Hershey Hurt by Overseas Weakness, Currency Headwinds


Hershey Co. on Friday said that revenue was about flat in the June quarter because of continuing weakness abroad and the strengthening of the dollar. However, earnings beat Wall Street expectations. "Results were adversely impacted by international performance, primarily in China. As previously stated, macroeconomic challenges and changing consumer shopping behavior in China were a headwind," said Chief Executive John Bilbrey. During the quarter, increased promotional spending—mainly in China—and foreign currency fluctuations were a 2.3 point and 1.3 point headwind, respectively. Hershey had previously attributed the weakness in part to declining consumer confidence in China on mixed macroeconomic data, where it has seen many packaged goods categories declined. Mr. Bilbrey added that weakness in North America should be somewhat fixed by the rollout of new products—such as Brookside Fruit and Nut Bars and Hershey's Snack Bites—as well as seasonally stronger orders in the Halloween and holiday period. The maker of America's top-selling chocolate brand, Reese's, as well as its namesake candy bar, has struggled with sluggish sales in certain U.S. stores and international markets, on top of rising costs for ingredients such as dairy and cocoa. In June, the company said it would cut about 300 jobs as part of a plan to simplify its business and it lowered its sales and earnings forecasts for the year as it continues to struggle with weak sales in China. Hershey said it is also reassessing the value of Shanghai Golden Monkey, including the remaining 20% that the U.S. company is scheduled to buy in September. Hershey agreed to buy the Chinese candy maker in late 2013 for nearly $500 million. It also is transitioning to using simpler and fresher ingredients, a move that comes after a similar announcement by rival Nestlé SA. Overall, Hershey posted a loss of $99.9 million, or 47 cents a share, compared with a profit of $168 million, or 78 cents a share, a year earlier. Excluding special items, earnings were 78 cents a share. Sales were about flat at $1.58 billion. Analysts polled by Thomson Reuters had expected per-share earnings of 75 cents on $1.62 billion in revenue. Shares, inactive premarket, have fallen 11% this year through Thursday's close

Continue Reading Below