- The Washington Times - Tuesday, April 21, 2009

HARRISBURG, PA. (AP) - Hershey, the nation’s second-leading candy maker, reports earnings for the first quarter on Thursday morning. The following is a summary of key developments related to the period.

OVERVIEW: The Hershey Co. has put together a string of three strong quarters and appears to have stabilized its business after it adjusted its marketing strategy to break out of a two-year slump.

The maker of Reese’s, Hershey’s Kisses and Ice Breakers also has produced bigger quarterly profit and revenue as it nears the end of a costly, $600 million effort announced in early 2007 to close underperforming domestic plants and shift more production to countries where labor is cheaper and population growth is explosive, such as Brazil, Mexico, India and China.

Hershey continued to consolidate in the first quarter as part of a strategy to concentrate on its core brands. It announced in February that it is eliminating Joseph Schmidt Confections, one of the two California-based premium chocolate brands it purchased in 2005 when it entered the fast-expanding, higher-margin segment.

Hershey said the move is not related to slowing growth in the segment.

Sales rose 3.8 percent to $5.13 billion in fiscal 2008, and profit rose 45 percent to $311.4 million.

BY THE NUMBERS: Analysts polled by Thomson Reuters on average expect Hershey to report it earned 34 cents per share in the quarter that ended March 31 on sales of nearly $1.19 billion. In the same period a year earlier, it reported earnings of 37 cents, excluding one-time items, on revenue of $1.16 billion.

ANALYST TAKE: Janney Montgomery Scott LLC analyst Jonathan P. Feeney said he is mystified by Hershey’s higher-than-average price-to-earnings ratio when compared to other packaged food companies. He put the company’s value at $29 per share, and cited the “extraordinary” level of marketing spending Hershey needs to keep pace with peers. He also warned that Hershey may suffer from dropping sales at convenience stores.

WHAT’S AHEAD: Hershey has said that price increases last August will continue to hurt its sales volume for the full fiscal 2009, which began Jan. 1, weighing down growth to a rate of 2 percent to 3 percent. Hershey has projected its profits to be below its long-term objective of 6 percent to 8 percent annual growth, warning of friction from higher commodity prices, pension costs and promotional spending.

STOCK PERFORMANCE: Hershey’s share price was stable between January and March, picking up just a penny to close at $34.75 on March 31. The price remains lower than it was in 2004 when the company issued a two-for-one stock split.

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