HSY - Earnings call transcript Q1 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to the Hershey Company First Quarter 2021 Question-and-answer session. . At this time, all participants are in a listen-only mode.

As a reminder, this conference is being recorded. I'd now like to turn the call over to your host, Ms. of for President Hershey Vice Poole, Investor the Relations Company. Melissa you. Thank

now You may begin.

Melissa Poole

morning, for pre-reported Q&A Thank for Rob. and our chance everyone. Thanks, Good website. press our you both everyone had Company's release are quarter to on read hope to the first joining presentation, XXXX I earnings our Session. listen has the management Hershey today us available

to will remarks. we that during include today's also make obligation future based have posted expectations operations that and Q&A a Please A risks Q&A company's listing These the a At session, are pre-recorded to various subject statements the and we as pandemic and Actual and The found update regarding the statements live uncertainties. call. other no the and results company's undertakes those events. COVID-XX result factors. conclusion SEC may to in financial risks statements addition, including can differ audio of assumptions as of In pandemic. be and session, the expectations forward-looking and impact projected filings. materially the of uncertainties of we COVID-XX from performance, post transcript press as a on detailed this release replay today's of transcript assumptions could such of note the well related subsequent today's company these

to substitute results measures presentation to for will in a that morning's GAAP presented Finally, please of believe financial intended isolation is note investors. that GAAP information accordance not press with information in financial included be or we non-GAAP refer we useful reconciliations in certain this information the may the provide this are considered release. to as for The

operator Hershey's CFO, Voskuil. the Joining Chairman Senior it the President Buck; that, Vice CEO, first and Hershey's over With I Steve to turn for question. and me Michele will and are today

Operator

Credit with the comes [Operator Moskow of your question. with Thank line first Robert Suisse. our Instructions] Please question And from proceed you.

Robert Moskow

get for more great and on the gross Thank to your obviously, little a the wanted for just Hi. color really expectations you question year. results. I margin

margin reasons guiding to to just would to these there. color you're be need And I of still like talking margin think gross You it higher like down to co-packing, expansion? turn talked you I why other things maybe the those to in extent quarter. gross the – think do are freight way? And first you get And more about transitory gross first pricing doing what incremental costs little that that need margin some like about, beyond sounds a quarter, would you'll keep for

Michele Buck

So take that have Steve let one. me

Steve Voskuil

Happy Sure. to.

are expansion still for on modest full year yes, calling So a basis. gross we margin

and quarter, from we impacts year, in were also lapping had cost to response the some some in the some noted you transitory remarks, As first higher in there the last volume.

As additional the we be some you that us, gross look of of that the will the the gains, the all of volume, margin. referenced, for part rest are that pricing of that the productivity forward strengths year, building for things

out look we one the we noted that largely I is think say what exception inflation are And in as watch. even our we'll for that had assumptions and the quarter to was and I first the we for plan, year, far, packaging. So would one tracking

quarter. weather year that some first a plays is out, the as by will the in Texas moderate for expectation Our impacted inflation bit

of and the carry we'll runway the support balance and here one manufacturing any that's support. we're and And opportunities customer more service in year, to the volume. in incremental So forward with to then of cost higher watching, have the capacity optimize of cost more between

the But watch still expansion see the we some gross course on close yes, of keeping we're over at margin point, So all a those. this year.

Robert Moskow

grocery and an on fully Okay. sense price And basis terms through? annualized new also what you flows absolute presents once non-chocolate, one give in and us of on both a can increase its it follow-up. The

Steve Voskuil

Yes.

So magnitude that we is the again, pricing across XXX see total about haven't portfolio it of about of since we increases, for And of is that half points, non-chocolate basis piece. price this reference the part all year the there priced XXXX. order

in our is pricing this the So about broader line parts strategy. and talked We've rotating of in refreshing with of portfolio.

Robert Moskow

Okay.

