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Hershey Announces Second Quarter Results; Updates Outlook For 2013

Outlook

The Company expects full-year net sales to increase about 7 percent, including the impact of foreign currency exchange rates. Net sales will be driven by core brand volume growth, Brookside distribution gains and repeat purchases as well as innovation such as Kit Kat Minis, Twizzlers Bites and Jolly Rancher Bites products in the U.S., Hershey’s Mais candy in Brazil, and the fourth-quarter launch of Hershey’s Kisses Deluxe and Hershey’s Drops chocolates in China.

Given year-to-date results, greater fixed cost volume absorption and overall input cost deflation, the Company now expects 2013 full-year adjusted gross margin expansion of 220 to 230 basis points. The annual increase in advertising expense remains the same and is expected to be up about 20 percent versus last year. For the full year, SM&A expenses, excluding advertising, are expected to increase at a rate greater than net sales growth. These investments will build on the marketing, selling and go-to-market capabilities established over the last few years. As a result, the Company anticipates 2013 adjusted earnings per share-diluted growth of around 14 percent versus a previous estimate of a 12 percent increase.

“As we enter the third quarter, we’re well-positioned to gain market share for the year in the geographies where our resources are focused,” added Bilbrey. “We’re on track to deliver another record year of solid net sales growth and a double-digit percentage increase in earnings per share-diluted. We have marketplace momentum in all segments of our U.S. business – chocolate, non-chocolate, mints and gum – and have visibility into our innovation pipeline and key line items within the income statement. The earnings growth, as well as the Company’s continued focus on working capital, enables us to generate strong operating cash flow. Therefore, I’m pleased to announce an increase to our quarterly dividend,” Bilbrey concluded.

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