Hershey Co (NYSE:HSY) released its second quarter earnings report on Wednesday, July 16th. In addition to releasing quarterly financial metrics, the confectionery titan also announced an 8% increase in wholesale prices effective immediately.
Food industry analysts point out that Hershey’s price increase will likely trigger similar announcements from rivals such as Nestle SA (VTX:NESN) (OTCMKTS:NSRGY) and Kraft Foods Group Inc (NASDAQ:KRFT). This situation is a little unusual, analysts say, as price increases are typically done quietly, but the recent spike in commodity prices left firms little choice in the matter.
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2Q 2014 Hershey results
The number one U.S. candy maker expects 2014 sales growth to be at the lower end of its long-term goal of 5 to 7%. The firm also noted it anticipates diluted growth in adjusted earnings per share to be at the low end of its 9 to 11% target.
Furthermore, adjusted gross margins were predicted to decline slightly in 2014, Hershey Co (NYSE:HSY) said. The company had earlier forecast full-year adjusted margins to increase by 50 basis points.
In its 2Q report, Hershey estimated an adjusted profit of 75 to 77 cents per share on sales growth of 4.5% for the quarter ended June 29. This calculates out to sales of $1.58 billion.
The consensus analyst estimate was earnings of 76 cents per share on revenue of $1.60 billion, according to data from Thomson Reuters.
Statement from Hershey Co.
Hershey Co (NYSE:HSY)’s North America head Michele Buck explained the need for a price increase in a statement on Tuesday. “Commodity spot prices for ingredients such as cocoa, dairy and nuts have increased meaningfully since the beginning of the year.”
Hershey’s statement also noted that customers who buy directly from the company will continue to be able to purchase products at the pre-increase prices through August 12.
The company also owns the Cadbury license in the United States, but didn’t specify if Cadbury product prices will also be increased.
The candy-making giant last raised wholesale prices in 2011, a Hershey Co (NYSE:HSY) spokesman said, an increase of around 9.7% in the United States.