Reuters logo
Hershey falls after profit warning, price hike
August 18, 2008 / 3:19 PM / 9 years ago

Hershey falls after profit warning, price hike

<p>A woman shops inside the Hershey Store in New York June 17, 2008. REUTERS/Shannon Stapleton</p>

CHICAGO (Reuters) - Shares of chocolate maker Hershey Co (HSY.N) fell nearly 10 percent on Monday after the company warned that full-year profit would be toward the lower end of its previously forecast range.

The company also announced a price increase of roughly 10 percent in the United States on Friday afternoon, as it tries to cope with higher costs for cocoa, corn sweetener, sugar and peanuts.

Citigroup downgraded Hershey to “hold” from “buy” in a research note dated Sunday.

“We believe Hershey still has issues that need fixing and see the stock price as reflecting the good news that came out of the second-quarter earnings report,” analyst David Driscoll said in a research note. He added that ConAgra Foods Inc (CAG.N), H.J. Heinz Co HNZ.N, General Mills Inc (GIS.N) and Kellogg Co (K.N) were more compelling investments in the food sector, with less risk than Hershey.

Hershey had stood by the earnings forecast less than a month ago, when it posted second-quarter earnings that beat analysts’ estimates.

Like other food companies, Hershey is facing rising commodity costs. But it has also lost market share to rival Mars Inc and is spending money to develop and promote new products.

At the same time, Hershey is overhauling its supply chain, switching some manufacturing to a new plant in Mexico.

Goldman Sachs analyst Judy Hong repeated her “sell” rating for Hershey in a note dated Sunday and said the price increases were likely to hurt the company’s sales volume.

Hershey shares were down $4, or 9.6 percent, at $37.62 in morning New York Stock Exchange trade. The stock is down 4.5 percent this year, compared with a 5.6 percent increase in the Standard & Poor’s U.S. packaged foods index .15GSPFOOD.

Reporting by Brad Dorfman; Editing by Lisa Von Ahn

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below