Hershey’s Releases Financial Results for Q4 and Full Year 2023 Offers Projections for 2024

We are navigating a dynamic landscape, but the enduring appeal of seasonal traditions and positive consumer response to our innovations within various categories are promising,” stated Michele Buck, President and CEO of The Hershey Company. “Although historic cocoa prices may constrain earnings growth this year, we remain confident that our robust marketing strategies, focus on innovation, and brand investments will propel top-line growth and cater to evolving consumer preferences. We are intensifying our efforts on productivity and transformation to fortify our business and deliver outstanding performance in the long term.”

Fourth-Quarter 2023 Financial Results Overview

  • Consolidated net sales reached $2,657.1 million, marking a slight increase of 0.2%.
  • Organic, constant currency net sales experienced a marginal decline of 0.1%.
  • Reported net income totaled $349.0 million, or $1.70 per share-diluted, representing a decrease of 11.5%.
  • Adjusted earnings per share-diluted remained steady at $2.02, unchanged from the previous year.

2024 Full-Year Financial Outlook Highlights

The company anticipates:

  • Net sales growth of 2% to 3%, primarily driven by net price realization.
  • Reported earnings per share to remain relatively flat due to elevated cocoa and sugar costs, along with one-time expenses related to the Q2 ERP implementation and planned incremental cost savings initiatives.
  • Flat adjusted earnings per share when excluding one-time costs associated with the ERP implementation and incremental cost savings initiatives.
  • Reported and adjusted effective tax rate of approximately 13%.
  • Other expense of around $220 million to $230 million, primarily reflecting the write-down of equity investments eligible for a tax credit.
  • Interest expense of about $165 million to $175 million, reflecting a higher interest rate environment.
  • Capital expenditures of approximately $600 million to $650 million, driven by core confection capacity expansion and digital infrastructure investments including the new ERP system.

Efforts are underway to enhance agility, automation, and efficiency, aiming to achieve long-term business and financial objectives. These initiatives are expected to generate ongoing supply chain, manufacturing, and operating expense savings, net of reinvestment, of $300 million by 2026, with $100 million expected to be realized in 2024. The company foresees pre-tax charges of $200 million to $250 million associated with these efforts, with around $25 million estimated as non-cash charges in Year 1.

Fourth Quarter 2023 Results Highlights

  • Consolidated net sales increased slightly to $2,657.1 million, with organic, constant currency net sales decreasing marginally by 0.1%.
  • Reported gross margin decreased to 42.3%, primarily due to derivative mark-to-market losses, while adjusted gross margin increased to 44.2%, driven by net price realization and supply chain productivity.
  • Selling, marketing, and administrative expenses rose 6.9%, mainly driven by capability investments, wage inflation, and media increases.
  • Reported operating profit decreased to $464.3 million, resulting in an operating profit margin of 17.5%, primarily due to increased brand and capability investment and higher wages.
  • North America Confectionery segment net sales increased by 2.1%, with segment income rising by 3.0%.
  • North America Salty Snacks segment net sales decreased by 24.6%, reflecting planned inventory declines related to ERP implementation.

In summary, Hershey’s remains focused on adapting to market dynamics while prioritizing innovation, efficiency, and long-term growth strategies

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