Aug 1 - Hershey cut its annual profit and sales

forecasts on Thursday and posted a near 17% drop in quarterly

sales, highlighting cautious consumer spending for its candy and

chocolates.

WHY IS IT IMPORTANT?

Hershey had been one of the few companies to gain market

share even as it increased product prices to combat the impact

of cost inflation.

However, demand trends have shifted as consumers across

income groups turned more price conscious and sought cheaper

alternatives.

MARKET REACTION

Shares of the Kit Kat maker fell about 5% in premarket

trading.

CONTEXT

Packaged food peers, such as Mondelez ( MDLZ ) and Kraft

Heinz ( KHC ), implemented double-digit price hikes over the

last two years to counter rising costs of commodities, including

sugar and cocoa.

However, while prices increases dented demand for Hershey's

confectionary products internationally and at home, selective

price reductions in salty snacks perked up its North America

volumes.

BY THE NUMBERS

Hershey's net sales fell to $2.07 billion in the three

months ended June 30, compared with analysts' average

expectation of $2.31 billion, according to LSEG data.

Net sales for confectionary products in the North America

segment, Hershey's largest market that accounted for about 80%

of its annual revenue, fell to $1.58 billion from $1.99 billion

a year earlier.

Excluding items, it earned $1.27 per share, below LSEG

estimates of $1.43.

The company's organic price rose 1%, while organic volume

slumped 18%.

The company's gross margin slipped to 40.2% in the second

quarter from 45.5% a year ago.

It expects full-year net sales growth of about 2%, compared

with previous view of 2% to 3%.

Hershey forecasts adjusted earnings per share to be down

slightly from prior expectations of flat.