Hershey has forecast full-year sales and profit below estimates and said it would cut jobs that will impact less than 5% of its workforce.
The maker of Hershey's Kisses and Reese's Peanut Butter Cups said it would incur up to $60 million in costs related to severance.
Hershey said it was introducing a new multi-year productivity initiative to improve supply chain and manufacturing-related spending, optimise selling and general and administrative expenses, to generate long-term savings.
Hershey estimates that the initiative will result in total pre-tax costs of $200 million to $250 million from inception through 2026.
Despite taking several rounds of price hikes over the past two years in a bid to counter higher cocoa, sugar and labor costs, Hershey has slackened to protect its margins from higher input costs and a stronger US dollar.
Cocoa Prices
The company said it expects to see higher cocoa prices to limit earnings growth this year.
Hershey's organic sales volumes fell 6.6% in the fourth quarter, as inflation-weary customers cut back spending on the company's expensive chocolates and candies.
"Consumers are spending less during non-seasonal periods, a trend that will likely continue throughout 2024," said CFRA Research's analyst Arun Sundaram.
Rival Mondelēz International also saw its volumes take a hit in the fourth quarter as price hikes deterred customers from spending on its products, especially in the North America segment.
Hershey said 2024 net sales are expected to increase between 2% and 3% year-on-year, compared with analysts' estimates of growth of 3.4%, as per LSEG data.
It sees the annual adjusted profit per share to be flat, compared with a year earlier. Analysts were expecting adjusted earnings growth of 3.3% to $9.82 per share.
As of 31 December, 2022, the company employed about 18,075 full-time and 1,790 part-time employees worldwide, according to a regulatory filing.
