Hershey’s third-quarter income falters as shipping costs rise

The Hershey Company’s third-quarter profits were hit by rising operating costs and lower sales prices, despite the company registering a rise in net sales.

The maker of Hershey’s chocolate and Reese’s Pieces’ overall net sales rose to $2.08 billion, an increase of 2.3% year-on-year, and the company registered net sales of $1.84 billion in North America in the quarter, an increase of 2.9% versus the same period last year.

However, the company’s net income fell to $263.7 million and operating profit fell to $406.3 million as higher shipping costs, the rising price of ingredients and low retail prices bit into the company’s quarterly profits.

Sales across the company’s US candy, mint, and gum portfolio have risen in the last few weeks in the build-up to Halloween, growing 2.5% in the four weeks to 14 October 2018.

The company anticipates that sales will increase further in its fourth-quarter, as it expects that confectionery sales will increase in the build-up to Christmas.

Michele Buck, The Hershey Company president and CEO said: “We remain on track to achieve the financial targets we shared earlier this year, and I am pleased with the progress we are making against our key strategic focus areas.

“Our US core confection retail takeaway and share trends are sequentially improving, in line with our expectations, driven by strong Halloween results and distribution gains on core items.

“The addition of Pirate Brands strengthens our brand portfolio and marks our second high-growth, high-margin acquisition this year to capture incremental snacking occasions.

“Our International business continues to deliver profitability improvements while driving strong constant currency organic sales growth.

“Importantly, we are achieving these results while staying true to our values and purpose, as evidenced by being named to the Dow Jones Sustainability World Index for the 6th consecutive year.”

Hershey has been moving away from its core confectionery business with several acquisitions in the recent past.

In December 2017, Hershey agreed to buy former SkinnyPop popcorn owner Amplify Snack Brands in a deal worth around $1.6 billion.

Hershey also agreed to acquire snack company Pirate Brands in September for $420 million, in order to further expand its snacking portfolio.