HERSHEY, PA. — The Hershey Co. raised its full-year sales and earnings outlook on the heels of strong demand for Halloween candy that is expected to continue into the holiday season.
The company saw “stronger than anticipated demand” in October and throughout the third quarter despite price increases, said Michele G. Buck, chief executive officer. The company’s overall average selling price increased nearly 8% in the quarter, while sales volume grew 4%.
“We anticipate this category momentum will continue in the holiday season and product is already out in stores and selling well,” Ms. Buck said during a Nov. 4 call with financial analysts to discuss third-quarter results. “Everyday trends are also expected to remain healthy as we exit the year, but with growth levels moderating as consumer behaviors continue to evolve in response to high inflation.”
Net income for the third quarter ended Oct. 2 was $399.5 million, equal to $1.94 per share on the common stock, down 9.3% from $444.9 million, or $2.14 per share, in the same period a year ago. Excluding unusual items, including derivative market-to-market losses, business realignment activities, acquisition-related activities and other miscellaneous losses, adjusted net income was $447 million, up from adjusted net income of $434.9 million a year ago.
Net sales totaled $2.73 billion, a 15.6% increase from $2.36 billion the year before. Organic, constant currency net sales increased 11.8%.
Executives at the company now expect full-year net sales growth of 14% to 15%, up from the previous guidance of 12% to 14%. Reported earnings per share growth is expected to be in the range of 11% to 13%, compared to the previous guidance of 9% to 12%.
Hershey’s North America Confectionery segment sales rose 10.4% to $2.2 billion in the third quarter, driven by a 12.6% increase in chocolate sales. Strength in chocolate was attributed to sustained on-the-go and at-home usage occasions, with instant consumables retail sales growing 11.2% and take-home retail sales growing 13.6%.
Investments to boost production across several confectionery brands and categories contributed to sales and volumes gains. Outsized growth for the Payday brand was driven by incremental capacity, with retail sales of the peanut caramel bar growing 35% in the period. Two manufacturing lines for Reese’s products came online in the quarter, contributing to a 16% increase in retail sales.
New gummy capacity also came online, producing the company’s first sealable case of Jolly Rancher Gummies.
“This critical capacity will allow us to unlock growth in the gummy segment through Jolly Rancher Gummies and the recent launch of Twizzlers Gummies, which will be in stores nationwide beginning in November,” said Steven E. Voskuil, senior vice president and chief financial officer at Hershey.
Other new products landing on shelves in November include Reese’s Big Cup Stuffed with Reese’s Puffs, Reese’s Dipped Animal Crackers, Kit Kat Birthday Cake and Jolly Rancher Lemonade Stand Gummies.
Ice Breakers Mint Crystal Gum, a sweeter take on the brand’s Ice Cubes lineup, will launch this fall amid a period of recovery for the gum category. Sales of Hershey’s gum products increased nearly 15% in the quarter, driven by less mask-wearing, while retail trends for Ice Breakers improved following supply chain challenges earlier in the year.
Hershey continued making progress on its goal of becoming a “snacking powerhouse” with offerings beyond the candy aisle, delivering another quarter of share gains for its growing North America Salty Snacks segment. Sales were $257 million, up 87% from the same period a year ago. Sales from the acquisition of Dot’s Pretzels and Pretzels Inc. were a 65.5-point benefit.
Retail sales of SkinnyPop and Pirate’s Booty increased 18% and 14%, respectively, with SkinnyPop posting a 120-point share gain in the ready-to-eat popcorn category. Both brands benefited from the back-to-school season, with retail sales of multipacks up 25% versus the prior-year period.
Increased distribution, new buyers and higher frequency among existing households drove a 34% increase in retail sales of Dot’s Pretzels. The brand gained another 200 points of share in the pretzel category following a 260-point share gain in the same period a year ago.“Dot’s core products remain strong, and we have an exciting new cinnamon sugar limited-edition flavor hitting stores now that will help generate even more consumer interest,” Ms. Buck said. “Despite higher retail prices, our Salty Snack volume trends have remained incredibly resilient and consumer units grew over 7% during the quarter, well ahead of category averages.”