HERSHEY, PA. — Despite price hikes, consumer demand for snacks and candy remains strong, even outperforming the broader packaged food industry, said Michele G. Buck, chairman, president and chief executive officer of The Hershey Co. A combination of volume gains and strategic price increases helped the maker of Reese’s peanut butter cups and SkinnyPop popcorn deliver double-digit sales and earnings growth in the recent quarter.
“Certainly, consumer behavior continues to evolve, and we know that many consumers have made changes to their spending to respond to inflation in the marketplace,” Ms. Buck said during an April 27 earnings call. “We certainly continue to see that food has performed well compared to other categories, specifically food at home as it’s a much more affordable option for consumers versus dining out.
“And we also know snacks and candy continue to perform even better than broader food, and elasticities in those categories have continued to remain pretty strong. And we do expect that we’ll continue to see strength in those elasticities. We know that consumers are being increasingly mindful about where they shop, they are looking for more affordable options, whether it is the channels in which they’re shopping, whether it’s private label, whether it is deals and increased promotion and we are constantly carefully monitoring those trends just to make sure that our media and our in-store activations are really optimized so that we can align to the trends that we’re seeing.”
Net income for the first quarter ended April 2 was $587.2 million, equal to $2.94 per share on the common stock, up 11% from $533.5 million, or $2.66, in the prior-year period. The current quarter included pre-tax derivative mark-to-market losses of $10.2 million, while the year-ago quarter included a pre-tax gain of $27.4 million. Reported results also were impacted by business realignment activities and acquisition and integration-related activities. On an adjusted basis, net income was $609.5 million in the quarter, up 16% from $523.5 million.
Net sales totaled $2.99 billion, up 12% from $2.67 billion.
Hershey’s North America Confectionery segment had income of $887.8 million, up 14% from the year-ago quarter, on sales of $2.45 billion, an increase of 11% versus the same period last year.
“Seasons continued to be a growth driver with category sales for Valentine’s Day up double digits versus the prior year, and despite the shorter Easter season, category sales grew mid-single digits,” Ms. Buck said in pre-recorded remarks released ahead of the call. “While consumers are shopping on tighter budgets, candy and snacks remain an affordable way to bring joy to seasonal celebrations with loved ones.”
The gum and mints category is rebounding from suppressed demand due to the effects of COVID-19. Retail sales in gum and mints grew 20% to 25% in the first quarter and are now ahead of pre-pandemic levels, and Hershey’s brands outpaced the category, growing 30% and gaining 110 basis points of market share, Ms. Buck said.
“This performance builds on previous share gains over the past several years, resulting in an overall refreshment share gain of 250 basis points versus pre-pandemic levels,” she said.
Increased investments in innovation and media for non-chocolate candy brands resulted in notable growth for Twizzlers, up nearly 19%, and Jolly Rancher, up 15%, in the quarter.
Hershey’s North America Salty Snacks segment income increased 120% to $46.8 million. Net sales of $270 million were up 19% from the year before, driven by price increases and volume gains.
“SkinnyPop retail takeaway of over 23% drove a 220-basis-point share gain in the ready-to-eat popcorn category,” Ms. Buck said. “Dot's Pretzels performance also continued to shine with retail sales growth of over 25% in the quarter resulting in a pretzel category share gain of 100 basis points.”
Hershey’s International segment profit rose 31% to $55 million on sales of $265.5 million, an increase of 19% over the year-ago quarter.
“We saw a stronger Easter season in Brazil than we had anticipated,” Ms. Buck said during the call. “We continue to see distribution gains in Mexico. And also in India, so across the board, some strength there. We do expect some moderation going forward because we have some pretty strong laps, but our demand has really remained pretty resilient.”
For the full year, management expects net sales growth of 8%, reported earnings-per-share growth of 15% and adjusted earnings-per-share growth of 11%.Hershey’s share price on the New York Stock Exchange closed at $273.33 on April 27, up 4.4% from the day before.