The Hershey Company has lowered its earnings estimates for 2006 following the massive product recall and Canadian plant closure after the detection of salmonella in a variety of Hershey products.
The company said that the US market was sluggish, adding that it expects sales growth this year to miss the targeted 3-4%, with earnings growth in the mid-single digits.
"While we're seeing areas of improvement in the US retail marketplace, particularly with selected new products and across key customers, the progress is below expectations," said Richard H. Lenny, chairman, president and CEO. "Further, the costs and business disruption associated with the product recall in Canada have placed additional pressure on the business. Therefore, we now anticipate net sales growth for 2006 to be slightly below our long-term 3-4% range and the increase in diluted earnings per share from operations to be in the mid-single digits."
Hershey lowered its earnings outlook in October, projecting growth slightly below its original goal of 9-11% expansion.
Last month, Hershey recalled a number of products including Hershey bars, Reese's Peanut Butter Cups and Oh Henry! bars after salmonella was detected at a factory in Ontario.
Hershey said that it hoped to revitalise its brands in 2007, forecasting 2007 sales growth of 3-4% and earnings growth of 7-9%.
"For 2007, revitalising Hershey's iconic brands through increased consumer and customer support is a key priority. We're making progress in shifting our growth strategy from line extensions and new varieties to innovative platforms. These platforms capitalise on consumer insights, and thus represent more sustainable growth arenas, as evidenced by our success in dark chocolate and refreshment. This portfolio transformation will accelerate next year. In addition, we're pursuing opportunities in selected high potential global markets representing attractive sources of growth," Lenny concluded.
