HSY - Earnings call transcript Q2 2021

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

Operator

Greetings, and welcome to The Hershey Company Second 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. Melissa Poole, Vice President of Investor Relations for The Hershey Company. you. Thank

begin. may You

Melissa Poole

read morning, are Hershey you earnings Company everyone presentation, chance I Good to and today prerecorded on our Q&A joining our for hope Management to the had The second of has press everyone. you. release for listen which Thank both us session. our available Thank quarter XXXX website.

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

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

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

Operator

Instructions] [Operator you. you. Thank Thank

the proceed Please comes with line Lazar Andrew question first your question. from Our of with Barclays.

Andrew Lazar

everybody. morning, Good

Michele Buck

morning, Good Andrew.

Steve Voskuil

morning. Good

Andrew Lazar

Hi.

bit should no guess, wanted XX% growth you kind more chain, a I any a in I serve that as to in on the come dig about guess, to how little given it dynamic that not in stress supply efficient. sales cost of a remark. matter quarter would talk I off, organic surprise First prepared the

up I is there exposed any structural you forward it So, or -- is, supply and in as capabilities these the were levels. my likely chain not guess, the sustainable as of simply the question any really volume part, elevated to costs, is needed changes, not are growth any Or suck spike? necessarily extreme at transitory, that higher particularly they’re make investments sort that by of labor the sort need going volume

Michele Buck

portfolio let our say and the would numbers, So, for let of then at are more give certainly had that some we there on some extraordinary just me example, key have me Andrew, growth, and parts details. the Steve to Reese’s. start, level, highest cited I ask of

strong going the of we thing one spikes So, over track time continued seen that where particularly strong very behind know that forward. and we growth demonstrated think on have is have and capacity brands businesses investigating records we've we will focused strength that are

Let talk to about cost serve. the Steve and bit of other of elements little me more have some cost a

Steve Voskuil

online and some benefits is agility, the additional that’ll working supply the would later so of program and I Yeah. year, side, add certainly structural helpful. flexibility one chain fulfillment provide our this Annville on will the X.X on that we’ve comes be been center

Andrew, the manufacturers it side. fast-growing like in especially pressure As same us you from pushed and some like and on From continuing to expanding and at that a of need supply standpoint core those on us warehousing much clearly of the said, capacity, to standpoint; the putting we pushed some rate, cost on invest of into Michele and on onsite off contract said, brands to overtime the an contract Reese. an It pushed where spots. getting work chain freight their getting a number time us one from pieces,

curve look in just inflation higher of the general we top sure plants is pressure points just we addition, particular value making at want on labor proposition It’s we result of rates our would like is then on market at as and ahead a little staying to or a the on the And those The everyone, for as pressure are volumes. attractive, I in call. challenging, touched availability packaging is So, make say last I point, bit pressure the similar. labor and so and sure a Packaging point. labor on in are of in that, our beyond hiring, general inflation volume. still

think we’re see yet. it still we going I we’re moderate forward, that we go to optimistic seen haven’t as but

things is of it combination and here look across little sticky as balance the more few on of back a So, of that volume, a year. are costs the those a the the bit higher we transitory

Andrew Lazar

full seems is math, And equal equal each now profit that. I offset year for for if like of of just you’ve of wanted the of roughly intact. full they’re back our impacts using Thanks more EPS upside seems in then, less had higher the costs see magnitude guidance that the I magnitude parts a and by in essentially. of tax just about operating sort it right. like full year It the the the of those year or some higher just envelope rate talked to the quarter maybe leaving

Steve Voskuil

far our tax guidance No, top piece line. the on by I alongside earnings biggest not us the impact up taking would it look at the as was

it the component, wasn’t The where the is guidance. but the was to piece, tax for of impact majority tax XX% in would’ve raised cost quarter. if serve the the as a XX% think impact we the I that think of the really or

Andrew Lazar

Really helpful. Thank you.

