Hershey Company reports key upturn with fourth quarter results
The Hershey stand at this year's Sweets & Snacks Expo. Pic: Neill Barston
The Hershey Company has released its latest fourth quarter results of $2,652,338 net sale, amounting to a 14% year-on-year improvement, owing to buoyant sales in the category, despite a backdrop of challenging market conditions including ingredients inflation, reports Neill Barston.
As the business reported, the bulk of its activity remains in North America, registering 2.1 billion sales for the region, plus a further $271,000 generated by snacks for the US, and its wider international operations delivered $205,000 during the past three months.
Furthermore, fourth-quarter 2022 reported operating profit of $526.6 million increased 14.7%, resulting in an operating profit margin of 19.9%, an upturn of 20 basis points versus the prior-year period.
Notably, Michele Buck, chairman and CEO of the company hailed the latest figures as some of the strongest on record, as the firm appointed a new vice president last month, as well as proposals to operate its European division as a completely standalone entity.
“In 2022, the Hershey Company delivered one of its strongest years in history despite record inflation, continued supply chain disruptions and macroeconomic uncertainty for many consumers. The Hershey Company Chairman and Chief Executive Officer. “It took tremendous hard work, perseverance, and agility from every one of our employees and partners, and I couldn’t be prouder of what we have accomplished or more excited for what lies ahead. We expect to deliver another year of strong sales and earnings growth in 2023 as we invest in our amazing portfolio of brands, additional capacity and capabilities,” enthused the CEO of its performance.
While the company delivered an encouraging set of final quarter results, it has faced challenges in recent months, with business coming under the microscope as among a number of leading companies named in a Consumer Reports study that claimed high levels of cadmium in dark chocolate ranges. The company has not directly responded to the allegations, but US-based National Confectioners Association moved to issue a response, stating that businesses in its membership complied with existing strict safety standards.
On its latest results, notably, the company reported gross margin decreased 30 basis points to 43.2% in the fourth quarter of 2022. This was reportedly driven by broad-based cost of goods inflation, including commodity mark-to-market losses, higher manufacturing costs and labor investments, and unfavourable portfolio mix, which was partially offset by higher organic net sales growth. Adjusted gross margin increased 20 basis points to 43.7% in the fourth quarter of 2022. Net price realisation and volume gains drove gross margin expansion, which was partially offset by raw material and packaging inflation, higher labor costs, increased manufacturing costs related to higher-than-anticipated demand, and unfavourable portfolio mix.
Selling, marketing and administrative expenses increased 11.5% in the fourth quarter of 2022 versus the prior-year period, primarily driven by higher corporate expenses. Advertising and related consumer marketing expenses increased by 3.3% in the fourth quarter of 2022 versus the same period last year. Higher levels of advertising were driven by Reese’s and Jolly Rancher brands in response to incremental capacity, which was partially offset by cost efficiencies related to new media partners. Selling, marketing and administrative expenses, excluding advertising and related consumer marketing, increased 15.4% versus the fourth quarter of 2021.