HERSHEY, Pa., Oct. 24, 2019 (GLOBE NEWSWIRE) -- The Hershey Company (NYSE: HSY) today announced net sales and earnings for the third quarter ended September 29, 2019 and updated its 2019 net sales outlook to reflect the acquisition of ONE Brands, LLC.
“We are pleased with our third-quarter results and the momentum we are seeing in our core business,” said Michele Buck, The Hershey Company President and Chief Executive Officer. “Investments in our brands, capabilities and strong execution are driving solid confection sales and share gains in both our U.S. and International markets. Our Amplify portfolio continues to deliver mid- to high-single-digit growth. And we continue to execute against our broader snacking ambition with the acquisition of ONE Brands and its portfolio of high-growth, better-for-you nutrition bars. We remain confident in our strategies and ability to deliver our financial commitments for the year.”
Third-Quarter 2019 Financial Results Summary1
- Consolidated net sales of $2,134.4 million, an increase of 2.6%.
- Organic constant currency net sales increased 1.6%.
- The net impact of acquisitions and divestitures on net sales was a 1.2 point benefit, while foreign currency exchange was a 0.2 point headwind.
- Reported net income of $325.3 million, or $1.54 per share-diluted, an increase of 23%.
- Adjusted earnings per share-diluted of $1.61, an increase of 3.9%.
1 All comparisons for the third quarter of 2019 are with respect to the third quarter ended September 30, 2018
2019 Full-Year Financial Outlook Summary2
- Full-year reported net sales are expected to increase around 2.5%, an increase versus previous guidance of around 2%, driven by the acquisition of ONE Brands. - The net impact of acquisitions and divestitures is estimated to be approximately a 1.0 point benefit3. - The impact of foreign currency exchange is anticipated to be slightly negative based on current exchange rates.
- Full-year reported earnings per share-diluted are expected to be in the $5.54 to $5.66 range, between a decline of 1% and an increase of 1% versus prior year.
- Full-year adjusted earnings per share-diluted are expected to be in the $5.68 to $5.74 range, an increase of 6% to 7%.
2 All comparisons for full-year 2019 are with respect to the full year ended December 31, 20183 Reflects the impact from the acquisitions of Amplify Snack Brands, Pirate Brands and ONE Brands as well as the divestitures of Tyrells, Shanghai Golden Monkey and the Van Houten brand rights
Third-Quarter 2019 Results
Consolidated net sales were $2,134.4 million in the third quarter of 2019 versus $2,079.6 million in the year ago period, an increase of 2.6%. The net impact of acquisitions and divestitures was a 1.2 point benefit. Price realization was a 1.1 point benefit, reflecting full execution of the company's 2018 price increase, partially offset by the transitional period related to the company's July 2019 pricing announcement. These results were in line with expectations. Volume was a 0.5 point benefit and foreign currency exchange was a 0.2 point headwind.
As outlined in the table below, the company’s third-quarter 2019 results, as prepared in accordance with U.S. generally accepted accounting principles (GAAP), included items impacting comparability of $18.4 million, or $0.07 per share-diluted. For the third quarter of 2018, items impacting comparability totaled $68.0 million, or $0.30 per share-diluted.
Reported gross margin was 44.2% in the third quarter of 2019, compared to 41.5% in the third quarter of 2018, an increase of 270 basis points. Adjusted gross margin was 44.8% in the third quarter of 2019, compared to 44.0% in the third quarter of 2018, an increase of 80 basis points. This increase in both reported and adjusted gross margin was driven by favorable commodities and net price realization.
Selling, marketing and administrative expenses increased 6.0% in the third quarter of 2019 versus the third quarter of 2018. Advertising and related consumer marketing expenses increased 10.5% in the third quarter of 2019 versus the same period last year driven by advertising increases in North America. Selling, marketing and administrative expenses, excluding advertising and related consumer marketing, increased 3.5% versus the third quarter of 2018 driven by increased spending related to incentive compensation.
Third-quarter 2019 reported operating profit of $460.8 million increased 13.4% versus the third quarter of 2018, resulting in an operating margin of 21.6%, an increase of 210 basis points driven primarily by gross margin gains. Adjusted operating profit of $477.0 million increased 1.3% versus the third quarter of 2018. This resulted in an adjusted operating margin of 22.3%, a decrease of 30 basis points versus the third quarter of 2018 as gross margin gains were more than offset by increased advertising in North America and higher incentive compensation.
The effective tax rate in the third quarter of 2019 was 20.2%, a decrease of 540 basis points versus the third quarter of 2018. The adjusted tax rate in the third quarter of 2019 was 20.1%, a decline of 270 basis points versus the third quarter of 2018. Both the effective and adjusted tax rate favorability were driven primarily by excess tax benefits from stock-based compensation and higher investment tax credits.
The full report is here.
