Yahoo Finance Can Hershey (HSY) Improve Sales in H2 Amid China Woes?
On Aug 13, 2015, we issued an updated research report on The Hershey Company HSY.
On Aug 7, Hershey reported second-quarter 2015 results wherein it beat the Zacks Consensus Estimate for earnings but missed the same for revenues. Earnings of 78 cents per share increased 2.9% as slightly better margins offset the weak top line. Sales grew 1.3%, ex-Fx, as better-than-expected performance in the U.S. was offset by currency headwinds and weak sales in China. Moreover, the Zacks Rank #4 (Sell) company lowered the 2015 revenue outlook – for the third time this year – due to weak sales performance in China.
Weak consumer shopping trends due to economic slowdown and increased competitive activity in the chocolate category are hurting the chocolate giant’s sales in the country. Stiff competition from e-Commerce/online sales and disappointing Golden Monkey performance due to confectionary category weakness are the other factors hurting sales trends. Since its acquisition in 2014, Golden Monkey has significantly underperformed with sales/profits missing management’s expectations.
The poor performance in China pulled down Hershey’s international sales by 1.6% (including acquisitions/divestures and currency headwinds) in the first half of 2015. For the full year, international sales are expected to decline in a mid single-digit range due to weakness in the country.
In fact, Hershey’s sales trends have been weak since 2014 due to lower retail store traffic, intense competition from the broader snacking category and soft international growth.
However, margins have been relatively better gaining from price increase, supply chain savings and productivity gains.
Moreover, the company is executing solid in-store merchandising and programming plans across all channels to drive growth in core brands as well as new products in both the U.S. and international markets. It is optimizing and refining its North American marketing model to improve advertising and marketing returns and make the most of the spending across the portfolio. It is also increasing digital investments in media mix as well as higher return chocolate business in North America.
In addition, management is expecting sales trends to improve in the second half on the back of new products like Kit Kat White Minis, Hershey’s Caramels and Ice Breakers Cool Blasts Chews as well as solid Halloween and holiday sales.
Stocks to Consider
Some better-ranked stocks in the broader food and beverage sector are Omega Protein Corporation OME, Cal-Maine Foods, Inc. CALM and Post Holdings, Inc. POST. All these stocks sport a Zacks Rank #1 (Strong Buy).
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HERSHEY CO/THE (HSY): Free Stock Analysis Report
CAL-MAINE FOODS (CALM): Free Stock Analysis Report
POST HOLDINGS (POST): Free Stock Analysis Report
OMEGA PROTEIN (OME): Free Stock Analysis Report
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