Understanding Hershey’s Consistent Performance amid the Slowdown
Sales continue to grow despite challenges
Hershey (HSY) is another food stock that has been consistent with its sales performance, despite the recent slowdown in the packaged food industry. Hershey’s iconic brands, its ability to increase prices, its stringent cost controlling measures, and its supply chain productivity initiatives have helped it report stellar bottom-line growth.
Hershey is generating strong growth in North America, while peers Mondelēz (MDLZ), Kellogg (K), Kraft Heinz (KHC), and Conagra Brands (CAG) have struggled in this domestic market as the consumer shift toward well-being foods has taken a toll on sales.
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Notably, the confectionery category is still witnessing stable demand in the overall food industry, which helps the sales of companies like Hershey and Mondelēz. But the rate of growth has slowed down.
By comparison, Hershey has been producing balanced top- and bottom-line growth, which sets it apart from Mondelēz, whose sales have been affected by a recent cyberattack and by lower volumes of crackers and gum in North America.
Hershey is projected to gain market share in the US (SPY) in coming quarters, as the company’s planned product pipeline, supported by increased marketing, should help it generate additional sales. However, the shift in timing of shipments to the second quarter is likely to affect its sales in the US.
HSY’s management expects sales in North America to remain flat for the rest of the year and has lowered its full-year sales growth projection. Hershey now expects its sales to rise 1% in 2017, down from its earlier guidance range of 2%–3%.
Still, Hershey’s sales will likely continue to benefit from recent product launches, including Reese’s and Hershey’s Crunchers candies, Hershey’s Cookie Layer Crunch bars, and Reese’s Crunchy Cookie Cups. Meanwhile, the company’s merchandising and display strategies in stores and focus on sales-driving events for Halloween and the holidays could further support its top-line growth.