Hershey Revises 2006 Expectations
The Hershey Co. last week said slower-than-anticipated improvement in the U.S. marketplace and the financial impact related to the product recall and temporary plant closure in Canada, has led to lower earnings expectations for 2006.
"While we're seeing areas of improvement in the U.S. retail marketplace, particularly with selected new products and across key customers, the progress is below expectations," said Richard H. Lenny, chairman, president and CEO. "Further, the costs and business disruption associated with the product recall in Canada have placed additional pressure on the business. Therefore, we now anticipate net sales growth for 2006 to be slightly below our long-term 3- to 4-percent range and the increase in diluted earnings per share from operations to be in the mid-single digits.
"Over the past five years, we've delivered strong financial performance through a combination of new products, superior retail execution and solid expense control," he continued. "We've expanded Hershey's leadership position within an attractive, on-trend category. In 2006, however, we haven't executed the types of competitively advantaged consumer and customer programs that are required to deliver superior sales and marketplace performance. This must and will change for 2007."
Next year, Hershey plans to revitalize its core brands through increased consumer and customer support. "We're making progress in shifting our growth strategy from line extensions and new varieties to innovative platforms," Lenny said. "These platforms capitalize on consumer insights, and thus represent more sustainable growth arenas, as evidenced by our success in dark chocolate and refreshment. This portfolio transformation will accelerate next year. In addition, we're pursuing opportunities in selected high potential global markets representing attractive sources of growth.
"While we're seeing areas of improvement in the U.S. retail marketplace, particularly with selected new products and across key customers, the progress is below expectations," said Richard H. Lenny, chairman, president and CEO. "Further, the costs and business disruption associated with the product recall in Canada have placed additional pressure on the business. Therefore, we now anticipate net sales growth for 2006 to be slightly below our long-term 3- to 4-percent range and the increase in diluted earnings per share from operations to be in the mid-single digits.
"Over the past five years, we've delivered strong financial performance through a combination of new products, superior retail execution and solid expense control," he continued. "We've expanded Hershey's leadership position within an attractive, on-trend category. In 2006, however, we haven't executed the types of competitively advantaged consumer and customer programs that are required to deliver superior sales and marketplace performance. This must and will change for 2007."
Next year, Hershey plans to revitalize its core brands through increased consumer and customer support. "We're making progress in shifting our growth strategy from line extensions and new varieties to innovative platforms," Lenny said. "These platforms capitalize on consumer insights, and thus represent more sustainable growth arenas, as evidenced by our success in dark chocolate and refreshment. This portfolio transformation will accelerate next year. In addition, we're pursuing opportunities in selected high potential global markets representing attractive sources of growth.