The Hershey Company’s HSYfirst-quarter 2018 adjusted earnings came in line with analysts’ expectation, while revenues beat the same. Growth in core chocolate brands and the acquisition of Amplify worked in favor of the company. However, cost pressures weighed on margins.
Earnings & Revenue Discussion
Adjusted earnings per share of $1.
Net sales of $1.97 billion surpassed the Zacks Consensus Estimate of $1.94 billion. Net sales rose 4.9% year over year, courtesy of 3.4% and 0.5% benefit to net sales, from acquisitions and foreign currency translation, respectively. Organically, excluding the impact of currency, sales increased 4.4%.
Volumes were up 2.4%. Meanwhile, net price realization had an unfavorable impact of 1.4%.
Quarterly Segment Discussion
North America(the United States and Canada) net sales improved 4.4% to $1.75 billion. Currency benefited sales by 0.2%. The Amplify acquisition had a 3.8% positive impact, while volumes provided a 1.8% benefit.
First-quarter net sales in the International and Othersegment grew 8.8% to $220.3 million. Currency had a positive impact on sales of 2.4% and volumes provided 8.1% benefit.
Constant-currency sales were solid (about 12%) in Mexico, Brazil and India. Net sales in China inched up 1% year over year.
Margins Detail
Adjusted gross margin declined 260 basis points (bps) to 44.9% due to unfavorable sales mix, higher freight and logistics costs as well as incremental investments in trade and packaging.
Cost of sales increased 2.8% to $997.9 million in the first quarter. Again, total advertising and related consumer marketing expenses fell 5.3% from first-quarter 2017. Adjusted operating margin contracted 150 bps to 21.7%.