HERSHEY, PA. — The Hershey Company saw second-quarter 2024 net income slide 55.1% to $180.9 million, or 89¢ in earnings per share on the common stock. That compares with $407 million, or $1.98 per share, from the year-ago period.

Consolidated net sales fell 16.7% to $2.07 billion in the second quarter, the company said, and organic, constant currency net sales dropped 16.8% due to retailer inventory reductions in North America Confectionery and International related to software implementation and seasonal shipment timing.

The North America Confectionery segment reported second-quarter income of $464.5 million, for a 29.3% drop from the prior-year period, a segment margin of 29.4% versus 2023 and a loss of 360 basis points. The company blamed the declines on reduced sales and increased commodity costs.

Net sales for the segment came in at $1.58 billion for the second quarter, which was a 20.7% decrease compared to the second quarter of 2023.

The company’s shares slid 5.3% in premarket trading Aug. 1 in response to the earnings report.

Michele Buck, Hershey president and chief executive officer, cited budget-conscious consumers for some of the second-quarter slump.

"Today's operating environment remains dynamic with consumers pulling back on discretionary spending," she said.

The company’s North America Salty Snacks segment was a bright spot, with volume growth pushing second-quarter net sales up 6.4% to $289.9 million compared with the same quarter in 2023. The segment’s income rose 19% to $52.2 million in the second quarter compared with a year ago. The company credited the income jump to higher sales and lower commodity costs, which it said more than offset higher marketing levels.

"Our business has been impacted by these trends, but we are pleased to see continued growth in the confection category and momentum building in our salty snacks portfolio,” Buck said. “Our second-half innovation is expected to bring energy to our categories, and we are confident our evolving strategies will meet consumers' changing needs and drive long-term success."

Second-quarter net sales in the company’s International segment fell 8.9% to $204.8 million compared with the year-ago period. Excluding planned inventory depletion and planned declines in Mexico from last year’s dairy beverage product line discontinuation, Hershey said net sales in the International segment rose by mid-single digits behind about 5 points of price realization.

Like other consumer packaged goods companies using cocoa in their products, Hershey has been impacted by higher prices for the commodity, and Buck previously projected continuing headwinds into 2025 due to supply challenges and price volatility.

In an April 2 company update, TD Cowan analyst Robert Moskow said Hershey was believed to have locked in 2024 cocoa costs at about $4,350 per tonne, or about 50% above 2023 estimates. Moskow said at that point Hershey had delayed raising prices and instead chosen to implement $100 million in various cost savings initiatives.

On an Aug. 1 earnings call, Buck said while the company believes the current cocoa price “is not sustainable,” the future prices will “be higher levels than we’ve seen before this kind of recent historic pricing cycle.”

She added Hershey’s pricing approach has been measured but may need to change.

“We've absorbed a lot of inflation already, but we do believe we need to pass some of it on,” Buck said.

Because of competition, she did not go into detail about pricing on the earnings call but noted Hershey assumes there will be “historic elasticities” that could be “a little bit worse than we have seen in our recent prices increases.”

She pointed out a significant amount of the company’s portfolio is at less than a $3 price point, and that the company has made choices about where price increases make sense and “some places that we’ve chosen not to lean in on price.”