Operator

you. Thank

your of with the Morgan. Our next question comes question. line from JP Goldman with proceed Ken Please

Ken Goldman

there’ll in the questions XXX that tailwind Two this and half. there’s mentioned you be Steve, you loading deload basis inventory on this. from thanks. a point back Hi, said quarter,

First, two, forecast not how quarter, I Number large quarter, the that? the the or the what’s this, of easy Is third it’s for fourth we modeling but majority back to estimate your best half? should think how be reduction the in will know at cadence just in for inventory the about retail purposes? always

Steve Voskuil

Yeah.

the think clever it impact. would the I we’re think two -- the a bit quarter. total I say to of skew I little in I terms don’t I’d give to of magnitude back look for points would I quarters, across half, of X.X think to both maybe you quarter. at precise enough fourth And

Ken Goldman

I the Thank this helpful. it’s some there’s doing didn’t but the guidance. is your great. That’s And that the beat raise you the uncertainty fair There’s EPS frustration investors say business recognize quarter. among some year, wasn’t to think I second the in of around then, world Okay. in back huge $X.XX morning you. half your

I’m So, little curious, internally, of of given the any you inflation and raising some guidance, risks? just feel macro line consideration it’s the was the a bottom did early there just or

Steve Voskuil

Yeah.

the taken again, think, serve. there’s I the in to but we our relative or piece, half tax back caution would’ve and to cost inflation up for Certainly, guidance. the risen

But like had and to we I our only that make And we investment sacrificing half the what that really was taken that. year. into we the piece, if up want but we’re our in tax a piece have that bead have the the on take think would’ve we around were looks not account. guidance, to good pretty hands back sure of

Michele Buck

Yeah.

tax meaningful. very was $X.XX perspective, For on EPS, so

Ken Goldman

so much. it. Got Thanks

Operator

you. Thank

with Robert of question Our with comes Moskow proceed from the Credit line next your question. Suisse. Please

Robert Moskow

easy tax the for of XXXX? Hi. about in maybe talk XXXX, this And for some the think an you some Steve? some impact, going for short-term. you Thanks the question. you’ll secondly, you’re do XXXX? are about think elements; any looks a rate going so structural, have like you how This What of year do about and one-time comp for pricing thinking this cost then Does impact are forward forward

Steve Voskuil

Sure.

On the to and XXXX. year a year one-off, so a were starting we as reset point, point the as about talk into lot we we’ll for at But more factor it if a the we this side, in later wouldn’t next tax -- again, starting look XXXX.

that’s then strategy, margin execute is is and I’d a pricing say our a part maintaining gross trend. can hope our key part on we Michele helpful. against of from here, a key And our pricing I growing, add strategy. and standpoint, the So, of

We retailers are so doing, the aware and inflation dynamics of very at from standpoint play are on, competitors doing. are an what what

going time. going as it, And that we not hand we’re our forward. kind is always, think a are our key through as So, part of remain to and of will we but tip all pricing environment strategy the evaluating

Michele Buck

Yeah.

really will the second half next the this two some we’ll different take in As also on you portfolio through recall, from price And first begin we our half year confection that in earlier year. that increases upside the flowing of year. have of did just

Robert Moskow

Okay. right. thank Well, you. All

Operator

Thank you.

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

Alexia Howard

Good morning, everyone.

Michele Buck

Good morning.

Steve Voskuil

morning. Good

Alexia Howard

Hi, was seeing a in on you of when remember there thoughts I the here. gross freight question give from any there. inflation. first lot margin I of are guess, lot is us companies pressure. back the XXXX can cost whether Obviously, outlook an other awful

pressure. held are I costs flat costs this are it up, you Input you some and pretty going also packaging yet around. think saw going up, time

that, on a So, and thoughts have just some I then follow-up.

Steve Voskuil

was to more commodity that all year’s closer as pleased do that question think through margin goal a were for course, I but We bit want inside We’ll bit, we gross year gross remains margin. with continue in looking QX so that would gross get guidance do firmly cost, of And our year, and managed in that strategy. that pricing it the we’ve little We in and margin balance again, Yeah. margin driving want last on implied want softening the inflation the ahead year. inflation of next the well, to to good. were productivity. important a on to a through our line of grow But year, the levers to forward little we time. we is to end be want we plan, to goal. the And of -- over little We manage an from is last it give do mind. Sure. the that and of through to We being think being our the seen slightly next up goal, our the building with that to of color outlook I face performance a the remains gross

Alexia Howard

Okay. Great. just on acquisition. a question And then Lily's the

Thank trying recently some that this you. work And this Scharffen confident time, time. sold past? make work What’s to company’s that problems the makes been it difference actually some that premium pass versus about the Berger make had DAGOBA. I’ll on. You you Lily's The for can and quite in you you’ve the of

