HARRISBURG, Pa. (AP) — Hershey, the nation's second-largest candymaker, said Thursday that higher prices and a new advertising effort helped its second-quarter profit leap by 72 percent.
The results easily beat Wall Street's expectations, and prompted The Hershey Co. to raise its sales and earnings expectations for the year. The company's shares climbed sharply in morning trading.
However, the company admitted it stumbled with two premium lines, including its Starbucks partnership, and will discontinue them.
Second-quarter advertising was up 46 percent, as Hershey has poured money into promoting its core brands, rather than new varieties, to pull out of a slump and keep pace with its larger competitor in the candy sector, Mars Inc. The Hershey, Pa.-based maker of Hershey's Kisses and Reese's remains No. 1 in the chocolate candy segment.
"Our results for the second quarter were strong and exceeded our expectations," Hershey President and Chief Executive David J. West said on a conference call with analysts.
West said the places where Hershey has focused its promotions, primarily in food and convenience stores, have delivered better returns than anticipated, encouraging the company to continue pushing its ad spending.
One television ad supporting Reese's peanut butter cups advises watchers to "stop global warming now — or all the Reese's will melt." Another that touts Hershey's chocolate bar features two animated chocolate people designed by the creators of Wallace & Gromit.
Shares rose $1.80, or 4.6 percent, to $40.75 in early trading.
Hershey will discontinue the Starbucks chocolates and its Cacao Reserve bars. West cited problems with the marketing and lateness of the products to a category whose rapid growth has flattened. Now, stores are clearing more shelf space for the cheaper chocolate treats that are attracting recession-conscious consumers — and are Hershey's biggest sellers.
Hershey said it earned $71.3 million, or 31 cents a share, in the three months ended July 5, up from $41.5 million in the year ago period.
Excluding charges to streamline its operations, Hershey says it would have earned $98 million, or 43 cents a share. That beat the 35 cents-per-share average estimate of analysts.
Revenue rose almost 6 percent to $1.17 billion.
Hershey began 2009 projecting sales to grow 2 percent to 3 percent and profits to fall short of its long-term objective of 6 percent to 8 percent in annual growth.
With two strong quarters under its belt, Hershey said Thursday that it now expects annual sales to grow 3 percent to 5 percent and profits to rise above the 6 percent to 8 percent range.
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