Hershey Co. missed quarterly earnings estimates amid signs that coronavirus-related changes in consumer behavior are depressing sales in such categories as snacks.
For the first quarter, Hershey earned $1.63 per share as net sales rose 1% to $2.04 billion. Analysts had expected earnings of $1.71 per share on sales of $2.08 billion.
Sales from the North American market rose 2.1%, the second-lowest sales growth in two years, while those from China plunged 46.7% as consumers in the world’s second-largest economy stayed home because of coronavirus lockdowns.
“A significant number of American households are not working and experiencing meaningful financial pressures,” CEO Michele Buck said in an earnings call. “All of this has impacted traffic into stores, length of time in stores and the amount of discretionary goods people are purchasing.”
According to Buck, Hershey’s business, prior to COVID-19, “was on track versus our expectations, both in Q1 and our outlook for the full year” and, as with many other food companies, it benefited from consumer stockpiling in March.
Total Hershey retail sales rose 10% last momth, with grocery and snacks businesses in particular seeing gains in both household penetration and basket size, Buck said.
But “the situation has evolved rapidly in April” as more regions have enacted shelter-in-place guidelines.
“Retailers have limited the number of consumers in-stores as well as operating hours, and the medical community is recommending individuals wear masks in public and limit grocery store trips unless essential,” Buck noted.
The SkinnyPop and Pirate’s Booty snack businesses, which grew approximately 20% in March, have experienced share declines and softening performance over the past three to four weeks while social distancing has hit gum and mint products that are usually sold at checkout counters.
Because of the pandemic, Hershey is suspending full-year guidance after previously forecasting it would earn roughly $6.20 a share. Uncertainty “around a few key variables” including the length and severity of the pandemic “influenced our decision to withdraw guidance,” Buck said.