Or… an mean annualized that the business? basis, to does total So it's X% X%, on

Steve Voskuil

points. about Yes, this annualized, about XX year. a it's It's point for basis

Robert Moskow

you Thank right. All very Okay. much.

Operator

from proceed Our your with of Michael Piper Sandler. line questions. with the comes Lavery next Please question

Michael Lavery

Good morning. Thank you.

Michele Buck

morning. Good

Michael Lavery

Just following bit. on pricing a little

I took on and And in mentioned You said that the some point to the expectations of X.X pricing the the lot reflects quarter. promotional of first for a year. that the X just you benefit

mentioned the just inflation You that should moderate. packaging also

some cocoa so and things pricing, got the didn't least costs were for relatively take it benign dairy this expecting, come some end You've if But to X you nimble you of to like X.X, And how upside sort say, much you're packaging in How seeing? far. to at of to could more what if we can way through? up timing the look flow does be?

Steve Voskuil

that Yes. the part Obviously, on a seasonal would parts It which takes depends pretty long time. of we the portfolio lead price.

On of really, so probably need to not three lead least that in months the time. an four would card everyday something basis, And for be at year. that's this we

optionality some worst plan. to you some still we from see scenarios in there's standpoint. so case could there, were the that's now, Right say a not if And cost

we for feel plan said, we think from about good cost happening I the monitor what's But have we'll that as standpoint. a pricing. I

Michael Lavery

but you've improve. How change over XXX side. around XXX Okay. scales, said bigger base And somewhere basis Thanks. points now? that to year that of should the the past and That's that as obviously, scale have you margins with great. those on e-commerce it lower, just seen believe follow-up surge this a benefit a the be might I

Steve Voskuil

the to at of the the standpoint, in has continue a to business, piece the in that right business line rest bit margins of as to the about we you're calls, a But dilutive look code. optimize we've margin. efficiency From that gotten drive dilution overall for talked Yes. closer the ways time, I Obviously, ZIP portfolio. to mean, prior with same and those there inside in bring bigger. It's

Michael Lavery

Do the just would sense would multiyear process? that of surge a of big take? a timing towards be still have that that Or what that's for some a now this might Is narrowing you of sticking help gap? kind

Steve Voskuil

We does the there. Sure. the sure. and of It's a help. mean, some put multiyear more across I scale process that for capabilities we investments scale get

in dilution, multiyear a is there there full the So present, going some process. to really it's be address the benefit to but

Michael Lavery

Okay. Great. Thanks so much.

Operator

proceed Nik RBC. from questions. Please the Modi with with of your Our next question coming is line

Nik Modi

everyone. Good questions. Thank morning, two you. Yes. had I

First is space. shelf just on

So is continues how effectively online the the sure been gains clear year, clearly, execute are just the on you chain seen, online as question execution, Hershey that and momentum business I'm continue gains in to given make that XXXX. also later to curious to stickiness first to has you reorienting more given XXXX? the in And done expect would space question. and how supply XXXX, then we've see momentum – on can kind you early that seeing supply if Thank providing about of you. have you've this grow? continues, That's just the chain your the or discussions but a retailers, phenomenal job second with in the thinking

Michele Buck

Nik. Good morning,

the to So question. first space me go let

a always all year, balanced media velocity, growth, growth As we gains. levers, focused seasons, distribution base growth focused have plan, to started driving for out using the accelerate on we in across

the of and the we during So strength been fortunate COVID that's are our performance particularly always chain, also supply some that a focus about for able, have our overall, of customers year. for five to us. customers given And incremental SKUs and of our needs we but our the SKUs some that very gained be able incremental were to viable, for, we that looking were of provide

that shelf so And gains. space certainly, with some comes

we've been that's on. So focused something

some get we long will. that shelf anticipate power as get we perform, SKUs staying has which As distribution that that we certainly now, those they as space and

