Hershey announced layoffs Thursday after reporting its quarterly earnings were hit by the soaring cost of cocoa and inflation-weary shoppers who in the reduction of on the corporate’s expensive chocolates and candies.
The Pennsylvania-based company said it could slash 5% of its workforce, leading to as much as $60 million in severance costs.
It wasn’t immediately clear what number of jobs amongst the corporate’s workforce of roughly 18,075 full-time and nearly 2,000 part-time staffers can be affected, or what teams can be impacted.
“We don’t expect significant disruption or impact to our worker base with impact being lower than 5% of our workforce,” a Hershey spokesperson told The Post on Thursday.
The Reese’s Peanut Butter Cups-maker said that the layoffs are a part of a latest multi-year productivity initiative to generate long-term savings as the corporate looks to offset declining sales within the face of rising cocoa, sugar and labor costs.
The move is meant to generate pre-tax costs of $200 million to $250 million from inception through 2026.
Hershey’s organic sales volumes fell 6.6% within the fourth quarter, the corporate said.
Hershey forecast 2024 net sales to extend between 2% and three% year-on-year, compared with analysts’ estimates of growth of three.4%, as per LSEG data.
The information also sees the annual adjusted profit per share to be flat, compared with a yr earlier. Analysts were expecting adjusted earnings growth of three.3% to $9.82 per share.
Hershey’s weaker-than-expected projections come after a rough Halloween season for Hershey, which up-charged trick-or-treaters a daunting 13% year-over-year after raising its prices by not less than 7% in each of the last seven quarters.
The figure was greater than double the 6% increase across grocery prices generally.
“While cocoa is predicted to limit earnings growth this yr, we imagine our business strategies will enable us to grow our categories and profitably expand market share over time,” Hershey CEO and Chair Michele Buck said in the course of the conference call.
Cocoa prices are nearly 65% higher than they were this time last yr, Food Engineering Magazine reported.
While consumer demand stays relatively strong, per the magazine, so do elevated cocoa costs, as West African farmers grapple with ongoing unfavorable growing conditions and crop disease.
“The cocoa issues come at a very difficult time for manufacturers,” Billy Roberts, senior food and beverage economist for CoBank, told Food Engineering Magazine, “considering the rise in sugar prices they’ve been coping with over the past three years.”
In 2020, the value of sugar averaged about $0.1288 per pound, in keeping with Macrotrends. On the time of writing, roughly three years later, the value surged some 86%, to $0.24 per pound.
Based on the newest Consumer Price Index — which tracks changes within the costs of on a regular basis goods and services — inflation rose a stiffer-than-expected 3.4% in December.
Consequently, “consumers are spending less during non-seasonal periods, a trend that may likely proceed throughout 2024,” which is impacting Hershey’s bottom line, in keeping with CFRA Research’s analyst Arun Sundaram.
The Bureau of Labor Statistics is ready to release January’s inflation reading on Feb. 13.
Analysts have been hoping that the figure will inch closer to the Federal Reserve’s 2% goal in order that central bankers will begin lowering rates of interest.
At the primary policy meeting of 2024 last month, central bankers unanimously decided to maintain rates of interest at their current 22-year high, between 5.25% and 5.5%.
Fed Chair Jerome Powell squashed Wall Street’s hopes that the primary of three highly-anticipated rate cuts could are available in March.
“I don’t think it’s likely the committee will reach a level of confidence by the point of the March meeting” to lower rates, “but that’s to be seen,” Powell said in a closely-watched press conference following the policy meeting.
With Post wires.