Will Hershey Meet Its Forecast?
For Hershey Co., the second half of the year mightn't be so sweet.
The nation's largest chocolate maker by market share indicated just a few weeks ago that it expected a strong end of the year, helping drive annual net sales growth "somewhat above" its long-term range of 3% to 4%.
But some preliminary data from checkout-counter scanners suggest Hershey's sales may be weakening as the company faces tough competition from, among others, closely held Mars Inc.
The data prompted J.P. Morgan Chase & Co. analyst Pablo Zuanic to cut his recommendation on Hershey's stock to "hold" from "buy" Tuesday, pushing the stock down more than 4% that day. Mr. Zuanic calculates that the company has lost two percentage points of chocolate market share during the past two months, a scary prospect with the approach of the important Halloween candy-selling season.
He doesn't expect to see improved trends until April of next year. Mr. Zuanic doesn't own Hershey stock. J.P. Morgan has a business relationship with the company.
Hershey declined to comment.
The hit to Hershey's stock comes as the company seeks to tap into America's growing taste for high-margin dark chocolate. This month, it is rolling out a new line called Cacao Reserve, which includes both milk- and dark-chocolate offerings.
Since Hershey Chairman Richard H. Lenny came on board five years ago, the company has emphasized innovation not only in its products, but also in its operations. The maker of Reese's, Almond Joy and other sweets has pushed hard to expand sales into new channels, striking a deal, for instance, to put its candies in 1,700 Home Depot Inc. stores around the country.
Moves like this have helped bolster the stock, which more than doubled in price between 2001 and 2005, when it peaked at nearly $67 a share. Since then, though, the stock has tumbled by more than 20%. It slipped four cents yesterday, closing at $51.88 on the New York Stock Exchange, giving the company a market value of $12.15 billion. According to Thomson Financial, Hershey's shares trade at a little more than 18 times expected earnings for 2007, slightly cheaper than Wm. Wrigley Jr. Co.'s estimated per-share multiple of about 21.
One concern involves Hershey's abilities to improve sales through convenience stores, which are a growing source of candy sales. In recent years, Hershey says, the number of trips to traditional grocers is down 12%, while trips to what it calls value and convenience stores are up 13% over the same period. Grocery stores are Hershey's leading source of sales, accounting for 28% of revenue.
Convenience stores also are a hot spot for a big group of candy-bar buyers: young men. They are the largest and most frequent shoppers within convenience stores, according to Hershey, with 68% of them shopping at least once a day.
But Hershey is underrepresented in convenience stores. It gets some 16% of its sales from them. Its overall U.S. confectionery market share is 30%. To beef up its presence in the stores, Hershey has announced plans to put new display racks in some 50,000 convenience stores nationwide.
Hershey also is trying to get consumers to buy more profitable types of chocolate. One of the hottest trends in the chocolate business is dark chocolate, which has a higher percentage of cacao than milk chocolate. Over the past two years, according to Hershey, household penetration of dark chocolate soared to 25% from 8%.
Retail prices for the new Cacao Reserve chocolates are expected to range from 99 cents to $1.49 for the regular-size bar and from $1.99 to $2.49 for the king-size bar. That is far above the price for the standard 1.6-ounce Hershey's bar, which retails for about 69 cents. The company says profit margins on Cacao Reserve are 25% greater than the company average.
Nonetheless, Mr. Zuanic, citing data from ACNielsen, says Hershey's sales growth has slowed for four consecutive four-week periods, with the company's share of the chocolate market falling to 45% from 47% in the past eight weeks, mainly to Mars brands like M&M's and Dove.
According to Information Resources Inc., a market-research firm in Chicago, sales of larger sizes of Dove chocolate -- 3.5 ounces and above -- soared 49% over year-ago levels for the 52 weeks ended July 16. Figures are based on sales through supermarkets, drugstores and mass-merchandise outlets, excluding Wal-Mart. A Mars spokeswoman couldn't be reached for comment.
Mr. Zuanic has cut his 2006 earnings-per-share estimate for Hershey to $2.50 from $2.58 and trimmed next year's forecast to $2.66 from $2.89. "We also doubt the company will meet guidance of sales growth in 2006 above the long-term 3-4% guidance range," Mr. Zuanic said in a note to investors. He now expects sales to grow only 2% in the second half of 2006.
Credit Suisse analyst David Nelson said concerns over Hershey's recent sales data may be overblown. Mr. Nelson, who has the company rated the equivalent of a "hold," says that most of Hershey's sales come from retailers, like Wal-Mart Stores Inc., whose sales aren't typically reflected in the scanner data most often used by analysts.
Mr. Nelson noted that Hershey's sales to consumers through the second quarter were up a strong 6.6%, which he thinks bodes well for the rest of the year.
