Hershey Cuts Outlook

Hershey(HSY) lowered its earnings projections for 2006, citing weak U.S. trends and a Canadian product recall.

The candy maker also tempered its expectations for 2007.

Hershey said Wednesday that it expects its full-year growth in earnings per share from operations to be in the mid-single digits. The company expects sales growth to be slightly below its long-term target range of 3% to 4%.

In October, Hershey forecast earnings growth "somewhat" below its long-term goal of 9% to 11%, with sales growth within the targeted 3% to 4% range.

"While we're seeing areas of improvement in the U.S. retail marketplace, particularly with selected new products and across key customers, the progress is below expectations," said Richard H. Lenny, chairman, president and chief executive. "Further, the costs and business disruption associated with the product recall in Canada have placed additional pressure on the business."

Last month, Hershey recalled a variety of chocolate products and candies following fears of Salmonella contamination at a Canadian plant.

Looking ahead, Hershey said it is focused on revitalizing its brands in 2007, including shifting its growth strategy from line extensions and new varieties to "innovative platforms."

The company expects earnings for the year to grow 7% to 9%, below its long-term 9% to 11% target, with sales growth of 3% to 4%.

According to Thomson First Call, analysts expect earnings of $2.47 a share for 2006 and $2.69 a share for 2007. Last year, earnings were $2.36 a share.

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