Hershey Co. warns of an upcoming Halloween horror, announcing on Thursday that it would fall short of meeting demand for this years trick-or-treat and Christmas holiday seasons.
Like many manufacturers, Hershey has been hit by supply chain issues and the war in Ukraine, making ingredients like cocoa, edible oil, and other food ingredients hard to find.
“Seasonal consumer engagement is expected to remain high, and we expect high single-digit sales growth for both our Halloween and holiday seasons,” said CEO Michele Buck in the company’s second-quarter earnings call this week. “Despite this strong growth, we will not be able to fully meet consumer demand due to capacity constraints.”
Hershey Chief Executive Officer Michele Buck said those issues, along with the company’s focus on meeting demand during non-holiday periods, would lead to a likely shortage during Halloween, but added that sales will still top last year.
The period around the Halloween holiday in October is Hershey’s busiest time of the year, making up about 10% of the company’s annual sales, as kids and their parents stock up on Twizzlers, Jolly Ranchers, and Kit Kat bars.
Still, shares of the Reese’s Peanut Butter Cup maker rose 2.5% in morning trading after the company lifted its profit and sales forecasts, benefiting from price hikes amid resilient demand for its chocolates and candies.
Hershey’s net sales rose over 19% to $2.37 billion in the quarter ended July 3, beating analysts’ estimates of $2.22 billion, according to IBES data from Refinitiv.
While Hershey expects more consumer pushback over higher prices in the second half of the year, the company is relying on price increases to boost growth.
The 128-year-old company raised its 2022 adjusted profit per share growth forecast to 12% to 14%, from 10% to 12%. Hershey also said it now expects net sales to grow between 12% and 14%, compared with the 10% to 12% estimated earlier.
“Historically, Hershey’s sales growth has been driven by higher prices and not necessarily volume … The company is entering this period from a position of strength with that expertise,” CFRA Research analyst Arun Sundaram said