HERSHEY, Pa.--(BUSINESS WIRE)-- The Hershey Company announced sales and earnings for the first quarter ended April 3, 2016. Consolidated net sales were $1,828.8 million compared with $1,937.8 million for the first quarter of 2015. Reported net income for the first quarter of 2016 was $229.8 million or $1.06 per share-diluted, compared with $244.7 million or $1.10 per share-diluted for the comparable period of 2015.
First-Quarter Performance
Consolidated net sales were $1,828.8 million in the first quarter of 2016, a decline of 5.6% versus the first quarter of 2015. Excluding the effect of foreign currency translation, which was slightly greater than estimates and a 1.2 point headwind, net sales declined 4.4% versus the year ago period. Price realization on seasonal CMG products was more than offset by increased levels of direct trade resulting in a net price realization headwind of 0.5 points. Volume was off 4.3 points due to a shorter Easter season and anticipated lower sales in China. Net acquisitions and divestitures were a 0.4 point benefit.
Adjusted gross margin was 46.8% in the first quarter of 2016, compared to 46.6% in the first quarter of 2015. The 20 basis point increase was driven by greater than expected supply chain productivity and cost savings initiatives and slightly favorable commodity costs, partially offset by other supply chain costs.
Total advertising and related consumer marketing expense declined about 10% versus the first quarter of 2015 due to timing. North America new product launches, as well as merchandising and display activity, are expected to accelerate over the remainder of 2016 and be supported by advertising and related consumer marketing expense, which should increase at a percentage rate greater than net sales growth. Selling, marketing and administrative (SM&A) expenses, excluding advertising and related consumer marketing, declined about 9% in the quarter, driven by the aforementioned increase in our annual productivity and cost savings target as well as the initiative announced in June of 2015. In the first quarter of 2016, the company repurchased $303.9 million dollars of outstanding shares, resulting in diluted shares outstanding of 217.5 million, compared to 222.7 million in the first quarter of 2015.
North America (U.S. & Canada)
Hershey’s North America net sales were $1,633.5 million in the first quarter of 2016, a decline of 4.3% versus the same period last year. Volume was off by approximately 3.7 points due primarily to a shorter Easter season. Price realization on seasonal CMG products was more than offset by increased levels of direct trade resulting in a net price realization headwind of 0.7 points. The combined Allan Candy and Krave acquisitions, as well as the Mauna Loa divestiture, were a 0.5 point benefit. Foreign exchange rates were 0.4 points unfavorable.
Hershey’s U.S. CMG retail takeaway for the 12 weeks ended March 26, 2016, 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, was up 8.2%, with market share off 0.1 points. This performance benefited from Easter being one week earlier in 2016. Therefore, April marketplace performance will be less than the year ago period and is expected to result in April year-to-date Hershey CMG retail sales of about the same as last year. In addition, Hershey’s and Reese’s snack mix items are not included in the CMG database as Nielsen captures this within salty snacks.
North America segment income declined 4.5% to $529.4 million in the first quarter of 2016, compared to $554.3 million in the first quarter of 2015. The decline in segment income was primarily driven by lower sales. North America advertising and related consumer marketing expense declined 6.6% versus the first quarter of 2015 due to timing. Full report.
