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Much like the chocolate-eating public, Hershey Co. is feeling the pinch from soaring unemployment, with the snacks-and-sweets company reporting sharp sales declines in recent weeks after an initial bump in the wake of the lockdowns to combat the coronavirus pandemic.
Hershey HSY, -4.44% said sales of chocolate syrup, baking chips and cocoa were up 30% March as families stocked up to spend time together baking.
Sales of salty Pirate’s Booty and Skinny Pop were also up 20%.
The Easter holiday season was in line with expectations despite the outbreak, though the company did expect year-over-year declines because the holiday fell a week earlier than usual.
Read:Grocery prices are rising as eat-at-home demand soars during the coronavirus pandemic
However, as the pandemic wears on and the number of shoppers who are out of work grows, Hershey said it’s seeing declines in April.
“A significant number of American households are not working and experiencing meaningful financial pressures,” Michele Buck, chief executive of Hershey, said on the Thursday morning call, according to a FactSet transcript.
Add to that, many places have put lockdown orders in place, retailers are curtailing the number of shoppers at any one time in a store, and shoppers are spending less time in stores. All of this together is putting pressure on Hershey sales.
“While many consumers have shared how our categories are helping them cope during this time and bond with their families, they’ve also shared how their shopping priorities have changed.”
The U.S. added 4.4 million to the unemployment rolls this week, bringing the total to 26 million.
Hershey is also taking a hit from fewer sales at convenience stores, which represents 15% of North American sales. And there’s been a 75% to 80% decline in the travel retail and foodservice business.
Gum and mint categories have fallen 40% to 50% due to social distancing.
On Thursday Hershey reported first-quarter earnings and sales that missed expectations and withdrew its guidance.
Going forward, Hershey says it has made adjustments now that sporting events are cancelled and more purchases are being made online.
“[W]e’ve adjusted our S’mores copy to emphasize family consumption at home versus larger community and friend gatherings,” Buck said.
“We have taken savings from events like NCAA March Madness and Olympics and reallocated some to digital and our Reese’s Lover promotion this summer while leveraging some of that to cover incremental COVID-19-related manufacturing and selling costs. We are proactively planning for Halloween and partnering with our retailers to be prepared for a strong recovery, while also making smart choices to mitigate risk if consumer behavior remains impacted.”
CFRA downgraded Hershey to sell from hold and cut its price target to $125 from $150 due to the headwinds the company will face in 2020, including the impact of discretionary income and soft Halloween sales if COVID-19 comes back in the fall.
Hershey stock slumped 4.5% in Thursday trading, but has rallied 17% over the last year. The Invesco Dynamic Food & Beverage ETF PBJ, -0.97% is down 11.6% over the past year. And the S&P 500 index SPX, -0.05% has slipped 4.4% for the last 12 months.
