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The Hershey Co - Stock Quote HSY

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Morningstar's The Hershey Co Stock Analysis

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Despite Sweeter Outlook, Strained Capacity and Soaring Inflation May Temper Hershey's Trajectory

Erin Lash, CFA Sector Director

Analyst Note

| Erin Lash, CFA |

Wide-moat Hershey has been firing on all cylinders. Organic sales shot up 11.5% in the quarter, reflecting a 7% increase in price and almost 5% volume growth—particularly impressive when viewed against the 13% gains in last year’s first quarter. We attribute this performance to investments to ensure Hershey's mix evolves with consumer trends, combined with a commitment to market behind its fare over a longer horizon. Advertising spending was down nearly 1% in the period, but we believe this course was undertaken to avoid touting brands where supply was insufficient; we see this as prudent, to avoid frustrating consumers and retailers, but not representative of a strategy shift. As such, we continue to forecast Hershey will expend a high-single-digit percentage of sales on average annually ($800 million) on research, development, and marketing.

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The Hershey Co's Company Profile

Business Description

Hershey is a leading confectionery manufacturer in the U.S. (nearly a $25 billion market), controlling around 46% of the domestic chocolate space (per IRI). Beyond its namesake label, the firm's mix has expanded over the last 85 years and now consists of 100 brands, including Reese's, Kit Kat, Kisses, and Ice Breakers. Hershey's products are sold in about 80 countries, albeit with just a high-single-digit percentage of sales coming from markets outside the U.S., including Brazil, India, and Mexico. The firm has sought inorganic opportunities to extend its reach beyond its core confection business, adding Amplify Snack Brands and its Skinny Pop ready-to-eat popcorn to its mix and Pirate Brands (including the Pirate’s Booty, Smart Puffs, and Original Tings brands) over the past few years.

19 East Chocolate Avenue
Hershey, PA, 17033
T +1 717 534-4200
Sector Consumer Defensive
Industry Confectioners
Most Recent Earnings Mar 31, 2022
Fiscal Year End Dec 31, 2022
Stock Type Classic Growth
Employees 18,990

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