US: Hershey outlines five-year brand strategy, sets long-term growth targets

By Michelle Russell | 25 June 2012

  • Hershey outlines five-year plan to expand five core brands
  • Reaffirms sales and EPS targets

US confectionery giant Hershey has set new long-term growth targets and outlined a five-year plan to expand its five core brands, including Reese's peanut butter cups and Hershey's Kisses.

While Hershey has not revealed any financial details of its strategy for the brands, the move is the latest investment by the group in its product portfolio. 

In April, Hershey announced it would increase its full-year advertising spend and focus on innovation during the remainder of the year. The company has continued to invest in its core brands in both the US and key international markets.

Hershey is expected to reveal further details of the strategy in an investor update today, but in its initial statement Hershey's chief executive John Bilbrey said: “We’ll continue to invest in tools and capabilities that will drive core brand growth. We’re excited about the insights we’ll obtain from the additional work currently under way on Hershey’s confectionery demand landscape that is focused on the individual segments of chocolate, non-chocolate candy and refreshment in the US and key international markets."

Hershey also reaffirmed its outlook for full-year 2012 net sales growth of around 7-9%, and full-year adjusted EPS-diluted growth of 10-12%, adding that it has the strategies in place to support long-term net sales growth of 7-9% and adjusted EPS growth of 8-10%.

In April, Hershey reported its first-quarter earnings jumped 24% as the firm saw its pricing efforts pay off with an 11% rise in sales. The company had raised its 2012 forecast earlier this year after it enjoyed relatively strong pricing power compared to its peers.

Show the press release

Hershey Details Strategy for Continued Growth and Announces New Long-Term Net Sales and Earnings Targets

HERSHEY, Pa.--(BUSINESS WIRE)--The Hershey Company (NYSE: HSY):

"Our marketplace and financial results over the last few years validate our consumer-driven approach to core brand investment in both U.S. and key international markets"
Five core brands - Hershey's, Reese's, Hershey's Kisses, Jolly Rancher and Ice Breakers - to become global cornerstones
Updated long-term targets announced; net sales and adjusted earnings per share-diluted growth of +5-7% and +8-10% established
Outlook reaffirmed for 2012:
Full year net sales expected to increase 7-9%, including Brookside acquisition
Reported earnings per share-diluted expected to be $2.82 to $2.92
Adjusted earnings per share-diluted expected to increase 10-12%
The Hershey Company (NYSE: HSY) today will announce initiatives designed to drive continued net sales and earnings growth at a Company-sponsored investor conference in New York.

"Our marketplace and financial results over the last few years validate our consumer-driven approach to core brand investment in both U.S. and key international markets," said John P. Bilbrey, President and Chief Executive Officer. "We'll continue to invest in tools and capabilities that will drive core brand growth. We're excited about the insights we'll obtain from the additional work currently under way on Hershey's confectionery demand landscape that is focused on the individual segments of chocolate, non-chocolate candy and refreshment in the U.S. and key international markets. Our Insights Driven Performance initiative - or IDP - has been embraced by retailers who value the solutions-based methods that drive mutual growth for the confectionery category and Hershey. We are creating a knowledge-based company built on intellectual capital and consumer and shopper insights. This collaborative approach has unique features within the confectionery space and differentiates Hershey from its peers.

"Hershey's leadership team has worked closely with the Board of Directors this year on a comprehensive five-year strategic plan. We have a global organization that we're equipping with resources and tools to win in the marketplace and will invest and expand our five core brands - Hershey's, Reese's, Hershey's Kisses, Jolly Rancher and Ice Breakers - in a disciplined manner, around the world. We believe the strategies in place support our new long-term targets of organic net sales growth of 5 to 7 percent and adjusted earnings per share-diluted growth of 8 to 10 percent.

"Our organization is energized and believes in the potential and capabilities of our people, brands and processes. In addition, our solid operating cash flow and the strength of our balance sheet enable us to participate in value enhancing strategic acquisitions. While acquisitions are difficult to predict, combined with solid organic growth, we have aspirational goals of reaching $10 billion in net sales by the end of 2017. I'm optimistic and excited about our future. We are focused and know what we need to do to succeed. We have strong plans in place that will enable us to win wherever we compete," Bilbrey concluded.

