The Hershey Company today announced sales and earnings for the second quarter ended July 5, 2015. Consolidated net sales were $1,578.8 million compared with $1,578.3 million for the second quarter of 2014. Reported net loss for the second quarter of 2015 was $99.9 million or $0.47 per share-diluted, compared with net income of $168.2 million or $0.75 per share-diluted for the comparable period of 2014.
Second-Quarter Performance
Consolidated net sales were $1,578.8 million in the second quarter, in line with the second quarter of 2014. Price realization, primarily in the U.S., was a 5.8 point benefit. Volume was off 3.6 points due primarily to elasticity related to the previously announced price increase, in line with expectations and lower sales in China. Increased promotional spending, mainly in China, and foreign currency translation were a 2.3 point and 1.3 point headwind, respectively. Net acquisitions and divestitures were a 1.4 point benefit. North America net sales were slightly better than expectations, primarily due to solid U.S. CMG performance. International and Other net sales, excluding the benefit of the SGM acquisition and unfavorable foreign currency exchange rates, declined versus a year ago due primarily to the underperformance of Hershey’s chocolate business in China.
North America
Hershey’s North America net sales were $1,399.6 million in the second quarter, an increase of 1.8% versus last year. Excluding the 0.6 point impact of unfavorable foreign exchange rates in Canada, North America net sales increased 2.4%. Net price realization was a 5.5 point benefit and volume was off 3.6 points due to snacks and grocery sales that were lower than anticipated and elasticity related to the pricing action that was in line with estimates. On a net basis, the Allan Candy and Krave acquisitions, as well as the Mauna Loa divestiture, were a 0.5 point benefit.
Adjusting for the Mauna Loa divestiture, net sales in the U.S. were slightly ahead of estimates, driven by solid CMG growth. This was partially offset by snacks and grocery softness, primarily due to increased competitive activity in spreads and baking chips. Hershey’s U.S. CMG retail takeaway for the 28 weeks ended July 11, 2015, which along with the comparable period in 2014 encompasses each year’s entire Easter season results, was up 3.1% in the expanded all outlet combined plus convenience store channels (xAOC+C-store), which accounts for approximately 90% of the company’s U.S. retail business. For the 28 weeks ended July 11, 2015, Hershey’s U.S. market share was an industry leading 31.3%, an increase of 0.1 points versus the prior period. As expected, Canada net sales excluding the Allan Candy acquisition and unfavorable foreign currency exchange rates declined low single digits on a percentage basis versus last year, due to the timing of Easter as well as merchandising activity in the year ago period.
North America operating profit increased 13.5% to $460.7 million in the second quarter of 2015, compared to $405.7 million in the second quarter of 2014. Operating profit growth was driven by 340 basis points of gross margin expansion, primarily due to pricing. Full report here.
