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Hershey Announces Third Quarter Results; Updates Outlook For 2012

Stocks in this article: HSY

“As the year has progressed, commodity markets have remained volatile. Input costs in 2012 will be higher than last year, although our current forecast indicates that the increase will not be as much as our earlier estimate. Therefore, we now expect adjusted gross margin to increase 120 to 140 basis points. This is greater than our previous forecast of about a 100 to 120 basis point increase. We are planning an additional investment in advertising in the fourth quarter and now expect full-year 2012 advertising expense to increase 13 to 15 percent versus 2011. This is greater than our previous estimate of a low double-digit percentage increase. Additionally, the Brookside acquisition will be slightly accretive for the full year 2012. Therefore, we anticipate adjusted earnings per share-diluted for the full-year to be in the $3.22 to $3.25 range, an increase of 14 to 15 percent versus 2011. This is greater than our previous estimate of a 12 to 14 percent increase.

“As we look to 2013, we assume the economic environment for retailers and consumers will continue to be challenging. However, we believe the investments we've made have resulted in a business model that is more efficient and effective, enabling us to deliver predictable, consistent and achievable marketplace and financial performance. Therefore, we expect 2013 net sales growth to be within our 5 to 7 percent long-term target, including the impact of foreign currency exchange rates, as we continue to focus on core brands and innovation in both the U.S. and key international markets. Additionally, we'll leverage Hershey's scale at retail as we launch Brookside branded products in the broader U.S. food, drug and mass channels. As we stated earlier this year, we remain focused on gross margin. We have solid productivity and cost savings initiatives in place and, while early in the planning cycle, we don't expect input cost inflation next year. Therefore, we expect to achieve gross margin expansion in 2013 and growth in adjusted earnings per share-diluted in the 8 to 10 percent range, consistent with our long-term target,” Bilbrey concluded.

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