The Hershey Company (NYSE/HSY) shares are falling as the company is cutting jobs and planning other cost cuts amid a slowdown in China sales.
The Pennsylvania chocolate giant said on Friday morning of June 19 that profit this year will be less than estimated previously. The maker of “Reese’s,” “Twizzlers,” and “Almond Joy” candies said growth in China in April and May was below its expectations, impacted by economic challenges surrounding the change in consumer shopping behavior and intense competition in the industry.
Excluding certain items, earnings per share (EPS) in 2015 came in at $4.10 to $4.18, down from a previous forecast of $4.30 to $4.38. (Source: The Hershey Co., June 19, 2015.)
Investors were disappointed by the results. The shares fell nearly two percent to $90.37 at 9:00 a.m. in New York.
The company also announced that it intends to cut approximately 300 jobs by the end of 2015. Hershey did not specify where the job cuts would occur, but mentioned they would not affect the manufacturing segment.
The company said its global sales for 2015 will improve about four to five percent when excluding the impact of currency exchange, down from a previous estimate of six to seven percent. Management added that a strong U.S. dollar would trim 1.5% off the company’s revenues this year.
Disappointing sales in China in April and May forced the company to reconfigure its financial outlook and restructure its existing strategies. As part of the company’s new strategy, Hershey said it would focus on getting its products in more small stores in China.
Analysts estimated an EPS of $4.32 on average for the rest of 2015 while the company said it will focus on gaining distribution in smaller stores and push core products and brands that deliver the highest return. Investors remain cautious on how the company can generate more sales in the intensified chocolate industry.