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Higher Prices Lifts Hershey 1Q Profit By 20 Pct

The Associated Press

HARRISBURG, Pa. (AP) — Higher prices helped Hershey's first-quarter profit surge 20 percent and beat Wall Street's expectations.

The Hershey Co., the nation's second-largest candy maker, said it also benefited from a later first quarter that captured more Easter sales but was hurt by higher commodity costs and a strengthening dollar.

"Hershey's results for the first quarter were solid, and I am pleased with the progress we continue to make," David J. West, the company's president and chief executive officer, said in a telephone conference with analysts.

However, he acknowledged that beating last year's results will become more difficult for the rest of 2009 because the company has now lapped a February 2008 price increase. Hershey also boosted prices in August.

That increase is still trickling down to store shelves because many retailers bought extra candy before it went into effect.

Hershey shares rose $1.39, or nearly 3.9 percent, to close at $37.45 Thursday.

The Hershey, Pa.-based maker of Kisses and Reese's candies said it earned $75.9 million, or 33 cents a share, in the three months that ended April 5. A year earlier, it earned $63.2 million, or 28 cents a share.

Excluding costs to streamline its operations, Hershey says it would have earned $86 million, or 38 cents a share. That beat the consensus estimate of 34 cents per share from analysts who also excluded one-time items.

Hershey says revenue rose 6.5 percent to nearly $1.24 billion from $1.16 billion a year ago. Analysts predicted $1.19 billion in sales.

The company is also spending more on promotions, pensions and commodity costs.

Analysts generally viewed the results positively, but many said Hershey shares are overpriced as it recovers from two years of lackluster sales.

"We see little in the way of potential catalysts for the stock and in particular nothing to justify its premium valuation," said a client note from Stifel, Nicolaus & Co. analysts.

Hershey maintained its expectations that sales will grow 2 percent to 3 percent in 2009 and profits will fall short of its long-term objective of 6 percent to 8 percent annual growth.