the as by good So shelf driven we well And we look And to on feel the kind on that. believe, that share been of the gains. as ability some continue be business have our gains we seen space to coincides that. as we are continuing with year, distribution drive of to have throughout focused about certainly, pretty that

it As supply the the future. our prepare business we really look e-commerce and the business. that environment we've because those legs were packs Chain being Supply at enable sold we was our adapt and X.X, a about on than to chain to that are momentum specifically, before focused relates to that have a manufacturing changing talked to initiative, different retail sold to our chain, for we online enable areas, the that we the And those as across as and build of program in one the e-commerce initiative big us certainly, agility slightly supply one of and lot key of

that making us win those we're there that of more the us in So enable some enable margin, efficiently better packs e-commerce. at a to right develop investments to

of So big builds. in new Supply all X.X our that against and in capacity focus Chain

Nik Modi

you, Thank Thanks. Michele.

Michele Buck

Sure.

Operator

Jason Our Goldman Sachs. with next the comes questions. proceed your with from question of English line Please

Jason English

little architecture, but to Hey. to question pricing, where you Good is obviously back moves, it you're are you that if in what much on a discipline Mars build follow, history, direction with order where in category? any And terms we a helped power come quite of me and And in implications or similar confidence is guess pricing to bit strikes from on in time Mars moving moment different lower me a direction? a one usually, of unique pricing more or different I unique sliding the guys a you move for direction and consistency may if want you with magnitude in a the that motivation higher back try historically pricing We're follows slightly seen look of a Mars morning, the in discipline folks. has now the I right circumstance follow Michele, category. the a to diverging. a a similar in in angle. in. Thank understand magnitude, to pricing love have we've moving for the in And different you this the investors I clarity you go magnitude. products.

Michele Buck

Yes.

discipline feel category perspective rational a a very really and that good I perspective. being to this So about strong from continue there being from pricing

seasons our of on and price levers to Our in increasing us different very different able growth realizing be also the to past recent business, different our do are types think for to the in SKUs we business are perhaps parts that, couple have of And and price good been proven also know portfolio. we've that across executing brands, different business regarding both and we strategy do over non with and have at portfolios and effective at pack grocery profitable the different the retailers. some for that's But across in on we us executing for consistent we drive reinvest announcements across through we needs what category, of terms points chocolate and each years time. and with even unique competitors also capabilities in the different of

pricing category consistent. price realization so exactly same, we And tactics exactly while is what might important those the is pack-to-pack, the pretty while all overall, and is products isn't think differ,

difference And we or us that from magnitude in of range. probably category, so you point price is what if player the getting look largest are each you look player in second in in and the largest and the at a at the terms

difference a between. it's So – significant significant a not it's

Jason English

it it. you. helpful. Got pass I’ll Thank That's on.

Operator

next questions. comes with Goldman question Ken the The of Please from your proceed JPMorgan. with line

Ken Goldman

you. Thank Hi.

to You recurring some your highlighted gross margin. headwinds

I your may you any incentive of that these margin? Steve have provide costs. payments payments, there away on can And much incentive any to do from so COGS those on into XQ? Is warehousing think some or were took just color, there bleed added comment how your

Steve Voskuil

Yes.

piece. So just incentive the maybe taking

that will prior we incentives quarter go versus yes, So in second additional as I see well. some

a As to to year, the little get narrower going we half of bit it's the back get year-on-year.

but in second And the so quarter. we'll definitely impact some see –

capabilities. in have also investments some year-over-year We

Chain through OpEx I these a on call, ERP some support last Supply costs still X.X also program. in and to the we that going bit Michele mentioned think little our touched

So some kind the of pieces those I would the be, of look year-over-year, if that between will lines, different. be

Ken Goldman

in I notice not it's the follow-up, the COCO, a commodities you only as than retired harder may sequentially to lately, that of but you're pushing And hasn't come willing down to about, has of Okay. little what be that couple it hard talk my was then last actually months.

