Shares in Hershey Company (NYSE:HSY, ETR:HSY) melted to a three-year low after the maker of chocolate Kisses, Reese's Pieces and KitKats cut its guidance for the year due to record cocoa prices and what it said is a "challenging" consumer environment.
Net sales for the third quarter of 2024 came in at just below $3 billion, down 1.4% on a year ago and missing the Wall Street average forecast of $3.07 billion.
Adjusted earnings per share for the third quarter fell 10% to $2.34, also falling short of analyst expectations of $2.56.
Net sales guidance was also reduced to "flat" from the previous expectation of around 2% growth, while full-year EPS is seen falling 6-9% on a reported basis (versus a decline of 1-3% before) or down by "mid-single-digits" for adjusted EPS, compared to "down slightly" before.
CEO Michele Buck said: "While year-to-date results have been affected by historically high cocoa prices and a challenging consumer environment, we are laser-focused on controlling what we can and are acting with immediacy to deliver value to customers, consumers and shareholders."
She said priorities are to "drive top-line and market share growth by winning in-store with key customers, expanding our chocolate portfolio, accelerating sweets, and maximizing our seasonal strength".
Rising costs, including cocoa prices at record highs for most of the year, forced the company to increase prices and diversify its product range into sweets, such as a collaboration with former basketballer Shaquille O’Neal to launch the Shaq-A-Licious gummies in September.
Also, Hershey recently struck a five-year deal with nine cocoa-producing cooperatives in Côte d'Ivoire, which the company said is part of a wider plan "to address the complex challenges facing cocoa farmers", but seems part of an effort to try and guarantee lower cocoa costs.