Hershey Earnings: Sales Sour, but Investments in Brands and Capabilities a Plus for the Long Term

Shares of wide-moat Hershey languished the past year on concerns around intensifying competition. But this angst seems to be reversing, as the stock soared by a mid-single-digit percentage, even as the firm ended fiscal 2023 on a bitter note. In the fourth quarter, the adjusted gross margin ticked up 50 basis points to 44.2%, but organic sales slipped 0.1%, as the benefit from higher prices was washed out by a retreat in volumes. While a portion of this sales shortfall was a byproduct of a planned reduction in salty snacks inventory, after it shot up in advance of its fourth-quarter ERP implementation, management also highlighted that consumers are showing an increased penchant for value, which constrained purchases of everyday chocolates.