Financial results

Hershey reinstates 2020 outlook after Halloween and lockdown buying shows strong third-quarter sales for confectionery giant

06-Nov-2020 - Last updated on 06-Nov-2020 at 13:00 GMT

An early sales push by Hershey for the Halloween season has helped its Q3 figures. Pic: The Hershey Company

A strong Halloween, coupled with demand for chocolate chips and cocoa powder from households in the US taking up baking during coronavirus lockdowns, has allowed Hershey to beat quarterly sales estimates and reinstate its full-year outlook.

Reporting its Q3 2020 financial results on Friday (November 6), the company said net sales rose 4% to $2.22bn in the third quarter ended September 27, beating analysts’ expectations of $2.16bn.

Third-Quarter 2020 Financial Results Summary*

Consolidated net sales of $2,219.8 million, an increase of 4.0%
Organic, constant currency net sales increased 3.8%.
The net impact of acquisitions and divestitures on net sales was a 0.8 point benefit, while foreign currency exchange was a 0.6 point headwind.
Reported net income of $447.3 million, or $2.14 per share-diluted, an increase of 39.0%.
Adjusted earnings per share-diluted of $1.86, an increase of 15.5%.

*All comparisons for the third quarter of 2020 are with respect to the third quarter ended September 29, 2019

The company also reinstated its full-year outlook that it had pulled in April, saying it expects full-year net sales to rise about 1% and adjusted earnings per share to rise between 7% to 8%.

"We had a strong third quarter, with accelerated reported net sales growth of 4%, adjusted diluted EPS growth of more than 15% and confectionery share gains across markets, including an almost 190 basis point gain in the US,” said Michele Buck, Hershey Company President and Chief Executive Officer.

“Our core US business remains healthy as consumers reach for small treats during the pandemic, and our decision to lean into Halloween ahead of the season supported consumers' desire to find new and creative ways to celebrate safely. We also saw sequential improvement in the areas of our business hit hardest by COVID-19, including our international markets, owned retail locations and food service business."

Candy, mint and gum

Hershey's US candy, mint and gum (CMG) retail takeaway increased 6.5%, resulting in a category market share gain of 188 basis points. This gain was largely driven by strong sales of Hershey's chocolate brands, which increased 9.8% versus the prior year period. Sales of Hershey's baking items, including peanut butter, syrup, chips and cocoa, continued to remain strong, increasing 15.7%. Hershey's salty snacks also performed well, increasing 11.8% in the 12-week period. This strength was partially offset by 19.2% declines in Hershey's refreshment products as the functional need for breath freshening has lessened with social distancing.

International markets

The company said consumer mobility and economic security continue to challenge its international markets, though each market reported improved sales trends versus the second quarter. Combined net sales in Mexico, Brazil, India and China decreased 13.9%. Excluding an 11.6 point headwind from foreign currency exchange rates, combined organic constant currency net sales in Mexico, Brazil, India and China declined 2.3%.

"We are continuing to focus on executing with excellence, investing in the business, and advancing our strategic priorities to deliver a strong fourth quarter and position us well for 2021," said Buck.

The Hershey Company withdrew its fiscal 2020 guidance on April 23, 2020. While the operating environment continues to evolve, the company is reinstating full-year guidance based on current visibility into sales and costs for the balance of the year.