Hershey 1st-quarter profit nearly doubles on increased advertising, holiday shopping

Advertising, Easter give Hershey sweet profit

NEW YORK — Increased advertising and an earlier Easter drove shoppers to Hershey Co.’s candy in the first quarter, almost doubling its profit.

The maker of Hershey’s Kisses and Reese’s peanut butter cups also boosted its 2010 adjusted earnings and sales growth targets above Wall Street’s expectations Thursday. Its stock rose $2.91, or 6.5 percent, to $47.75 in afternoon trading. The shares touched a new 52-week high of $48.16 earlier.

While industry competitors have concentrated on snapping up other businesses, Hershey has stayed true to aggressively expanding its marketing over the past two years to add sales. The company based in Hershey, Pa. plans to increase its 2010 advertising spending by 35 percent to 40 percent, up from its prior estimate of 25 percent to 30 percent.

While it recently lost out to Kraft Foods Inc. in the bidding for British rival Cadbury PLC, many experts did not view this as bad for Hershey because they feared the acquisition would have unwisely stretched the company’s finances.

Hershey, the nation’s second-largest candy maker, earned $147.4 million, or 64 cents per share, for the period ended April 4. That’s well above its profit of $75.9 million, or 33 cents per share, a year earlier.

Revenue grew 14 percent to $1.41 billion from $1.24 billion. U.S. sales benefited from Easter occurring a week earlier than last year, so more sales came in the first quarter.

In contrast, CEO David West said during a conference call that Valentine’s Day shoppers spent less on candy than they have in previous years.

Hershey’s quarterly revenue improvement also got a jolt from a significant advertising push. The candy maker boosted domestic advertising by 68 percent for core brands such as Kit Kat, Twizzlers and its namesake candy as well as launched new product promotions for Hershey’s Special Dark, Almond Joy and York Pieces. The new products contributed nearly two percentage points to Hershey’s quarterly sales growth.

The first-quarter performance easily surpassed Wall Street’s forecasts, as analysts polled by Thomson Reuters expected earnings of 47 cents per share on revenue of $1.29 billion.

West said Hershey gained market share for both the quarter and the Easter season and credited strong performances from stalwart brands like Reese’s, Kit Kat and its namesake for pushing retail results higher.

While the candy maker has focused heavily on marketing existing products, it does plan to roll out some new ones this year, with both Hershey’s Drops and Reese’s Mini Minis, expected to debut in December.

Hershey now expects full-year adjusted earnings to rise in the low to mid-teens. Its prior guidance called for a 6 percent to 8 percent rise. The candy maker also anticipates better revenue for 2010, projecting its sales will rise at least 6 percent compared with a previous outlook for 3 percent to 5 percent growth. With 2009 revenue of $5.3 billion, this implies sales of at least $5.62 billion for 2010.

Analysts forecast a full-year profit of $2.33 per share on revenue of $5.5 billion.

Elsewhere, comptetitor Nestle AG reported Thursday that its first-quarter sales rose 4.4 percent on growth in emerging economies. The Swiss-based company, whose brands include Nescafe, Perrier and Haagen Dazs, is the world’s largest food and drink maker.