Hershey targets cutting $300 million in costs as annual forecasts disappoint
Reuters
Published Feb 08, 2024 07:45AM ET
Updated Feb 08, 2024 03:36PM ET
By Granth Vanaik
(Reuters) -Hershey on Thursday outlined a new two-year restructuring program that would generate about $300 million in pre-tax savings after projecting annual sales and profit below Wall Street expectations.
The Reese's Peanut Butter Cups maker's announcement helped shares reverse course to rise about 6% in early trading.
The restructuring will impact less than 5% of the company's workforce and will result in up to $60 million in severance expenses.
Meanwhile, fourth-quarter net sales of $2.66 billion missed estimates of $2.71 billion. Organic sales volumes fell 6.6% as inflation-weary customers cut back spending on the company's expensive chocolates and candies.
"Consumers are spending less during non-seasonal periods, a trend that will likely continue throughout 2024," said CFRA Research's Arun Sundaram.
Cadbury chocolate maker Mondelez (NASDAQ:MDLZ) International also posted volumes drop in the fourth quarter as price hikes deterred customers from spending on its products.
Hershey said 2024 net sales are expected to increase between 2% and 3% year-on-year, compared with analysts' estimates of growth of 3.4%, as per LSEG data.
It sees the annual adjusted profit per share to be flat, compared with a year earlier. Analysts were expecting adjusted earnings growth of 3.3% to $9.82 per share.
CEO Michele Buck said Hershey expects higher cocoa prices to limit its earnings growth this year.
The company, which raised its quarterly dividend by 15%, had about 18,075 full-time and 1,790 part-time employees worldwide, as of end 2022, according to a filing.
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Written By: Reuters
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