好时下半年可有好运？
对好时食品(Hershey Co.)来说，今年下半年的滋味恐怕不会太美妙。
这家全美市场规模最大的巧克力生产商几周前刚刚表示，预计今年底将实现强劲业绩，从而有望使其全年净销售额增幅略高于3%-4%的长期水平。
但根据初步收集到的销售数据显示，面对来自Mars Inc.及其他公司的激烈竞争，好时的销售情况或许正在下滑。
根据这些数据，摩根大通(J.P. Morgan Chase & Co.)分析师帕伯罗?祖安尼克(Pablo Zuanic)周二决定将好时的评级从买进下调至持有，该股股价当天下跌4%以上。据祖安尼克计算，好时过去两个月在巧克力市场的份额跌去了两个百分点，在万圣节糖果销售旺季即将到来之际，这一情况真是非常不妙。
他预计，到明年4月份之前，好时的业务形势不会有改善。他不持有好时股票，但摩根大通与好时有业务往来。
好时拒绝置评。
好时股价受挫之际，该公司正在试图进入美国人越来越喜爱且利润率很高的黑巧克力市场。好时本月新推出了名为Cacao Reserve的巧克力系列，其中有牛奶巧克力和黑巧克力两个品种。
自从好时董事长理查德?兰尼(Richard H. Lenny) 5年前就任以来，好时就开始强调不仅要注重产品创新，还要重视经营创新。这家生产Reese's、Almond Joy和其他糖果的公司积极寻求新的销售渠道，比如，与Home Depot Inc.达成协议，在其分布在全美的1,700家分店里销售好时的糖果。
类似做法对好时的股价起到了提升作用，在2001-2005年间，好时的股价增长了一倍多，最高时接近67美元。不过从那之后至今，该股下跌了20%多。周三该股收盘跌4美分至51.88美元，以此计算，好时总市值为121.5亿美元。
据Thomson Financial的数据，好时股价的预期市盈率略高于18倍，低于美国箭牌糖类有限公司(WM. Wrigley Jr. Co.)的21倍。
好时让人担心的一个问题是，它是否有能力通过便利店提振销售，目前，这个渠道正日益成为糖果销售的一个重要途径。好时说，近年来，去传统杂货店的人次下降了12%，去便利店的人则增加了13%。而杂货店正是好时最主要的销售渠道，来自杂货店的销售额在其总收入中的比例为28%。
便利店也是块状糖果的大买家男孩子们喜欢去的地方。好时说，男孩是便利店比例最高和最频繁光顾的一个群体，他们中间有68%的人每天至少光顾一次便利店。
但好时来自便利店的销售份额很不够，现在大约只有16%。它在全美糖果市场的占有率是30%。为强化便利店渠道，好时宣布，计划在全国50,000家便利店布置新的展示架。
好时还表示，希望能刺激消费者购买其利润更高的糖果品种。目前最时兴的巧克力品种之一是黑巧克力，它比牛奶巧克力含的可可成分更多。据好时说，过去两年来，黑巧克力在美国家庭的渗透率从8%升到了25%。
新的Cacao Reserve巧克力普通大小的零售价预计将在99 美分至1.49美元左右，大块的在1.99美元至2.49美元左右。这个价格比好时标准的1.6盎司巧克力69美分的零售价要高出很多。好时表示，Cacao Reserve的利润率将比公司的平均利润率高四分之一。
不过，祖安尼克援引AC尼尔森(ACNielsen)提供的数据说，如以每4个星期为一个周期滚动统计，好时的销售增长已连续4个周期出现下跌，在过去8周时间里，好时在巧克力市场的占有率从47%降到了45%，而同期占有率上升的主要是Mars的品牌如M&M's和德芙(Dove)。
据芝加哥市场研究公司Information Resources Inc.的数据，在截至7月16日的52周时间里，德芙大块巧克力（3.5盎司以上）的销售较之前一年增长了49%。这个统计是根据来自超市、杂货店、大型购物中心（不包括沃尔玛）的销售情况作出的。记者未能联系到Mars发言人置评。
祖安尼克将其对好时2006每股收益预期从2.58美元下调到2.50美元，他在客户报告中写到：我们对好时2006年的销售增长预期能否超过3%-4%的长期预期范围也表示怀疑。
目前他预计该公司2006年下半年的增幅将只有2%。
然而，瑞士信贷(Credit Suisse)分析师戴维?内尔森(David Nelson)认为，市场对好时近来销售数据的担忧有点过头了。他对好时的股票评级相当于“持有”。他说，好时的销售大多来自沃尔玛这样的零售商，这类商店的销售数字通常不包括在分析师最经常采用的跟踪数据里。
内尔森指出，好时二季度零售额增长6.6%，是个很不错的水平，他相信今年余下时间好时还将保持良好势头。
Joseph T. Hallinan
