Hershey Earnings: Consumers Begin to Ration Confectionery Purchases, but Investors Should Stock Up

Parsing through the noise in wide-moat Hershey’s second-quarter results, we still see a competitively advantaged business poised to navigate the travails of the current industry backdrop. Organic sales collapsed nearly 17% in the quarter on an 18% volume retreat, but this downswing was primarily the byproduct of retailers working through inventory as the firm rolled out its new ERP system. Absent this, the volume decline was a more modest low-single-digit percentage. So, while cash-constrained consumers’ hankering for confections could be waning (given the more discretionary nature of the product), we don’t think Hershey’s leading position (with more than one third share of the US chocolate aisle) has been tarnished.