Hershey forecasts full-year sales above estimates on resolute demand

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[1/2] An employee shows a Hershey's chocolate bar made in USA in the "American lifestyle" store in Berlin, Germany, August 13, 2018. REUTERS/Fabrizio Bensch

Feb 2 (Reuters) - Hershey Co (HSY.N) forecast full-year net sales and profit above analysts' estimates on Thursday, after beating holiday-quarter expectations on steady demand for the company's candy and chocolates despite price increases.

Shares of the Pennsylvania-based company rose 1.6% to $228.29.

Hershey, like Cadbury chocolate maker Mondelez International Inc (MDLZ.O), has seen little pushback to a cost-inflation induced increase in prices in the United States, as consumers remain willing to pay more for their favorite candy brands instead of trading down to cheaper alternatives.

Hershey Chief Executive Officer Michele Buck also said inflation-hit shoppers are choosing to divert more of their expenditure to snacks and confectionary items rather than dining out.

"As a result, we believe snacks and confection trends will continue to pace ahead of other food categories, and our planned increases in advertising levels, supported by higher production capacity, are expected to further bolster Hershey's growth and help offset price elasticity," Buck said.

Hershey, the maker of Kisses chocolates and Jolly Rancher lollipops, said it expects full-year 2023 net sales to grow between 6% and 8%, compared with analysts' estimates of an 5.6% increase, according to Refinitiv data.

It expects 2023 adjusted profit per share to grow by 9% to 11%, compared with analysts' estimates of a 5% increase.

"(We) see these results also as part and parcel of the broader industry trend of still-elevated sales growth, modest elasticity, and pricing catching up to costs," said Andrew Lazar, analyst at Barclays.

The Reese's Peanut Butter Cup maker's revenue for the holiday quarter ended Dec. 31 rose 14% to $2.65 billion, beating analysts' estimates of $2.58 billion.

The company's organic sales increased 10.7%, with higher prices driving 8.5 points of the gain, and increased volumes accounting for the rest.

Reporting by Uday Sampath in Bengaluru; Editing by Krishna Chandra Eluri

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Uday has been reporting on U.S. retail and consumer companies for over five years and has written multiple analysis pieces on the space, including about a flurry of mergers in the toy industry, how an aging population benefited the golf industry and how weak sales from retailers spooked global markets. Uday has a bachelor's degree in commerce from Christ University Bangalore, India.

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