, missing analysts' average estimate of $3.08 billion, according to data compiled by LSEG.

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Excluding certain items, the company earned $2.34 per share in the third quarter, below estimates of $2.56.

Elsewhere, Swiss chocolate maker Barry Callebaut posted annual profit growth as it managed to pass on surging cocoa prices to customers, but said it expects a second straight year of flat sales volumes as prices of the key ingredient remained high.

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