The Hershey Company (HSY) reaffirmed its full year 2013 guidance and provided an update on the company’s growth initiatives at the 2013 Consumer Analyst Group of New York (:CAGNY) conference.
The company discussed several initiatives to drive growth over the long term.
The company is bullish about its North America business and intends to make further investments and expand its presence in the region in order to drive growth. The company intends to continue focusing on core brands in the U.S.
Hershey is also keen on expanding its geographic footprint. The company intends to drive its top-line growth further by focusing on emerging countries with strong GDP and increasing consumer spending power. Hershey intends to expand its five core brands of Hershey’s, Reese’s, Hershey’s Kisses, Jolly Rancher and Ice Breakers in these markets. The company believes that about 15% to 20% of net sales will be generated outside the U.S and Canada in fiscal 2013. By the end of 2014, the company intends to achieve its target of $1 billion in international net sales. Its long-term plan is to achieve international revenue increase in the range of 10% to 25% of total company sales.
Given the company’s robust liquidity position, Hershey is also investing in marketing in order to drive revenue increase. In fact, advertising is the most important component of brand building. The company expects its advertising to be same or increase 2 times its net sales growth. The company’s brand investments give it a competitive advantage and are one of the principal reasons behind the company witnessing better volume elasticity versus its peers.
The company aims to be a $10 billion company by 2017.
Full Year 2013 Outlook Retained
The company maintained its outlook for net sales growth in a range of 5%–7% for the long term. Volume growth of core brands driven by increased promotional efforts and innovation are expected to help Hershey achieve its sales targets.
Gross margins are expected to expand in 2013 by 180–200 basis points as input cost inflation subsides. Productivity gains and costs savings will also boost margins.
The company maintained its adjusted earnings guidance in a range of $3.56–$3.63, which represents growth of 10%–12% year over year.
Investments in core brand marketing, regular product innovation, productivity improvement and moderate commodity cost inflation are expected to help it achieve these targets despite a challenging macroeconomic environment.
Hershey carries a Zacks Rank #2 (Buy).
Other companies in the sector that warrant investor attention include Flowers Foods, Inc. (FLO), ConAgra Foods, Inc. (CAG) and J&J Snack Foods Corp. (JJSF) all carrying a Zacks Rank #1 (Strong Buy).
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