Hershey Announces New Consumer-Centric Approach and Allocates Resources Behind Core Brands to Drive Long-Term Net Sales and Earn
June 17 2008 - 7:30AM
PR Newswire (US)
- Market structure and segmentation to drive targeted innovation
and consumer investment - Long-term net sales and earnings per
share growth rates of +3-5% and +6-8% established - Outlook
reaffirmed for 2008, growth in net sales 3-4%, with earnings per
share-diluted from operations expected to be in the $1.85 to $1.90
range HERSHEY, Pa., June 17 /PRNewswire-FirstCall/ -- The Hershey
Company (NYSE:HSY) today will announce initiatives designed to
deliver its long-term goals for net sales and earnings per share
growth. After completing an in-depth market structure and category
segmentation review, the Company is targeting key consumer segments
that will drive growth. The Company is aligning resources in
support of this approach and expects total advertising to increase
by at least 20 percent in both 2008 and 2009. The increased support
will be focused on core brands that currently generate
approximately 60 percent of total U.S. net sales. This targeted
allocation and disciplined approach, combined with an increase in
U.S. retail coverage, will enable the Company to consistently meet
its net sales and earnings objectives in the future. "Our extensive
consumer research validates our strategy of increasing advertising
and consumer investment behind the core U.S. brands that offer the
greatest potential for growth," said David J. West, President and
Chief Executive Officer. "We will combine this focused approach
with consumer-centric innovation and continued international
expansion to achieve our long-term net sales growth rate of 3-5
percent. Longer term, as marketplace trends improve and targeted
consumer initiatives are executed, the Company expects to generate
earnings per share growth of 6-8 percent." The Company expects
full-year 2008 net sales growth of 3-4 percent and earnings per
share-diluted from operations of $1.85 to $1.90. A reconciliation
of full-year earnings per share-diluted excluding realignment
charges to full-year earnings per share-diluted on a GAAP basis is
included below. Management will discuss the new strategy and
long-term goals during a meeting with analysts and investors this
morning. The meeting begins at 8:30 a.m. EDT today and will be web
cast live at The Hershey Company web site,
http://www.hersheys.com/, or can be accessed via a listen-only
conference call at 1-800-990-8039. Please go to the Investor
Relations Section of the web site for further details. Note: In
this release, Hershey has provided income measures excluding
certain items described above, in addition to net income determined
in accordance with GAAP. These non-GAAP financial measures are used
in evaluating results of operations for internal purposes. These
non-GAAP measures are not intended to replace the presentation of
financial results in accordance with GAAP. Rather, the Company
believes exclusion of such items provides additional information to
investors to facilitate the comparison of past and present
operations. The aforementioned items relate to the Global Supply
Chain Transformation program announced in February 2007 and the
business realignment in Brazil announced in December 2007. The
Global Supply Chain Transformation program is expected to result in
pre-tax charges and non-recurring project implementation costs of
$550 million - $575 million. Total charges include project
management and start-up costs of approximately $60 million. In
2007, the Company recorded GAAP charges related to the Global
Supply Chain Transformation program of $400.0 million, or $1.10 per
share-diluted. Additionally, in the fourth quarter of 2007 the
Company recorded business realignment and impairment charges of
$12.6 million, or $0.05 per share-diluted, related to its business
in Brazil. In 2008, the Company expects to record total GAAP
charges of about $135 million - $145 million, or $0.39 - $0.42 per
share-diluted. Below is a reconciliation of GAAP and non-GAAP items
to the Company's earnings per share-diluted outlook: 2007 2008
Reported / Expected EPS-Diluted $0.93 $1.43 - $1.51 Total Business
Realignment and Impairment Charges $1.15 $0.39 - $0.42 EPS-Diluted
from Operations* $2.08 -- Expected EPS-Diluted from Operations*
$1.85 - $1.90 *From operations, excluding business realignment and
impairment charges. Safe Harbor Statement This release contains
statements which are forward-looking. These statements are made
based upon current expectations which are subject to risk and
uncertainty. Actual results may differ materially from those
contained in the forward-looking statements. Factors which could
cause results to differ materially include, but are not limited to:
our ability to implement and generate expected ongoing annual
savings from the initiatives to transform our supply chain and
advance our value-enhancing strategy; changes in raw material and
other costs and selling price increases; our ability to execute our
supply chain transformation within the anticipated timeframe in
accordance with our cost estimates; the impact of future
developments related to the product recall and temporary plant
closure in Canada in the fourth quarter of 2006, including our
ability to recover costs we incurred for the recall and plant
closure from responsible third-parties; the impact of future
developments related to the investigation by government regulators
of alleged pricing practices by members of the confectionery
industry, including risks of subsequent litigation or further
government action; pension cost factors, such as actuarial
assumptions, market performance and employee retirement decisions;
changes in our stock price, and resulting impacts on our expenses
for incentive compensation, stock options and certain employee
benefits; market demand for our new and existing products; changes
in our business environment, including actions of competitors and
changes in consumer preferences; changes in governmental laws and
regulations, including taxes; risks and uncertainties related to
our international operations; and such other matters as discussed
in our Annual Report on Form 10-K for 2007. All information in this
press release is as of June 17, 2008. The Company undertakes no
duty to update any forward-looking statement to conform the
statement to actual results or changes in the Company's
expectations. DATASOURCE: The Hershey Company CONTACT: Financial:
Mark Pogharian, +1-717-534-7556; or Media: Kirk Saville,
+1-717-534-7641, both of The Hershey Company Web site:
http://www.hersheys.com/
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