Energized by a new line of premium cookies, Ice Breakers Liquid Ice, Take 5, and other recently introduced products, Hershey reported strong first-quarter organic sales growth of 8% -- double its long-term targeted 3% to 4% growth rate. Last year's acquisitions -- which include Hawaiian macadamia nuts producer Mauna Loa as well as Mexican candy manufacturer Grupo Lorena -- tacked on another 3% to the top line.
Together, the two helped overall sales climb 11.2% to $1.13 billion. With a tight clamp on costs, earnings advanced 14.6% to $0.47, or $118.2 million, from $0.41 a year ago. Both totals set new highs for the company, and management is predicting more of the same again this year, reaffirming that earnings would come in at the upper end of its 9% to 11% growth range. All that sweet news had Hershey shares moving sharply higher this morning.
Often, companies should just stick to what they know best, and for Hershey, that would obviously be confectionary products -- not the pasta, coffee, or frozen foods that distracted the firm and swallowed resources in years past. Much of its recent success stems from cleverly repackaging old favorites that still resonate with America's sweet tooth -- such as Reese's Peanut Butter Cups coated with white chocolate. Innovative new products and limited-edition releases have also helped stimulate sluggish sales in the mature, slow-growth industry.
One of the firm's key competitive advantages lies in its distribution capability. More often than not, chocolate is bought on a whim -- often at a checkout counter at Target
Rivals have also seen some momentum from new products, though, such as Topps
Hershey seems to be doing many things right these days, and that execution is reflected in the company's stock -- which broke into 52-week high territory this morning. Still, for investors who aren't on a low-valuation diet, Hershey is a name that sounds tempting.
Unwrap and sample these other looks at the candy business:
Fool contributor Nathan Slaughter is eagerly awaiting Hershey Kisses filled with peanut butter. He owns none of the companies mentioned.