Hershey said the coronavirus pandemic has triggered a huge shift in consumer behavior that has made it impossible to forecast this year’s sales and earnings.
The company rescinded its 2020 forecast on Thursday as it reported first-quarter results that fell short of analyst expectations. Hershey’s shares fell around 3.3 percent Thursday morning following the report.
Consumers rushed to buy baking supply sales — Hershey syrup, baking chips and cocoa — in March. Sales in of these items jumped around 30 percent as households filled their cupboards and families spent more time at home baking. Sales of products like SkinnyPop popcorn and Pirate’s Booty also jumped because of stockpiling.
But after the initial rush, those double-digit sales gains have fallen off in recent weeks, the company said.
Sales of many types of candy, especially gum and mints, declined dramatically. This is likely because the closures of shopping malls, schools, and movie theaters have reduced the occasions when people purchased those items. Similarly, sales are likely down at gas station convenience stores because people are driving much less.
Hershey’s CEO Michele Gross Buck said on the company’s earnings call on Thursday gum and mint sales have fallen between 40 percent and 50 percent over the past several weeks.
People may also just not be consuming as many breath-fresheners because of social-distancing. It is just not likely that anyone is going to smell your bad-breath from six feet away.
“We have never seen so many factors at play at the same time on such a global scale,” Buck said.
Although grocery store sales overall are up because of stockpiling and people eating and cooking more at home, visits are down. That may be cutting down on impulse purchases. Job-losses are likely going to weigh on sales going forward, as households eliminate expenses on things like candy.
“A significant number of American households are not working and experiencing meaningful financial pressures,” Buck said on the earnings call. “All of this has impacted traffic into stores, length of time in stores and the amount of discretionary goods people are purchasing.”
Sales of Hershey’s signature Kisses have apparently continued to do well.
In perhaps a warning of what is to come, sales in China fell 46.7 percent in the three month period ended March 29. Much of China was on lockdown during that period, while the lockdowns in the U.S. did not take effect until later. Sales in the U.S. and Canada, Hershey’s biggest market, rose 2.1 percent, its smallest gain in two-years.
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