Hershey announced layoffs Thursday, reporting a hit to its quarterly profit as soaring cocoa prices and inflation-weary shoppers refrained from buying the company’s expensive chocolate and candy.
The Pennsylvania-based company announced it will cut 5% of its workforce, resulting in up to $60 million in severance pay.
It was not immediately clear how many jobs at the company’s workforce of about 18,075 full-time staff and about 2,000 part-time staff would be affected or which teams would be affected. .
“We do not anticipate any significant disruption or impact to our employee base, which will impact less than 5% of our workforce,” a Hershey spokesperson told the Post on Thursday.
The maker of Reese’s Peanut Butter Cups says the layoffs are a multi-year plan to generate long-term savings as the company looks to offset declining sales in the face of rising cocoa, sugar and labor costs. He said this is part of a new productivity improvement plan.
The move is intended to result in pre-tax costs of $200 million to $250 million from inception through 2026.
Hershey’s organic sales volume fell 6.6% in the fourth quarter, the company said.
Hershey expects net sales to increase 2% to 3% year over year in 2024, compared with a 3.4% increase expected by analysts according to LSEG data.
Full-year adjusted earnings per share were also flat year over year, the data showed. Analysts had expected adjusted earnings to rise 3.3% to $9.82 per share.
Hershey’s weaker-than-expected outlook comes after a difficult Halloween season for Hershey, which increased its trick-or-treat prices by 13% year-over-year after raising prices at least 7% in each of the past seven quarters. They have raised prices by an appalling %. .
This figure was more than double the 6% rise in overall food prices.
“While we expect cocoa to limit earnings growth this year, our business strategy allows us to grow the category and We believe that over time we will be able to increase our profits and market share.”
Cocoa prices are up nearly 65% compared to this time last year. food engineering magazine report.
The magazine said that although consumer demand remained relatively strong, cocoa prices were also rising as West African farmers grappled with continued unfavorable growing conditions and crop diseases.
“The cocoa issue comes at a particularly difficult time for manufacturers, given the rising sugar prices that manufacturers have been dealing with over the past three years,” said Billy Roberts, senior food and beverage economist at Corbank.・Told the magazine.
In 2020, sugar prices averaged about $0.1288 per pound. macro trend. As of this writing, nearly three years later, the price has increased approximately 86% to $0.24 per pound.
Inflation rose a sharper-than-expected 3.4% in December, according to the latest Consumer Price Index, which tracks changes in the cost of everyday goods and services.
As a result, “consumers are spending less during non-seasonal periods, a trend that is likely to continue through 2024,” impacting Hershey’s bottom line, according to CFRA Research analyst Arun Sundaram. That’s what it means.
The U.S. Bureau of Labor Statistics is scheduled to release January inflation figures on February 13th.
Analysts are hopeful that this number will inch closer to the Federal Reserve’s 2% target and that the central bank may start cutting interest rates.
At their first policy meeting of 2024 last month, central bankers unanimously decided to keep interest rates at 5.25% to 5.5%, their current 22-year high.
Federal Reserve Chairman Jerome Powell dashed Wall Street’s hopes that the first of three highly anticipated interest rate cuts could occur in March.
“I don’t think it’s likely that the committee will reach a level of confidence to cut rates by the March meeting, but that’s something we’ll see,” Powell said at a closely watched news conference after the policy meeting.
Comes with post wire.
