Summary
- Hershey is benefiting from strong demand for “affordable luxuries” such as chocolate.
- Momentum could continue near term as the category has little private label exposure, and price hikes along with moderating inflation could support performance.
- Long term efforts in the core North American chocolate market, better-for-you chocolates, and salty snacks could support growth.
Hershey (NYSE:HSY) is benefiting from strong consumer demand for chocolate treats despite inflation, a trend that is likely to continue. Long term strategic efforts to increase share in the domestic chocolate market, increase penetration in better-for-you confectionery, and ramp up its salty snacks brands are promising. However, a relatively poor debt and liquidity position, along with competitive pressures are risks to watch out for.
Robust growth
Despite inflationary conditions, consumers are spending on sweets and snacks helping chocolate makers see robust sales growth; Hershey saw revenues up 16% YoY to USD 2.73 billion during the quarter ended October 2022, and the company revised its full year 2022 net sales and earnings per share outlook upwards, a similar performance compared to rivals such as Mondelez (MDLZ) , the maker of Cadbury chocolates, who saw chocolate sales rise 9.3% in the October 2022 quarter, and revised their full year 2022 outlook upwards as well.
