01—Abstract
Summary
Summary of the 10-Q filed November 7, 2024. Cited figures are marked; the original filing is the authoritative source.
The Hershey Company's Form 10-Q for the quarter ended September 29, 2024 shows a weaker third quarter and nine-month period.
Net sales for the third quarter were $2,987.5 milliona, down 1.4% from $3,030.0 million a year earlier, driven by a volume decline of approximately 3% and partly offset by price realization of approximately 2%. Gross margin fell to 41.3% from 44.9%, citing commodity costs (notably cocoa), higher supply chain costs, unfavorable mix and business realignment costs. Net income declined 13.9% to $446.3 million and diluted EPS fell to $2.20 from $2.52.
For the nine months, net sales were $8,314.7 millionb (down 2.3%) and diluted EPS was $7.00 versus $7.36. Operating profit for the third quarter was $613.2 million, down 16.7%, and business realignment costs rose to $27.6 million in the quarter, tied to the Advancing Agility & Automation initiative, whose total pre-tax cost is estimated at $200 million to $250 million through 2026. Management states that cocoa futures averaged $3.32 per pound in the first nine months of 2024, versus a 2023 annual average of $1.49, and that consumer demand for its products continued to decline.
On the balance sheet, cash rose to $614.951 million and short-term debt increased to $1.196 billionc, with current portion of long-term debt at $904.8 million. Cash dividends paid totaled $814.3 million and share repurchases were $494.2 million in the nine months. Management says it believes it has sufficient liquidity, and it expects 2024 capital expenditures of $575 million to $600 million.
02—Key points
Key Highlights
- Third-quarter net sales of $2,987.5 million fell 1.4%, with volume down approximately 3% and price realization up approximately 2%.
- Gross margin contracted to 41.3% from 44.9% in the third quarter of 2023, driven by commodity costs, supply chain costs, unfavorable mix and business realignment costs.
- Operating profit declined 16.7% to $613.2 million, and net income fell 13.9% to $446.3 million in the third quarter.
- Diluted EPS was $2.20 for the third quarter versus $2.52 a year earlier, and $7.00 for the nine months versus $7.36, benefiting from lower weighted-average shares.
- Average cocoa futures price was $3.32 per pound in the first nine months of 2024, versus a 2023 annual average of $1.49 per pound.
- Business realignment costs under the Advancing Agility & Automation initiative totaled $104.8 million since inception; estimated total pre-tax costs are $200 million to $250 million through 2026, with ongoing annual savings of approximately $300 million expected.
- Cash dividends paid were $814.3 million and share repurchases were $494.2 million in the first nine months of 2024; approximately $470 million remains under the December 2023 repurchase authorization.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Hershey kept $0.15.
- Revenue$2.99B100.0%
- Cost of revenue−$1.75B58.7%
- Gross profit$1.23B41.3%
- Operating costs−$619.6M20.7%
- Operating income$613.2M20.5%
- Interest, other & tax−$166.9M5.6%
- Net income$446.3M14.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed November 7, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $2.99B$2.49B | +20.0% |
| Cost of Revenue | $1.75B$1.36B | +29.2% |
| Gross Profit | $1.23B$1.13B | +8.9% |
| SG&A Expenses | $591.92M$571.80M | +3.5% |
| Operating Income | $613.16M$560.66M | +9.4% |
| Interest Expense | $51.91M$43.89M | +18.3% |
| Net Income | $446.30M$406.98M | +9.7% |
05—Questions
Frequently Asked Questions
How did Hershey's sales and profitability trend in the third quarter of 2024?
Net sales were $2,987.5 million, down 1.4% from $3,030.0 million. Gross margin fell to 41.3% from 44.9%, operating profit declined 16.7% to $613.2 million, and net income fell 13.9% to $446.3 million.
What drove the decline in gross margin?
The filing attributes the decline to unfavorable commodity costs, primarily cocoa, higher supply chain costs, unfavorable product mix and increased business realignment costs, partly offset by lower sales volume.
What is the Advancing Agility & Automation initiative?
A multi-year productivity program approved by the Board on February 2, 2024 to improve supply chain and manufacturing spend, optimize SM&A expenses and automate processes. Total pre-tax costs are estimated at $200 million to $250 million through 2026, with ongoing annual savings of approximately $300 million expected at program conclusion.
How is the company's liquidity and debt position?
Cash and cash equivalents were $615.0 million at September 29, 2024. Short-term debt rose to $1.196 billion and current portion of long-term debt was $904.8 million. Management believes it has sufficient liquidity and can satisfy near-term maturities through operating cash flow, new debt issuance, or its unsecured credit facility.
What did the company return to shareholders in the first nine months of 2024?
Cash dividends paid totaled $814.3 million, and share repurchases totaled $494.2 million, including $400.0 million under pre-approved repurchase programs.
06—Continue