(Adds analyst and company comments, byline, share rise)
By Brad Dorfman
CHICAGO, July 23 Hershey Co (HSY.N) posted
higher-than-expected quarterly sales and earnings on Wednesday
as the chocolate company benefited from an overhaul of its
supply chain and increased advertising spending, sending its
shares up 4.5 percent.
Hershey, which has been hammered by soaring commodity costs
and a loss of market share to Mars Inc, also said repeat
purchases of its Bliss chocolates, an key new product launched
in March, have exceeded expectations.
"It does seem as though the turnaround is gaining
traction," Edward Jones analyst Matt Arnold said, noting that
sales rose 5.1 percent, the company's best sales performance in
Excluding one-time charges, second-quarter earnings were 29
cents a share, a penny above analysts' average forecast,
according to Reuters Estimates.
Net income was $41.5 million, or 18 cents a share, compared
with $3.6 million, or 1 cent a share, a year earlier.
Sales rose to $1.11 billion from $1.05 billion, helped by
higher prices. Analysts' average forecast was $1.05 billion.
Hershey has been making changes in its supply chain,
including moving some manufacturing to a new plant in
Monterrey, Mexico, to try to save money.
The company spent 30 percent more on advertising and other
"brand-building" initiatives in the quarter, focusing on its
Hershey's and Reese's brands. In June, it said it would
increase advertising spending by 20 percent in each of the next
two years and focus on its most popular candies to try to
Among the products receiving extra advertising are Bliss,
an entry in the fast-growing premium chocolate market that
Hershey hopes will help it catch up to rivals who entered that
"The fact that they are seeing early success with Bliss is
a very encouraging sign," Arnold said.
Aside from spending on its U.S. business, the company is
also trying to build a larger international presence, with
joint ventures in China and India among the moves it has made.
Hershey said that while it expects earnings to rise in
2009, the increase will not meet its growth target of 6 percent
to 8 percent. It expects commodity costs and increased spending
on advertising and international expansion to cut into profit.
For 2008, the company said it still expects sales to rise 3
percent to 4 percent, with earnings at $1.85 to $1.90 a share
excluding special charges.
Hershey shares were up $1.57 to $36.52 in morning trade on
the New York Stock Exchange,
(Reporting by Brad Dorfman; Editing by John Wallace)