The Company reaffirms its outlook for full year 2012 net sales growth of about 7 to 9 percent, including the expected impact of foreign currency exchange rates, and full year adjusted earnings per share-diluted growth of 10 to 12 percent. See the note at the end of this press release for a reconciliation of earnings per share-diluted in accordance with GAAP to non-GAAP adjusted earnings per share-diluted. Management will discuss the Company's strategy and long-term goals during a meeting with analysts and investors this morning. The meeting begins at 9 a.m. EDT today and will be web cast live at The Hershey Company web site, www.thehersheycompany.com. Please go to the Investors section of the web site for further details.

Note: In this release, Hershey references income measures that are not in accordance with U.S. generally accepted accounting principles (GAAP) because they exclude business realignment and impairment charges, business acquisition closing and integration costs, certain gains and losses, and non-service-related pension costs. These non-GAAP financial measures are used in evaluating results of operations for internal purposes. These non-GAAP measures are not intended to replace the presentation of financial results in accordance with GAAP. Rather, the Company believes exclusion of such items provides additional information to investors to facilitate the comparison of past and present operations. A reconciliation is provided below of earnings per share-diluted in accordance with GAAP to non-GAAP adjusted earnings per share-diluted, which excludes business realignment and impairment charges as well as non-service related pension expense in 2012 and 2011, closing and integration costs primarily related to the Brookside acquisition in 2012 and a gain on the sale of trademark licensing rights recorded in the third quarter of 2011.

In 2011, the Company recorded GAAP charges of $43.4 million, or $0.11 per share-diluted, attributable to Project Next Century and $5.8 million, or $0.02 per share-diluted related to the Global Supply Chain Transformation (GSCT) program and $2.8 million, or $0.01 per share-diluted of non-service related pension expense (NSRPE). Additionally, in the third quarter of 2011, the Company recorded a pre-tax gain on the sale of certain trademark licensing rights of $17.0 million, or $0.05 per share-diluted. In 2012, acquisition closing and integration costs related to the Brookside acquisition are expected to be $0.04 to $0.05 per share-diluted. Additionally, the Company expects to record total GAAP charges of about $55 million to $65 million, or $0.16 to $0.19 per share-diluted, attributable to Project Next Century and $19.0 million, or $0.05 per share-diluted of NSRPE.

Below is a reconciliation of earnings per share-diluted in accordance with GAAP to non-GAAP adjusted earnings per share-diluted.


2011
2012 (Projected)
Reported EPS-Diluted $2.74 $2.82 - $2.92
Acquisition closing & integration charges - 0.04 - 0.05
Gain on sale of trademark licensing rights (0.05) -
Total Business Realignment and Impairment Charges 0.13 0.16 - 0.19
NSRPE 0.01 0.05
Adjusted EPS-Diluted $2.83 $3.11 - $3.17

Safe Harbor Statement

This release contains statements that are forward-looking. These statements are made based upon current expectations that are subject to risk and uncertainty. Because actual results may differ materially from those contained in the forward-looking statements you should not place undue reliance on the forward looking statements when deciding whether to buy, sell or hold the Company's securities. Factors that could cause results to differ materially include, but are not limited to: issues or concerns related to the quality and safety of our products, ingredients or packaging; changes in raw material and other costs; selling price increases, including volume declines associated with pricing elasticity; market demand for our new and existing products; increased marketplace competition; disruption to our supply chain; failure to successfully identify, execute and integrate acquisitions, divestitures and joint ventures; changes in governmental laws and regulations, including taxes; political, economic, and/or financial market conditions; risks and uncertainties related to our international operations and related growth targets; disruptions, failures or security breaches of our information technology infrastructure; the impact of future developments related to the investigation by government regulators of alleged pricing practices by members of the confectionery industry, including risks of subsequent litigation or further government action; pension cost factors, such as actuarial assumptions, market performance and employee retirement decisions and funding requirements; the ability to implement our supply chain realignment initiatives within the anticipated timeframe in accordance with our cost estimates and our ability to achieve the expected ongoing annual savings from these initiatives; and such other matters as discussed in our Annual Report on Form 10-K for 2011.

All information in this press release is as of June 25, 2012. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

Contacts

The Hershey Company
FINANCIAL CONTACT:
Mark Pogharian, 717-534-7556
or
MEDIA CONTACT:
Jeff Beckman, 717-534-8090

Recent Stories from The Hershey Company

 

Original source: http://www.businesswire.com/news/home/20120625005858/en/Hershey-Details-Strategy-Continued-Growth-Announces-Long-Term

Sectors: Confectionery, Financials, NPD & innovation

Companies: Hershey

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