Hershey Slashes FY Outlook, To Cut 300 Jobs

(RTTNews) - Chocolate maker Hershey Co (HSY), on Friday slashed its earnings and sales outlook for 2015, citing weakness in China, and said it would cut 300 jobs as part of efforts to boost margins.

Following the announcement, Hershey shares slid about 4 percent on the New York Stock Exchange.

Hershey now expects 2015 adjusted earnings of $4.10 to $4.18 per share and sales growth of 2.5 percent to 3.5 percent. The company had earlier projected earnings of $4.30 to $4.38 per share on sales growth of 4.5 percent to 5.5 percent.

Analysts polled by Thomson Reuters currently expect Hershey to report earnings of $4.31 per share on sales growth of 4.7 percent for 2015. Analysts' estimates typically exclude one-time items.

Hershey indicated being impacted by weakness in the China modern trade, mainly the tier one hypermarkets which sell most of its chocolates. The company's chocolate sales growth in China trailed its expectations in April and May. It also grapples with intense competition and consumers' preference for e-commerce purchases.

Hershey also is moderating its sales expectations from Shanghai Golden Monkey Food Joint Stock Co, the privately held candy maker it agreed to buy in December 2013. Hershey bought 80 percent of Shanghai Golden Monkey last year and is to acquire the final 20 percent on the one-year anniversary of the initial close.

Over the remainder of the year and in 2016, Hershey's China operations will focus on distribution gains in smaller format stores and core brands that deliver the highest return.

On the proposed job cuts, Hershey said the move would result in pre-tax charges of $100 million to $120 million, or $0.29 to $0.35 per share, mostly in 2015. The cuts are part of productivity initiative measures which Hershey expects to result in to pretax savings of $65 million to $75 million, primarily in 2016.

Hershey also announced changes to its global leadership team to boost growth. Its Chief Financial Officer Patricia Little will take on responsibility for mergers and acquisitions; and Steve Schiller, a regional president, will assume a new position as president of China and Asia.

The company also created a global leadership job focused on expansion in emerging markets and is searching for candidates for the position. Hershey also said it was looking for candidates to head emerging markets such as India, and Latin and South America.

Hershey shares are trading at $88.82, down $3.44 or 3.73%, on the NYSE.