might some don't in know commodity inputs maybe can otherwise terms talk XXXX higher? you much how in your protecting has could specific us of point? about little of you walk at numbers to just a really how lock so bit So I longer bit a buys. have, than this your risen you're you looking you favorable given everything But help your just else about It through

Steve Voskuil

too mean, Ken, I you're going we're not Yes. right, specific. Sure. to get

Our two and hedging three say the months market, liquidity, said trying years, our respect kind up what's and on vary. in team depending interpreting the We to program. pricing, to good moves commodities horizons past with signals is of very will smart I the on that available hedging make at to

about don't that, Beyond comment not bit longer from if as hedging really bit. you little to want moved It's opportunity yet say we're XX. cocoa's more probably like a to you around. be than a some any to a said were standpoint, going little that and that we might I'll interpret but down

Ken Goldman

you. Thank Understood.

Operator

with Bernstein. proceed with next from Howard questions. the Please Our comes your Alexia of line question

Alexia Howard

you me everyone. okay? can morning, Hope hear Good

Michele Buck

we Yes, can.

Alexia Howard

Perfect.

Okay.

developments question give around guidance, you're And in we're you're us encouraging? you little more year question, interesting not wonder guess channels, granularity XXXX giving quarterly to I the be particularly which out my an so the So year. into bit can I my period go regions, Which then was but first playing that's we and away-from-home going second QX. what such lapping North if And ago unusual obviously, recovery, America. follow-up is, there seeing that exactly as know a some is detail I in

us be you. the quarter. any in was just I'll minuses on what you you And develop? be the how might whether as line it quarter? give spend and to pass Thank mentioned bottom next Or to the and pointers ad think can expected second top think up I other the about wondering on. going materially the are I'm pluses we

Michele Buck

Sure.

would it So strength, is relative across say away-from-home the to the I board.

channel, our as that stronger in see and there that core the traditional kind really, allocated only in channels, positive and all, drove did non-measured and not a and that in accelerated of what believe, consumer distribution very we well from from food, we call first QX. would in traffic I stimulus had North also vaccine funds mobility was So foot America, the impact as drug more It strength pickup well. channels – some mass was on strong our the also convenience of even as were

retail those were year some retail businesses decliners in than own a for anticipated. So, big food faster service, world stores our last travel came that of really us we

was than pretty those in had improving it across much board say, would of terms I So we the all venues of a more bit anticipated.

bit the we board. we markets it than business. expected. So, more our in US to led merchandising mobility helped we accelerated some traffic. of North summer a And traffic, beyond sell-through increased some due Easter And even also programs, had of well, given of the distribution America, across and then us sell-through foot incremental the shipments to which international in as by actually to the then And our driven then, mobility strong saw of we able was were that capture saw, strong consumer course, and confection also

I So later turn mobility talk those certainly us think QX. in plan, to not in to in I'll have about quarters. a that it Steve QX. with bit year see had We with the and planned for unplanned that, those our the little to but improvements in And over that, were

Steve Voskuil

building merchandise said, coming the QX, on on QX. got at look lot we've of into to a momentum we as standpoint, quarterly able line a early. From Yes. what We're Michele top

start. to season, a the will of get – to Some that off a us summer strong

sales go we going top last line, get growth forward The tougher. from the see moderate. on you're As there to

Michelle start as plan recover back back would the said, mobility half. to half. our to contribution got the make pricing begin in more see assumed a You'll as we And to

we'll a turn So improvement that's progresses. corner less the some the we year of on new of then the piece as story margin as And midyear. the see

spent in year some because the spending was and or going made to up much buy adjustments You – for was that how adjustments, pretty COVID. we some in response advantage mentioned quarter it ad be we It's last Year-over-year, just cheaper pricing QX. some to pricing big. to some where

the that hopefully, the a of little gives bit So color quarter. of balance on you

Alexia Howard

pass Thank I’ll so helpful. you it Very much. on.