Michele Buck

for that What marketing, $XX to mark were Berger it that $XXX a acquisition smaller, success. make $XXX we it over really is like to whereas really shared is, about broad-based we I close business, built and additional a Yeah. us, best been really million acquisition much million the before to and in in kind DAGOBA apply the distribution, around scale that Lily's to enough synergies, capabilities we’ve this being close Scharffen a so million manufacturing, can more And that et time, think around range. we’ve found is cetera, size, help good marketing, has of our

better-for-you. I mindedly focused other single is on say thing would is Lily’s The

that of is it That confidence benefit So, a understandable which the into sugar. is fits understand, us our of distinct consumers a neatly gives it while very operating it that model. lot those premium, about also has lack very

of is already nice area portfolio that broader of terms in we you there. As on of know, so us. whole a better-for-you a core our focus there’s have some and for focus better-for-you brands, big our And point synergy launched

Alexia Howard

Great. very it I’ll Thank on. much. you pass

Operator

the Our Lavery Instructions] [Operator of Sandler. from your Michael you. comes Piper with with Thank Please line next proceed question. question

Michael Lavery

Thank you. Good morning.

Michele Buck

morning. Good

Steve Voskuil

Good morning.

Michael Lavery

know to at how Just you do tend or try be, of how about to anticipate score that about sense and consumer think well. your pricing? ways in How your we’ve to that that? it, be come terms elasticity, as curious -- quite And response the to is can hard may aggressive The I how just it you Does you you tried that think to well? you and measure. not

Michele Buck

Yes.

other price complex models thresholds, price own -- snack categories, we only very where around price have sophisticated seen at we our gaps, as and well. not We elasticity look points within price items also have

in which consistently think pricing price us it think power seen on is I right perhaps over brands time, category is tend gives to confidence less what time. I elastic we other ability the and categories, that business, our we’ve some take to our and side our versus the feel when be the

Michael Lavery

That’s Reese's. that you nicely perspective? organic for your maybe a how give price expectations, versus compares it And It accretive. Reese's just it’s looks Can be little Okay. point, sense and its that directionally just a a correct? of follow-up with bit Is tracking from on how the might helpful. launch, a pretty margin probably like,

Michele Buck

free. than it’s not, targeted at material this little with early but sugar time, I we line is kind So, organic it days, line what it’s expectations. And is in move with piece in performing bit offering It would big zero of in expected. launch a as a as say, we better-for-you phase of forward. point a absolutely more or test-and-learn in really is a our of is our sugar It say,

Michael Lavery

Okay. Great. so Thanks much.

Michele Buck

of charge cost part a point it it. also the so price obviously, more, your from higher to for your the comparable core. second we And Yeah. a perspective, question, margins are does do margin But to

Michael Lavery

Okay. Thank you.

Operator

Thank you.

comes question Bank with question. with of next line Ken Montreal. the Our Please your of from Zaslow proceed

Ken Zaslow

Good quick implicitly, non-cash a or you’re questions. second more item? is actually it the And understanding everyone. had I cash thing correctly? tax, Am two ask just is EBITDA, a Hi. raising I’ll it the is the item oriented. is, cash One which morning, then not I

Steve Voskuil

second non-cash question balance but it’s and quarter, for the it portion for the year. balance your an the the or will cash be So, about so could in from of a it probably is year, become portion the yes, both first that a the year, become of the for will mix question, second of EBITDA the thinking of On right way you’re standpoint. balance the is non-cash,

Ken Zaslow

flow sure up, understanding that it increase more this. I based EBITDA The saying. Okay. will it’s coming on -- exceeds want And Is I if fair then I of you’re just because is on magnitude it I’m be to a the follow-up tax, to there. make the the taxes. leave down, not pay then just want amount to going way? make correctly. what cash And understand to needed like the seems that just actually just of the cash on I’ll it

Steve Voskuil

say caveat the time. Yes, I’d that’s true, but is All right.

at looking a more could a of period that So, time, if you’re longer become reserve of portion it’s that possible cash.

that might or to And the balance so, the if next at one of you’re answer. quarter looking lead year,

years, different next two you’re it If a looking at the could be answer.

Ken Zaslow

appreciate Thank you. I it. Great.

Operator

you. Thank

of Our next Spillane Bryan proceed line question from question. America. Bank comes Please with your of the with

Bryan Spillane

morning, Hey, good everyone.

