Apparently, Hershey (NYSE:HSY) needed a makeover. The Hershey Foods name that it had been wearing for so long was becoming dated -- though it was quite stylish when the company first tried it on back in 1968. So, earlier this week, shareholders cheered as the chocolatier emerged with a fresh new name and a redesigned corporate logo. This morning, the new Hershey Company released its first ever quarterly results, and apparently the prospect of a sleek new image had given the company an extra spring in its step.
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 (NYSE:TGT) or Walgreen (NYSE:WAG) -- and Hershey has its products proudly on display at more than 2 million retail locations. During the quarter, it increased its already-commanding 43% market share by another 160 basis points.
Rivals have also seen some momentum from new products, though, such as Topps (NASDAQ:TOPP), whose candy sales spiked 10% in the most recent quarter on the strength of Juicy Drop Pops. Wrigley (NYSE:WWY) has also taken steps to expand beyond its core gum business by purchasing Altoids and Life Savers from Kraft (NYSE:KFT).
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.
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Fool contributor Nathan Slaughter is eagerly awaiting Hershey Kisses filled with peanut butter. He owns none of the companies mentioned.