Operator

Andrew coming the of The with line from Barclays. next with questions. question Please your Lazar is proceed

Andrew Lazar

everybody. morning, Good

Michele Buck

morning. Good

Steve Voskuil

Good morning.

Andrew Lazar

trying a this much be to of you doing around versus you much things accommodative structural, about might based of stuff of what's some how else made from space, sort of to Michele, think about merchandising and and of know, talked innovation product one how do that about, you've a can be but get chain think right, in sticky do those out know think parse some of right, sometimes. on whether more nature? be the be supply you've to I a just a the how time? that a missteps a lot and can hard seen over gains in So been hard gains couple as that you gains sense, that it you've market, you're how little those – environment it's of last of But of I'm good the perspective like right, everything quarters, clearly shelf others, competitive a the answer, I distribution

Michele Buck

Yes.

So to parse out. is of that bit you're It little I a think all tough right.

And which we came many win to we seeing feeling pricing I business to the So each on distribution, driving of I really and have laid of elements. volume that growth, we're the the think against is those is seasons, growth. delivering innovation, with on are And line core balanced good pre-COVID our really say we got the would on into those year about at strategies. focused relative out top we what

focus has some relative innovation that not innovation, the Not over on pre-COVID And one of in so to balanced on those things. over power we on price strategies one the put core too much. rotating I place that is volume, optimizing factor, that and our certainly, balancing any rotating on a think of staying piece

some that our over there in think is strength lot us the marketplace. manufacturing capabilities year as of there perhaps underlying the supply the perhaps and in our at deliver levels a made some I have chain than So core in as others stronger investments that well we've enabled to our that

you managers. And media, tend we're impact terms know, strength there they're that of without strong that impact. of always, category of so things, COVID We seeing the those of as types in some to

So we when at comes to retail. do tend winning to do well it

distribution that our at [ph] operate I transitory. than, it's our us same of this some guess, do a the Certainly, in to I I would the proprietary more places retail force was our in probably number we incremental that. one well. little we have in won more of as bit sales I We situation out of enable some level to able associated being have At say, if because dynamics historic strength some items, have march where competitive maybe terms to environment the with of the current time, agility, say, new parse and going

in unique strong. I a the think sustain two probably at one those So QX. you particular, for And that in about both being biggest ones we've we're factors that we're it into in And the of other the unique. quarters, couple of – got where in benefiting is that, of now both being guess, certainly, from duality I more at-home away-from-home the level did narrow that of behaviors, probably that course, me, QX, can't asked from right and I kind I kind QX, that most are seeing that

a bit. going do that, to Does moderate we So that's yes. help that think

Andrew Lazar

be helpful. about moderates to hear industry very at-home time point interesting. really whole, the of return strong be really those does in obviously, were I same your the will how will the interesting as QX. It it as both mobility how But a really That's of at see Yes. for much

So yes, that's very helpful. Thanks much. so

Michele Buck

you. Thank

Operator

coming Jefferies. is proceed The Rob of next with questions. Dickerson question from line Please the your with

Rob Dickerson

performance touch segment international I the in so extremely minute. obviously, QX wanted much. Thanks just on I to mean, for Great. strong. a

guess up And go would And right, somewhat just expectation out. international the it comments in around even it piece kind through much right, play incremental Because year? if we then overall, basically obviously, are than volume-driven growth. remarks was actually strong. lockdowns full I year off could as through know now seem the does the the for thinking had it Guidance year. the expect as essentially for kind as is, that a the lot playing progress I to is of be that question think more prepared what international some is of total easier, that if continue volume-driven you your year right? company. of There's stronger, compares originally, I the could modest safe, we're it would North for as given actually But relative would occurring, visibility those be about so seem is we we to America, piece for the

simplistically, self-correct you I'm the if of have currently line were you're of could just mean, on to Thanks. all. already kind do That's kind So not but asking, were continue guiding? you I the in than top better I don't international, realize much to just and things visibility, momentum

Michele Buck

US strength in North confection well First of including we I'd of North great every and we our America, feel as say, seeing are every as in business. amplify In across hey, component of America, piece all, that international.

