Keep in mind that sales were about $4.1 billion in 2001, and most analysts have that number pegged at $5 billion for 2006. Stretching across the same timeframe, however, profits have more than doubled from $199 million to my estimate of about $550 million this year. A quick peek at the income statement shows sales, general, and administrative costs (SG&A) increasing by only about $50 million over the same time span.
With all of that mind, let's try to figure out what this quarter's numbers tell us. Sales were up 6% to $1.05 billion, and net income rose about 5% to $98 million, including a $2.6 million dollar charge for "business realignment initiatives." SG&A costs for the quarter continued to decline by about 2%, helping net margins remain steady at 9.4% as rising interest expenses drained away some profit.
Being notably leveraged is not an unusual strategy for a consumer-goods company -- Anheuser-Busch
On the other side of the ledger, Hershey's new product pipeline for the first time in a while is not that exciting. In terms of new products, the Kissables line is quite successful, but the company exited the Swoops and SmartZones products last quarter. New products in the works are sandwich cookies based on existing products, which sound pretty mundane to me.
I'll grant you that the candy business can be tough, with Cadbury
At some point, Hershey has to start growing the core business instead of hacking away at the costs. That growth has to come from some innovative products, not just another brand extension. For this chocoholic, the current approach just won't fly.
More sugary goodness:
- Folly Volley: Rocky Mountain Chocolate Factory
- Rocky Mountain's Bittersweet Quarter
- Land of the Free, Home of the Fat
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