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Hershey seen ready for problem-free Easter
PHILADELPHIA, March 28 (Reuters) - Hershey Foods Corp. is expected to breeze through the Easter candy season with few of the nagging distribution problems that made last Halloween a nightmare for the leading U.S. chocolate maker, analysts said on Tuesday.
But Hershey may not regain the full faith of Wall Street until the end of 2000, after the candymaker has opened a new 1.2 million-square-foot distribution centre and weathered the onslaught of this year's back-to-school and Halloween sales seasons.
``How Easter goes is still a big question,'' said Edward Jones food analyst Patrick Schumann. ``It won't be an earth-shattering Easter for them, but they'll still be in a better position to handle this than they were at the end of 1999.''
Easter ranks as the second-biggest candy season for Hershey -- behind Halloween -- and represents about 20 percent of annual sales, analysts said.
Last autumn, the maker of Reese's Peanut Butter Cups, Kit Kats, Twizzlers, Hershey's bars and Hershey's Kisses had difficulty getting inventory onto store shelves for the key back-to-school and Halloween candy season, which represents about 35 percent of its annual sales.
Problems stemmed from a new computer system that caused glitches in distribution channels. Company executives have since worked to rebuild relations with customers, investors and Wall Street analysts.
``No question, the more critical back-to-school/Halloween season is when we're really going to have a sense of whether Hershey is back on track,'' said Lehman Brothers analyst Andrew Lazar.
With Easter Sunday less than a month away, Hershey seems ready to bounce back.
Hershey spokesman John Long said on Tuesday that ``with our distribution issues, the problems seem to be behind us and it's business as usual.''
Hershey will continue to ship Easter candy for another two weeks. Its last shipment date for the holiday is April 7.
On April 24, Easter Monday, the company also will report first-quarter earnings. Wall Street analysts believe Hershey will show a strong comparison against the poor results of a year earlier.
Analysts expect Hershey to report earnings of 43 cents a share, compared with 37 cents in the first quarter of 1999.
``Looks like their first quarter is coming along pretty well,'' said William Leach of Donaldson, Lufkin & Jenrette. ``It's an easy comparison because they had a terrible quarter last year. But I expect their sales volume to be up 7 (percent) to 8 percent.''
The opening of a new state-of-the-art distribution centre outside Hershey, expected during the second quarter, is part of the company's plan to enhance profitability by squeezing costs through automation.
``Distribution is the one place where technology is now improving tremendously, so that there are lots of things that can be done now that weren't able to be done 10 or 15 years ago,'' said Elisabeth Echeandia, publisher of Confectioner magazine.
Hershey stock fell 1-3/16 to 42 on the New York Stock Exchange on Tuesday.
Copyright 2000 Reuters Limited.
-- (Just@an.update), March 29, 2000
-- (October@of.1999), March 29, 2000.
Thank God the distribution problem has been solved.
I was worried sick about this!
-- (email@example.com), March 29, 2000.
I love Hershey's chocolate.
Thank you, Hoffmeister; where ever your are.
-- (Ladylogic@....), March 29, 2000.