Hershey has reported first-quarter net sales of $2.02 billion – 2.3% stronger than the same period last year – though net income fell by more than 13%.
Consolidated net sales were up against the $1.97 billion recorded in the first quarter of last year, while net income fell from $350.2 million to $304.4 million.
The chocolate maker expects full-year net sales growth in the range of 1-3%, with a 0.5 point benefit from acquisitions and divestitures: last year, Hershey paid $420 million for the owner of snack brands Pirate’s Booty and Smart Puffs, as well as divesting Tyrrells to KP Snacks.
Despite the decline in reported net income, the figures released this morning by Hershey still represent a 0.8 point increase in adjusted gross margin – prompting shares in the company to jump by more than 10% in pre-market trading.
Hershey CEO Michele Buck said: “Our year has gotten off to a strong start and we are on track to deliver our financial commitments. We remain committed to delivering balanced growth today, while making key investments in our brands, capabilities and people to take the business to the next level in the future.”
Region-by-region breakdown
In North America, media and production efficiency gains enabled by new capabilities drove double-digit consumer impression growth through modest dollar spend increases. Advertising and related consumer marketing expense declined 0.8% in the first quarter of 2019 versus the same period last year, driven primarily by the continued right-sizing and timing of investments in Hershey’s ‘international and other’ reporting segment.
Hershey’s North America net sales were $1.8 billion in the first quarter of 2019, an increase of 3.2% versus the same period last year. Volume was a 1.4 point benefit, net price realisation was a 0.4 point benefit, and foreign currency exchange rates were a 0.2 point headwind.
Outside North America, first-quarter net sales decreased by 4.9% to reach $209.5 million. Divestitures and foreign currency exchange rates were a 4.6 point and 3.5 point headwind respectively. Volume was a 4.0 point benefit and net price realisation was a 0.8 point headwind. Combined organic constant currency net sales growth in Mexico, Brazil, India and China was approximately 3%.
Income increased by 14.5% to $20.2 million, driven by gains from volume growth, gross margin expansion and selling, marketing and administrative expense reductions as the company continued to execute against its ‘Margin for Growth Program’ initiatives.
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