In This Article:
The Hershey Company HSY delivered impressive third-quarter 2023 results, with the top and the bottom line increasing year over year. Earnings and net sales beat the Zacks Consensus Estimate. Management reaffirmed its adjusted earnings per share (EPS) and net sales guidance for 2023.
Quarter in Detail
Hershey posted adjusted earnings of $2.60. The metric surpassed the Zacks Consensus Estimate of $2.47 and increased 19.8% year over year.
Consolidated net sales of $3,030 million rose 11.1% from the year-ago quarter’s level. The metric surpassed the Zacks Consensus Estimate of $2,963.5 million. Organic sales on a constant-currency (cc) basis increased 10.7%, fueled by price realization. Volumes rose slightly owing to the planned inventory increase across the North America Salty Snacks unit.
The adjusted gross margin came in at 44.9%, up 240 basis points (bps) year over year. The upside can be attributed to price realization and productivity gains, which offset increased manufacturing, commodity and overhead expenses. We had expected the adjusted gross margin to expand 140 bps to 43.9%.
Selling, marketing and administrative expenses rose 13.1% year over year on increased levels of media and capability investments. Advertising and related consumer marketing expenses moved up 20%, with elevated investments across segments. Selling, marketing and administrative expenses, excluding advertising and related consumer marketing, increased by 9.9% due to wage and benefits inflation, capability and technology investments.
The adjusted operating profit of $753.4 million rose 22.4%. The adjusted operating profit margin rose 230 bps to 24.9%. The upside can be attributed to favorable price realization and productivity gains, somewhat negated by supply-chain inflation and elevated brand and capability investments. We had expected the metric to expand 70 bps to 23.3%.
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Segment Details
The North America Confectionery segment’s net sales increased 9.9% year over year to $2,457.6 million. Organic net sales at cc rose 10.1% due to net price realization, partly hurt by soft volumes. We had expected segment sales to increase 7.3% year over year to $2,398.6 million.
The company’s U.S. candy, mint and gum (CMG) retail takeaway for the 12-week ended Oct 1, 2023, rose 2.5% (in multi-outlet plus convenience store channels or MULO+C). CMG’s shares have declined by about 120 bps due to an adverse category mix and a rise in competitive innovation. The segment’s income advanced 19.9% to $847.5 million.
The North America Salty Snacks segment’s net sales jumped 25.5% from the year-ago quarter’s level to $345.2 million. The upside can be attributed to favorable price realization and volumes. We had expected the segment sales to increase 7.8% to $296.5 million.
Hershey's U.S. salty snack retail takeaway for the 12 weeks ended Oct 1, 2023, in MULO+C remained flat year over year. The segment’s income advanced 29% to $57.4 million.
Net sales in the International segment grew 4.4% to $227.2 million. At cc, organic net sales fell 1.2% due to soft volumes. We had expected the segment sales to increase 13.7% to $247.5 million. The segment’s profit was $31.7 million, down by $3.7 million from the year-ago period’s reported figure.