(Reuters) - Hershey Co (HSY.N) topped Wall Street estimates for quarterly revenue and profit on Thursday, as it benefited from its acquisition of a healthier snack maker and higher demand for its chocolates in the United States.
The chocolate market in America has been witnessing slowing growth due to changes in consumer preferences towards foods that are less processed and low in sugar, forcing traditional confectionary makers like Hershey to think of new ways to prop up sales.
Over the past few years, Hershey has focused on diversifying into snacks, buying beef jerky maker Krave in 2015 and popcorn brand SkinnyPop’s parent Amplify Snack Brands early this year.
The integration of SkinnyPop was a main factor in helping boost Hershey sales in North America up 5.6 percent at $1.56 billion in the second quarter, the company said.
The company’s shares rose as much as 10 percent in early trading. Hershey also announced a $500 million share buyback and raised its quarterly dividend by 10 percent.
In the latest quarter, Hershey boosted advertising and consumer marketing spending in the quarter on the revamped versions of its traditional Reese’s chocolates, called Reese’s Outrageous and Hershey’s Gold, but still saw its market share in the U.S. candy, mint and gum industry fall 30 basis points.
Overall, Hershey reported a 5.3 percent rise in sales to $1.75 billion, scraping past analysts’ estimates of $1.74 billion, according to Thomson Reuters I/B/E/S.
The company also cut it full-year sales guidance to reflect its planned divestitures of its Golden Monkey unit in China and Tyrrells in the U.K. that was part of the Amplify deal.
The results from Hershey follow those of Mondelez International Inc (MDLZ.O), which also reported higher sales as consumers lapped up its Oreo cookies and Cadbury chocolates in Europe and North America.
Besides changing consumer tastes, the package food industry is also struggling with higher costs of commodities such as cocoa as well as transportation expenses. To offset those costs, Hershey is working towards bringing more digitilization and analytics in inventories and sales planning.
These steps contracted adjusted gross margin by 260 basis points to 44.5 percent in the second quarter ended July 1.
Excluding one-time items, Hershey earned $1.14 per share, beating the average analyst estimate of $1.10, according to Thomson Reuters I/B/E/S.
Reporting by Karina Dsouza in Bengaluru; Editing by Maju Samuel and Sriraj Kalluvila