Candy maker Hershey saw its shares wilt in after-hours trading after it cut its earnings guidance for 2017 and announced a new programme aimed at boosting its profit margins, which it expects to result in a 15 per cent reduction to its global workforce.
Hershey announced on Tuesday the launch of a series of initiatives dubbed “Margins for Growth”, which it said were aimed at reaching an adjusted operating profit margin of 22-23 per cent by the end of 2019.
It said the programme will entail investments in its core confectionary business — which includes such sweet treats as Hershey chocolate bars and Reese’s Peanut Butter Cups — finding new on-trend opportunities to expand its product portfolio, optimising its supply chain, streamlining its operating model and reducing administrative expenses.
Overall, it expects the programme to result in pre-tax charges of $375m to $425m. That figure will include expected one-time worker separation benefits of $80m to $100m, as it plans to reduce its global workforce by 15 per cent, focusing primarily on its hourly headcount outside the US. Hershey’s web site says its workforce includes about 21,000 employees.
It also lowered its earnings guidance from the previous range of $4.54 to $4.65 a share, to $3.19-$3.45 a share, while reaffirming its outlook for 2-3 per cent net sales growth in fiscal year 2017.
Michele Buck, who is set to officially take the reins as the sweets-maker’s president and chief executive on March 1, said: “Our objective is to ensure that we always have the right level of innovation, marketing plans and consumer and customer expertise to drive net sales growth, especially in our North America confectionery and snacks business.” She added that the company also hoped to return its international business to profitability as soon as possible.
The company’s shares fell as much as 1.5 per cent in after-hours trading before paring some of those losses to trade down about 0.35 per cent at pixel time.