Hershey's profit climbs as sales rise

AP News
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Posted: Apr 26, 2011 8:43 AM
Hershey's profit climbs as sales rise

The Hershey Co. on Tuesday reported higher first-quarter net income as its sales increased thanks to new products and heavy advertising.

The chocolate-making icon credited the launch of Hershey's Drops and Reese's Minis, its expansion outside the U.S. and a 30 percent increase in ad spending.

Net income rose to $160 million, or 70 cents per share, compared with earned $147.4 million, or 64 cents per share, in the period a year earlier. Adjusted earnings were 72 cents per share, beating analysts' expectations for 70 cents, according to FactSet.

Revenue increased 11 percent to $1.56 billion, beating analysts' average forecast for $1.49 billion.

Like other companies, Hershey is facing higher costs for raw materials including sugar, fuel and packaging. Last month, it said it would pass those costs along to customers and raise prices by nearly 10 percent this year.

But Hershey stressed the rising cost of commodities less than other consumer companies that have reported their financial results this month; it said its cost cutting measures would help sustain its profit margin. Last year, Hershey rolled out a money-saving program it calls Project Next Century, which included laying off workers and ending production in the old factory that Milton Hershey built.

Still, the company will have to convince customers to keep buying chocolate, at a higher price, even as they spend more on gas and groceries. It will also have to keep prices low enough that customers aren't driven to much-larger rivals Kraft Food Inc. and Mars Inc.

Hershey said Tuesday it will work with retailers to offer promotions and merchandising to keep customers buying even with the price increases.