October 28, 2015 / 11:21 AM / in 2 years

Hershey cuts forecast on weak demand, higher marketing costs

(Reuters) - Chocolate maker Hershey Co (HSY.N) cut its full-year profit forecast, hurt by weak demand in North America and higher marketing costs ahead of the holiday season.

Hershey's chocolate bars are shown in this photo illustration in Encinitas, California in this January 29, 2015, file photo. REUTERS/Mike Blake/Files

The company also reported lower-than-expected sales for the third quarter due to weak demand for candy, mint and gum, which accounted for 90 percent of U.S. retail sales in the quarter.

Hershey attributed the fall in sales to some retailers cutting down on marketing and fewer shoppers visiting stores.

A shift in consumer preference from candies and other sugary snacks to healthier foods has forced retailers to limit their marketing efforts on such products.

Slowing growth in China has also reduced spending on items such as Hershey’s Kisses chocolates, which are popular gift items in the world’s second-largest economy.

Hershey said it expected sales to be flat to slightly up this year, down from the 1.5-2.5 percent growth it forecast in August. This is the fifth time the company is cutting its sales forecast.

Profit is now expected to be $4.10 per share compared with the $4.10-$4.18 it anticipated earlier, as it expects to “markedly” ramp up spending during the holiday quarter.

Net income fell to $154.8 million, or 70 cents per share, in the third quarter ended Oct. 4, from $223.7 million, or $1 per share, a year earlier.

Net sales were nearly flat at $1.96 billion, missing analysts’ average expectation of $1.98 billion, according to Thomson Reuters I/B/E/S.

Excluding items, the company earned $1.17 per share, beating expectations by 4 cents.

Shares of the company, which is also known for its Reese’s Peanut Butter Cups, were down 2.6 percent at $91.86 in premarket trading on Wednesday.

Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Maju Samuel and Saumyadeb Chakrabarty

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