Hershey Q1 Sales Stagnate
Posted on: Monday, 24 April 2006, 06:00 CDT
Hershey, the largest US chocolate maker, has had a 7% increase in first-quarter profits compared to the same period last year despite a slowdown in sales.
The Kit Kat manufacturer earned $121 million, or 50 cents per share, in the first quarter of 2006 compared to $113 million, $45 cents per share, for the comparable period of 2005.
Hershey faced higher sugar and energy costs this year, which were in part offset by price increases and a lower tax rate. The overall figures were slightly below those predicted by some analysts, with sales stagnating and the firm's gross margin decreasing.
"Our sales performance was impacted by earlier seasonal shipments, which benefited our market share results, as well as lower single-serve shipments. This slowdown can be attributed to a price increase buy-in from last year and a reduction in retail inventory levels at selected customers," said Richard Lenny, chairman, president and CEO.
The company gained market share in all its major product segments. New introductions to its range such as Kissables and Ice Breaker Ice Cubes also performed well. Mr Lenny said the chocolatier intends to pursue several market opportunities in 2006, including the expansion of its dark chocolate business. The plan is to streamline the company to focus fully on the most lucrative areas.
"For the full year 2006, we expect that net sales will increase at a rate somewhat above our 3-4% long-term goal, with diluted earnings per share from operations to increase slightly above our 9-11% long-term expectations," Mr Lenny concluded.
Source: Datamonitor
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