Hershey Sales Rise Nearly 4 Percent

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Hershey Sales Rise Nearly 4 Percent

HERSHEY, Pa. -- The Hershey Co. saw fourth quarter and full-year 2008 net sales increase 2.6 percent and 3.8 percent, respectively, as the candy maker focused on core brands.

Hershey's fourth-quarter consolidated net sales were $1.377 billion, compared to $1.342 billion for the fourth quarter of 2007. Reported net income was $82.1 million, compared to $54.3 million for the comparable 2007 period.

"Hershey's strong fourth-quarter results represent a solid end to the year and further validate our strategy of focusing investment on core brands," said David J. West, president and CEO. "Net sales increased by 2.6 percent, driven primarily by pricing, offset somewhat by the impact of unfavorable foreign currency exchange rates and sales volume declines, primarily in the United States."

The results were also dampened by the shift of approximately 2 percentage points of net sales growth into the third quarter, due to the timing of a buy-in related to the August price increase, he said in a statement.

Core brand strength was attributable to increased advertising and retail effectiveness, with U.S. advertising expenses up 26 percent in the fourth quarter, West noted. Focused investment behind the Reese's and Hershey's brands delivered an 8-percent gain on retail takeaway for these franchises, in the channels that account for more than 80 percent of Hershey's retail business.

"Fourth-quarter profitability was slightly ahead of our expectations," he said. "We benefited from net price realization, better-than-expected volume and mix trends compared to our initial estimates associated with the August price increase, and supply chain savings. These gains were substantially offset by higher input costs and greater levels of investment spending in the U.S. and key international markets."

For the full year 2008, consolidated net sales were up 3.8 percent to $5.13 billion. Reported net income for 2008 was $311.4 million, compared to $214.1 million for 2007. Net income from operations was $133.8 million for the quarter, compared to $124.1 million the year before.

"The financial market and credit crisis has not had a material effect on our business operations or liquidity to date. However, the increase in our cost structure and uncertainties in the financial markets and in the broader economy present challenges as we head into 2009," the CEO said. "Despite these issues, we'll continue to invest in our core brands in the U.S. and key international markets to build on our momentum. Specifically, advertising is expected to increase $30 million to $35 million in 2009. These cost increases will be more than offset by higher net pricing, savings from the Global Supply Chain Transformation program and on-going operating productivity improvement."

For 2009, Hershey expects net sales growth of 2 percent to 3 percent, as pricing actions and core brand sales growth are partially offset by lower volumes and the impact of unfavorable foreign currency exchange rates, the company said.