Hershey's Doubles Profits

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Hershey's Doubles Profits

HARRISBURG, Pa. -- The Hershey Co. reported higher profits and sales for its third-quarter 2008, helped as costs from a major restructuring project subsided and customers ordered extra shipments to beat a price increase in August.

In the three months ended Sept. 28, Hershey said it doubled its earnings to $124.5 million on revenue of $1.49 billion.

Sales rose 6.4 percent, partly due to customers timing extra shipments ahead of a price increase announced Aug. 15. Without the buy-in ahead of the 11 percent price increase, sales would have risen just 4 percent, the company said.

However, The Hershey Co.'s margins are still being squeezed by high commodity costs and heavy spending to try to revive two years of flat sales, and it said sales volumes will be hurt by the August price increase.

The company saw growth in its core brands and new products, which include the premium Bliss and Starbucks Chocolate brands, although sales of snacks, mint and gum products were soft in the period, according to David J. West, Hershey's president and CEO.

Halloween "is off to a good start with solid programming and merchandising in place," West said.

Additionally, the company’s 25 percent increase in advertising and promotional spending in the quarter is yielding positive results, and stemming recent market share losses, West added.

Hershey reaffirmed its 2008 forecast of sales growth of 3 to 4 percent and per-share earnings between $1.85 and $1.90, discounting one-time items.

The August price increase is expected to hurt sales volumes in 2009, dragging them down to a growth rate of 2 to 3 percent. Profits are expected to increase in 2009, but higher spending on commodities and promotions will keep profit below the long-term objective of 6 to 8 percent growth, Hershey said.