Hershey's sales fall in first quarter

April 24, 2008 6:46:15 PM PDT
Hershey's first quarter wasn't so sweet, with the nation's largest candymaker reporting that sales remained flat, profits fell by a third and results missed analyst expectations. The Hershey Co. said Thursday it was hurt by an early Easter holiday and the discontinuation of one of its mint lines, Ice Breakers Pacs, as dairy and cocoa costs continue to rise and it increases promotional spending in an effort to revive foundering sales.

President and Chief Executive David J. West said the company has laid the groundwork for improved results later this year, as Hershey struggles to pull out of a funk that dates back to 2006 and regain market share it lost to its closest competitor, Mars Inc.

"We are making progress," West told analysts on a conference call. "While it is slower than we would like, we do see the signs of improving marketplace trends."

The company hit its operating profit goals, and plans to increase promotional spending to bolster the March rollout of its new high-end Hershey's Bliss and Starbucks products that the company hopes will raise Hershey's profile in the expanding premium chocolate segment, West said.

Edward Jones analyst Matt Arnold said he expects the company's performance to improve as it benefits from reshaped supply lines and moderating dairy prices.

"They're doing a number of things to make this year a year of stabilization and then from there, longer term, they can resume the track record they have of being a strong confectionery franchise with a good growth profile," Arnold said.

The Hershey, Pa.-based maker of Hershey's Kisses and Reese's said it earned $63.2 million, or 28 cents a share, for the three months ended March 30. That compares with last year's first-quarter profit of $93.5 million, or 40 cents a share.

Discounting charges of $30.7 million, largely to streamline its supply chain, Hershey said it would have earned $83.9 million, or 37 cents a share, in this year's first quarter.

That was below the 39 cents per share consensus estimate of analysts polled by Thomson Financial. Estimates typically exclude one-time charges.

First-quarter sales were $1.16 billion, up slightly from $1.15 billion a year ago. Analysts had projected revenue of $1.17 billion.

Hershey shares fell 48 cents, or 1.4 percent, to close at $34.75 Thursday.