Steve Voskuil

Good morning.

Michele Buck

Good morning.

Bryan Spillane

Hi.

not bit Michele, back lot So, I And what’s and guess, cost Andrew’s where of seen labor right, I wanted to companies beginning. this maybe follow-up the addition higher this to coverage questioning just stepping right, our a bit, universe. a on in environment, the maybe that, inflation, a we’re we’ve little little at but shortages, just seeing in effectively this across in --

the stimulating is, when just challenges think So, of on about demand that. I all I you dynamics just it’s product economy all back in One in second getting related step are running if a look of at in kind ways in And some two situation supply terms general, guess, the these is just, I as is guess to out, different shelf? that and had definitely how you questions unique. some the and the chains you there’s environment

for the to how to of of we this business type planning thinking approaching next, know, about I perspective, Your XX some the be seen before? just if And XX you’re you environment. in don’t maybe have this continue over months,

Michele Buck

a believe, too reminder Kids are seems certainly know all fully all working of companies CDC guess are lot to going variant is, Delta volatile then. like of It’s it much recently. say It office. realize thinking we that with companies spend of time out a of talk I what on. still, something September, of somewhat to lot that about certainly clearly guidance the time, a back I of the do the that implementing of yeah, personally and lot pandemic. of aren’t we I And that a recent is It’s school. we return we and doing And a that Yeah. in a would kind

on about The for mean So, there some for capacity we supply and because How will where across couple managing out chain investment more full as some of a is, those available of and us learn about I key Reese, big those of focusing in are we keep and ways. out areas and it’s do behaviors way investment, the now efficiently that. and such the to one a I that. pointing consumer changes we hefty for of revenue? that rate. at we -- we businesses think portfolio greater maximize business is into businesses have where do take to piece looking we profitably And reallocating we and a on can guess and focus growing the maximize so, of all really that leaning -- what do the maxing things like are we how maximize be we portfolio example If our where think really so advantage those right a brands of there with example, an really of such

things invest there going where play because then want and to so more. have bit of right the the of in parts we’ll that. capacity, in a one, in are track just not to And and big as on invest out total portfolio because dynamics of investments making lean capacity record the And We a capacity we’re that. that around then confidence we away here -- piece

seasonal of our breadth take leverage we So, with portfolio. is of We’ve -- breadth we one the strengths consumable our got the the portfolio have really home. the

of range brands. We different have a

manage we possible leverage really that as to try and so, best through. And

build investing of then a even what kind always of potential and now. stronger, chain kind right balance now, regret to outcomes supply from the contingency Doing for doing, of doing it’s move, a even are. more planning we but of no we’re what future which need on we’re the perspective depending that So,

Bryan Spillane

quick for with one that. just Okay. Thanks I one. If follow-up could

to more as focusing and come of Just year general, service of merchandising for a can actually retailers in a sell be that Is you’ve in the can half in sort that now? more have sort sensitive of stock? factor sold more but are of holidays take are or a program up Like, maybe they planning in that decision-making right levels just a in you on? they the program, becoming more factor back to as

Michele Buck

Yeah. absolutely. I huge say under this issues with many know, past as shifts that manufacturers’ Retailers all mean, were pressure with I on tremendous COVID all of caused had, would out-of-stocks. businesses. They year tremendous we the

their is stock. goal And in remain sure so, they to make

sure a past, want In that a have because bit I bit manufacturers so than it some cases mentality. there’s in a They in little have make retailers fact, we’ve more lean really now, in to and right think may little of bit to the to a inventory there. seen They inventory carry scarcity product. allow bit are and a hedge know taking they them price, also they

So, continued year. have worst I year, continued definitely of to for come to deliver and course, pandemic They’ve able last us how deliver to of proud us, to rely of been always were focus during on and, the the we’ve area focal think a it this we retailers. that on we how to is given and are something able

Bryan Spillane

Michele. Thanks, Okay.

Michele Buck

Absolutely.

Operator

Thank Instructions] for final floor this turn It you. time. Poole any no you. there seems other comments. to questions the Ms. are Thank [Operator back I’ll at

Melissa Poole

I’ll joining day be follow-up other for any this questions available may you morning. Thank throughout for us you have. the

Operator

conference. Thank today’s you. concludes This

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

The Hershey Company (HSY) 1 Aug 212021 Q2 Earnings call transcript