Hershey lowers outlook due to soft Chinese market

by Keith Nunes
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This past September, Hershey acquired an 80% stake in Shanghai Golden Monkey.

HERSHEY, PA. — The Hershey Co. has lowered its fiscal 2015 outlook due to weakness in the Chinese market. This past September the company acquired an 80% stake in Shanghai Golden Monkey for approximately $394 million. On June 19, Hershey said it was moderating its full-year sales expectations for the new business and in the process of reevaluating the value of the business. Hershey is scheduled to acquire the remaining 20% stake in Shanghai Golden Monkey this September.

Hershey executives initially had estimated full year company sales would increase 6% to 7%, but have now lowered the expectation to 4% to 5%. Fiscal 2014 sales were $7,421,768. The company estimates its fiscal 2015 earnings per share to be between $3.62 and $3.79.

“In China, Hershey chocolate growth was below expectations in April and May,” the company said. “As a result, the company has tempered its expectations for organic net sales and operating income growth. Macroeconomic challenges and trends are affecting consumer shopping behavior resulting in continued softness within the China modern trade, particularly the tier one hypermarkets where the company generates the majority of its chocolate sales.

“Additionally, increased chocolate category competitive activity and the accelerated momentum of e-commerce and on-line purchases are impacting results and prolonging trade inventory destocking. Over the remainder of the year and in 2016, the company’s efforts related to its chocolate business in China will focus on: distribution gains in smaller format stores, core s.k.u.s and brands that deliver the highest return, and determination of the optimal organization structure to drive future growth.”

Steven Schiller has been named president of China and Asia for Hershey.

To respond to the situation in China, Hershey has made several changes to its global leadership team. Steven Schiller, regional president of AEMEA for Hershey, has been named president of China and Asia for the company, a newly created position. Patricia Little, chief financial officer, now has the added responsibilities for corporate development and mergers and acquisitions.

Hershey also announced new productivity efforts that will result in the reduction of approximately 300 jobs by the end of 2015. The company did not say where the reductions would take place, but did say manufacturing operations are not included in the effort.
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