The Hershey Company (HSY) Q2 2024 Prepared Remarks earnings summary

Executive summary

• Q2 2024 net sales declined 16.7% year-over-year to $2,074.5 million, driven by reduced discretionary spending, planned inventory reductions, and ERP implementation timing, with the convenience channel particularly impacted.

• Net income for Q2 2024 was $180.9 million, down 55.6% year-over-year, with diluted EPS at $0.89 and adjusted EPS at $1.27, reflecting lower gross profit, higher income taxes, and business realignment expenses.

• Salty Snacks portfolio grew 6.4% in Q2, led by Dot's pretzels and Pirate's Booty, while Confectionery faced significant volume and inventory headwinds.

• Innovation, new product launches, and marketing campaigns are expected to drive growth in the second half of 2024 and into 2025.

• Major ERP system implementation was completed in Q2 2024, impacting shipment timing and internal controls.

Financial highlights

• Q2 reported net sales declined 16.7% to $2,074.5 million, with organic, constant currency net sales down 16.8%.

• Gross margin for Q2 2024 was 40.2% (reported) and 43.2% (adjusted), both down year-over-year due to unfavorable commodity costs and business realignment.

• Operating profit for Q2 2024 was $287.8 million (reported, down 48.7%) and $383.5 million (adjusted, down 32.8%), with operating margin at 13.9% (reported) and 18.5% (adjusted).

• Adjusted EPS declined 12.5% in the first half and 36.8% in Q2; full-year EPS now expected to be down slightly.

• Cash and cash equivalents increased to $467.1 million as of June 30, 2024.

Outlook and guidance

• Full-year net sales outlook narrowed to approximately 2%, reflecting softer snacking trends and updated from 2–3%.

• Acceleration in performance expected in the second half, driven by innovation, merchandising, and seasonal contributions.

• Recently announced pricing actions will mainly benefit 2025, with minimal 2024 impact.

• Full-year tax rate expected at approximately 13%; interest expense forecasted at $165–$175 million; capital investments for the year expected at $600–$625 million.

• $100 million in savings expected from Advancing Agility & Automation Initiative.