And in that So significantly was first great ahead did expectation. see. a we certainly, that's strong our quarter have international of to

those interesting stronger mobility consumer were what we anticipated. of was despite markets, think in and than increased, us COVID that for I that high that category for drove cases our many was that was still demand this fact

the moderate. hamper quite lockdowns case And that rising. other markets is are markets could I this There pretty one think the look in you new certainly, some slowly. being and but we're news, where we as the of going as trends implemented, at that everywhere in, India concern situations, vaccination dissemination are could are you certainly these those, see counts potential is dire those especially are where the and there of some mobility expect certainly, that

always volatile going are this during but not So markets more are they behavior. are volatile, know those time. things to linear And even we certainly have international,

What to do to our stages we'll we within in So volatility. and adapting based on tremendous trying are with the is the expect our agility market. responding status teams the in each control, that continued and what's see we're plans drive

it's there's year we China business the chocolate So certainly, focus just all a a whether of again also well. to things going that initiatives, of of transition we'll know good be new model, or in see have our could out. feel the all could that But those our there to plays and restart downside our initiative, control, on key how lot upping are our we well. outside be our – If positive, however, things are And as there upside. India

Rob Dickerson

so Thanks All Great. right. much.

Operator

is Our of your questions. America. next Please Bank with Fletcher of with question the Morgan line proceed from

Morgan Fletcher

the you Thank for morning. question. good Hi,

Michele Buck

morning. Good

Morgan Fletcher

I could you're on but if refreshments So while changed chain touched portfolio growth, and decline. also We have maybe is categories my has go perspective COVID an very have earlier, had on question supply how guess baking in maybe e-commerce may the strong more Like looking we your how seen just on way? mix inorganic at but through inorganic, differently?

may forward? just Thank about you. category on basis be So your how you going thinking a portfolio

Michele Buck

portfolio think breadth of of was to the COVID we Yes, just the things participate be one the our of absolutely. occasions. different about I that able strength in feel that I mean, good to reinforced

on products – about business being home and celebrations. a-third, a-third, about all which which people our people go; all all out a there; about consuming so within home, is instant splits we about would and And the confections a-third, have the seasons, and I at start being then is are which core say, consumables, and take first

of also we connection something so focus et a consumers wow, on cetera, consumable. play And immediately create And take-home our was, to able were rituals more hungry consumers in merchandising, COVID traditions our might and time COVID, just the media, when efforts we confection, with to during to like hungry and bit connectivity and And more saw what that we were instant during so portfolio. normally, so within a we store hit, shift that brands for for. saw roles season were that just our

full within leveraging confection the really important. So was of that breadth

were and baking leverage our of part raised baking You more, were and to portfolio. able we consumers that certainly, as

I follow And likewise, consumer we which really – at as most as relevant and was nutrition able So that we bars this certainly, to I has pivot inorganic our time. category during and SkinnyPop on organic quite that advantage portfolio think of were us incredibly to what the parts of to done to we well. take them taught ability the like if done know think it that to focus And think haven't were well COVID.

playing So the breadth time, it's really meet to of the those right having the options piece of able the be on portfolio but the pieces your at portfolio needs. and to across

Morgan Fletcher

you. Thank

Operator

Buck remarks. Thank you. for now We've reached the Michele to end of the question-and-answer session. I'll turn over the call closing

Michele Buck

over closing Melissa to for remarks. it turn I'll

Melissa Poole

I earnings. morning. of a busy this know, us joining for day you it's Thank

additional answer will to may always, you. As have. questions I be available Thank any you

Operator

This you. today's concludes Thank conference.

at You you time. may disconnect your this for Thank your lines participation.

The Hershey Company (HSY) 29 Apr 212021 Q1 Earnings call transcript