Hershey(US:HSY)2025-05-01 00:00Financial Data and Key Metrics Changes - First quarter net sales reported a decline of 13.8% year-over-year, impacted by a 90 basis point headwind from foreign currency translation and a 15-point volume decline due to inventory lapses and fewer shipping days [23][24][29] - Adjusted earnings per share decreased by 32% in the quarter, with expectations for a less severe decline in the second quarter as seasonal impacts reverse [29] - Adjusted gross margin decreased by 370 basis points, with expectations for further compression in the second quarter due to ongoing commodity inflation [26][27] Business Line Data and Key Metrics Changes - North America Confectionery segment net sales declined by 15%, with volume down nearly 18%, partially offset by net price realization of around 3% [24][25] - The North America salty snacks segment saw a 1% increase in net sales, with volume growth of nearly 4% driven by brands like Dots and Skinny Pop [25][26] - The salty snacks portfolio is positioned for growth, with Skinnypop consumption increasing by 5.4% and Dots retail takeaway growing by 20.6% [14][15] Market Data and Key Metrics Changes - International segment organic constant currency net sales declined by 7.9%, with performance ahead of expectations in key markets like Brazil and Mexico [25][15] - The global cocoa grind declined by 3.4% in Q1, marking the eighth consecutive quarter of declines, indicating ongoing demand challenges [20] Company Strategy and Development Direction - The company is focused on becoming a leading snacking powerhouse, with strategic acquisitions like Lesser Evil and Fulfill to enhance its portfolio [6][7] - Investment in technology and automation is expected to deliver $125 million in cost savings this year, supporting long-term growth [17][28] - The company plans to launch several new products and partnerships, including a collaboration with Pokémon, to drive consumer engagement [12][13] Management's Comments on Operating Environment and Future Outlook - Management noted heightened cost pressures but emphasized a strong balance sheet that allows for continued investment in the business [6] - The company anticipates a strong second quarter with net sales expected to increase by more than 20% as seasonal impacts reverse [24] - Management remains committed to its financial outlook, despite uncertainties related to tariffs and commodity costs [32] Other Important Information - The company did not repurchase any shares in the first quarter, prioritizing capital for acquisitions instead [30][31] - The adjusted tax rate for the quarter was 24.4%, reflecting challenges in executing tax strategies in a changing global landscape [28] Q&A Session Summary Question: What are the expectations for the second quarter? - The company expects total net sales to increase by more than 20% in Q2, reversing the impacts seen in Q1 due to Easter and inventory lapses [24] Question: How is the company addressing cocoa price pressures? - The company is engaging with the US government for tariff exemptions and is preparing strategies to mitigate inflation and protect margins [20][21][32]