Hershey's Profit Rises On Lower Costs, Higher Prices, Ad Push

HARRISBURG, Pa. — Hershey, the nation's second-biggest candy maker, said Tuesday that its fourth-quarter sales and profits rose, helped by dropping capital costs, higher prices and a huge advertising investment behind its core Reese's and Hershey's brands.

The Hershey Co. earned $82.2 million, or 36 cents per share, in the fourth quarter, up from $54.3 million, or 24 cents per share, a year earlier, when it was spending heavily to expand overseas and streamline its domestic supply chain.

President and Chief Executive David J. West credited a 26 percent boost in advertising spending with fueling sales in spite of the impact of higher commodity costs and unfavorable foreign currency-exchange rates on pricing.

"That focus on the core (brands) is clearly paying off for us," West told analysts on a conference call. "We are more efficient and profitable by getting that core to work hard for us and we think that strategy is still working out."

The positive results capped a year in which Hershey pulled out of a two-year skid that claimed the jobs of West's predecessor and a majority of the board.

It revamped its domestic strategy to adjust to toughening competition and revive lackluster sales, and is emerging from a costly effort to shift more production to countries where labor is cheaper and consumption growth is explosive. Dairy and gas prices also have begun to ease.

Sales climbed 2.6 percent to $1.38 billion from $1.34 billion, to meet a consensus estimate of analysts by Thomson Reuters. West said sales in the fourth quarter would have been about 2 percentage points higher, but customers bought more in the third quarter to beat an August price increase.

Although overall sales volume declined, West said the company has reversed its declining market share, thanks to the advertising blitz.

Not counting 23 cents per share in charges related to its supply-chain restructuring and a charge related to trademark values, profit was 59 cents per share.

Analysts surveyed by Thomson Reuters forecast profit of 54 cents per share. The estimates typically exclude one-time items.

For all of fiscal 2008, the Hershey, Pa.-based company reported sales of $5.13 billion, up 3.8 percent from $4.95 billion in 2007. Full-year profit came to $311.4 million, or $1.36 per share, compared with $214.2 million, or 93 cents per share for 2007.

Hershey reiterated its expectations for 2009 of sales growth of 2 percent to 3 percent and profit to grow below the company's long-term goal of 6 percent to 8 percent.

Comments

[marko77]

Hershey's profits are up because they employ Mexican workers for pennies, instead of Americans. That's the only reason. Hershey's sucks.

[Caliwoman]

If you ever visited a Mexican food factory, you would not eat Hershey chocolate. Lack of labor and health standards are cheaper in the short run, until the first lawsuit for melamine or food poisoning.

[hmargret]

Hershey lost me forever...they changed their chocolate by deleting some of the cocoa butter. it doesn't taste good to me anymore. that's ok, now I buy Girardelli chocolate...which is a better product.

[jwws007]

see all the money you can make when you shift production to mexico, otherwise known as "streamlining you domestic supply chain". i stopped buying their product when they pulled that stunt

[babymonster]

Much of this must be because of all the super healthy scientific findings around chocolate.

[spartanmom]

None of Hershey's products fall into the heart healthy chocolate category. You have to eat the very darkest of the highly regulated European chocolates to get those benefits

[apoyo]

I hate the way companies keep the price the same but reduce the quantity. The package shrinks but it still costs the same. Do they think we won't notice?

[drymartini1]

its called inflation my friend. they know you notice it too.

[marijam]

I won't ever purchase Hershey's if I can help it since they moved to Mexico for production. One more American icon that isn't American any more. I'd rather have imported chocolate from anywhere else. Like Belgium.

[greyhound2]

Ditto. Hershey, a one company town, laid off about 3,200 of its workers and moved its entire production operation to Mexico where it can pay slave wages. Hershey should have to pay the unemployment and welfare costs it dumped on the county and state. Instead of a tax break for moving off-shore, they should have to pay a penalty and pay a tariff to import their chocolate bars back into the US. The Hershey management should be given the "Dick" award.

[HOPEFOCUSED]

Not entirely true . . . they have moved some production to Mexico, certainly not all of it. I believe MX is doing less than 10% of the entire company's production. There are still alot of workers working in the town of Hershey at several different facilities and those people are the ones your hurting by not purchasing their products. If you don't like the product, that's one thing, everyone has their own likes and dislikes but to not purchase their products based on incorrect information is only hurting this company. The company has had to make some difficult decisions to keep the company viable and profitable and some of those decisions have been difficult. But to the 12,000 employees still working there, they are grateful about their accomplishments in 2008. The Hershey Company's success directly affects all the children that live and go to school at the Milton Hershey School (do some research on this school to see the wonderful thing that Milton Hershey left; his legacy is so much more about this school and these kids than it is about chocolate). This is still a great American company with hardworking employees who pride themselves in making great products that consumers love. And lot's of consumers still love their products.

[drymartini1]

at least Hershey isnt asking for a bailout. unlike your auto companies...!!

[jwws007]

you're right, it's only ok for the republicans to give trillions to the banks

[Shashi0224]

Hershey's is just plain good chocolate.

[spartanmom]

Not if you really love good chocolate.

[mjb5406]

Of course, they now charge $1 for a regular Hershey bar, the same one that cost 59 cents not that long ago. When you boost prices 40% I guess it's easy to make a profit.

[ramal]

And if you have bought any Hershey Chocolates recently you know that they are adding wax or cheap chocolate or something to the product. I guess anything for a profit.

[hmargret]

that's right....it's waxy and has chalky stuff on it. but the Mexico manufacturing says it all. no more Hershey for me, thanks.