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Hershey Co.’s stock fell by 5.3% in premarket trading following a disappointing second-quarter performance, which saw both sales and earnings fall short of expectations. The company also lowered its guidance for 2024, reflecting a challenging operating environment with shifting consumer behaviours.
For the second quarter, Hershey reported net income of $180.9 million, or 89 cents per share, a sharp decline from $407 million, or $1.98 per share, in the same period last year. On an adjusted basis, the company posted earnings of $1.27 per share, missing analyst expectations of $1.44 per share, according to FactSet.
The company’s organic, constant currency net sales fell by 16.8%, largely due to reduced retailer inventory levels in North American and international markets. This decrease was partly attributed to the implementation of a new enterprise-resource-planning (ERP) system, which has impacted inventory and seasonal shipment timing.
Hershey revised its 2024 earnings per share forecast, now expecting a decline of 1% to 3%, compared to the previous outlook of stable earnings per share. On an adjusted basis, the company anticipates a slight decrease in earnings per share. The timing shift in seasonal shipments is anticipated to delay some North American confectionery sales until the latter half of 2024.
Despite the current challenges, Hershey’s shares have risen by 5.9% in 2024. This increase, however, lags behind the S&P 500 index, which has gained 15.8% this year.
Hershey CEO Michele Buck commented on the situation, stating, “Today’s operating environment remains dynamic with consumers pulling back on discretionary spending.”