The Hershey Company
Fourth Quarter 2021 Question-and-Answer Session
February 3, 2022
The Hershey Company - Fourth Quarter 2021 Question-and-Answer Session, February 3, 2022
C O R P O R A T E P A R T I C I P A N T S
Melissa Poole, Vice President, Investor Relations
Michele Buck, Chairman and Chief Executive Officer
Steve Voskuil, Senior Vice President and Chief Financial Officer
C O N F E R E N C E C A L L P A R T I C I P A N T S
Andrew Lazar, Barclays
Robert Moskow, Credit Suisse
Nick Modi, RBC Capital Markets
Jason English, Goldman Sachs
Michael Lavery, Piper Sandler
Ken Zaslow, BMO Capital Markets
Ken Goldman, JPMorgan
Bryan Spillane, Bank of America Merrill Lynch
Chris Growe, Stifel Institutional
David Palmer, Evercore ISI
Steve Powers, Deutsche Bank
Rob Dickerson, Jefferies
Jonathan Feeney, Consumer Edge
Pamela Kaufman, Morgan Stanley
John Baumgartner, Mizuho Securities
P R E S E N T A T I O N
Operator
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The Hershey Company - Fourth Quarter 2021 Question-and-Answer Session, February 3, 2022
Greetings. Welcome to The Hershey Company Fourth Quarter 2021 Question & Answer Session.
At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded.
I'd now like to turn this call over to your host Ms Melissa Poole, Vice President of Investor Relations for The Hershey Company. Thank you. You may begin.
Melissa Poole
Good morning everyone. Thank you for joining us today for The Hershey Company's Fourth Quarter 2021 Earnings Q&A Session. I hope everyone has had the chance to read our press release and listen to our Pre-Recorded Management Presentation, both of which are available on our website. In addition, we have posted a transcript of the pre-recorded remarks. At the conclusion of today's live Q&A session we will also post a transcript and audio replay of this call.
Please note that during today's Q&A session we may make forward-looking statements that are subject to various risks and uncertainties. These statements include expectations and assumptions regarding the Company's future operations and financial performance, including expectations and assumptions related to the impact of the COVID-19 pandemic. Actual results could differ materially from those projected as a result of the COVID-19 pandemic, as well as other factors. The Company undertakes no obligation to update these statements based on subsequent events. A detailed listing of such risks and uncertainties can be found in today's press release and the Company's SEC filings.
Finally, please note we may refer to certain non-GAAP financial measures that we believe will provide useful information for investors. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations to the GAAP results are included in this morning's press release.
Joining me today are Hershey's Chairman and CEO, Michele Buck, and Hershey's Senior Vice President and CFO, Steve Voskuil.
With that, I will turn it over to the Operator for the first question.
Operator
At this time we will be conducting a question-and-answer session.
Our first question is from Andrew Lazar with Barclays. Please proceed with your question.
Andrew Lazar
Good morning everyone.
Michele Buck
Good morning Andrew.
Steve Voskuil
Good morning.
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The Hershey Company - Fourth Quarter 2021 Question-and-Answer Session, February 3, 2022
Andrew Lazar
Hi there. I guess my question is it seems like the plan of this year is, is Hershey's going to look to certainly leverage greater SG&A to more than offset some of the expected gross margin pressure during the year. I guess my question is how does the company balance sort of leaning more heavily on SG&A this year to hit certain targets, including less aggressive marketing spend, albeit in light of capacity constraints? How do you balance that with continuing to lean in on reinvestment to protect as much of the sort of the current momentum and the market share that's been gained in the last two years, really to benefit the outyears, right, of '23, '24 and sort of beyond?
Michele Buck
As you know, we take a pretty balanced approach in terms of focus on delivering the short term as well as making sure that we are building all the capabilities and continued investment to build the long term. So, as it relates to-let me start with some of our SG&A.
We think it's important to continue to build capabilities. Some of the places that we have been very focused are in the areas of ERP, obviously, so that we can really get a solid foundation of technology that we think will bring us tremendous benefit going forward in the future. We incur a lot of the expense now, and frankly, more of the benefit in the future.
Also, in terms of digital as a big investment area, specifically we've had a big focus in advancing our capabilities to deliver more sophisticated targeting and get more efficiency in media. So we believe some of those lean-ins are really important to help us build those capabilities for the future.
As we look at brand investment, as you know we are big believers in our business model that brand investment is key. We have always been very solid spenders, and we continue to believe that. We have moderated some of that spending as we've had supply challenges and constraints to make sure that we keep our very strong returns on that investment, so it's a balancing act. Some of the investments in media have enabled us to get to efficiency so that we are still delivering a pretty strong number of consumer impressions out there. We feel good about where our share of voice is. So, we're really trying to balance that and say, "Okay, we'll moderate a bit now in brand investment," but certainly keep our eye on it as we go forward to make sure that we continue to protect that for the long term.
Andrew Lazar
Right. Thank you.
Michele Buck
Steve, do you have anything to add to that?
Steve Voskuil
No, I think you hit the highlights. We have a compensation reset that happens as we set new targets, and so that gives us a little bit on benefits side to deploy against the things that Michele said.
Andrew Lazar
Right. Then just briefly, Steve, I guess where you say Hershey is right now with respect to sort of retail inventory levels and I guess finished goods inventory as well, relative to where the company might
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The Hershey Company - Fourth Quarter 2021 Question-and-Answer Session, February 3, 2022
typically see itself sort of at this time of the year? Just trying to get a sense of what sort of inventory refill opportunity there might be moving forward, obviously as capacity allows. Thanks so much.
Steve Voskuil
Sure. As we formed our guidance for next year, we have an assumption inside there that there is an opportunity for some inventory build back into the network. Of course, we've also got some inventory building to do on our side, but from a retail distributor standpoint as well and that's part of our guidance.
Andrew Lazar
Okay. Thank you.
Operator
Our next question is from Robert Moskow with Credit Suisse. Please proceed with your questions.
Robert Moskow
Hi. Thank you for the question. I wanted to get a sense of what you're seeing from competition. Is your competition facing the same supply chain constraints that you're facing, and therefore, should we assume that you're expecting a year of market share gains? Or do you expect to hold share this year? Do you expect them to reduce media as well?
Michele Buck
Relative to the competition, yes, we would say everyone in the category seems to be having similar challenges, just as I would say pretty broadly in the industry that's the case. We anticipate the situation relative to delivering on demand to be about comparable across the competitors.
Relative to market share, we believe that we will hold share this year. As you know, we've had some really significant gains over the past two-year period of time. We will have more tepid share performance in the first half of the year, building to a bit more strength in the second half due to laps alone. And relative to share of voice on advertising, we do track that and we feel really good about where we are from an advertising share of voice perspective.
Robert Moskow
Okay, great. Maybe a follow-up. Gross profit dollars, for the core business, not including the acquisitions, should we still assume that your gross profit dollars are growing? This is kind of a backhanded way to figure out what kind of gross margin I should expect for 2022.
Steve Voskuil
Yes. Gross margin dollars are going to grow. As we talked about in the prepared remarks, from a margin standpoint we expect there to be some dilution comparable to what we saw in '21. But from a dollars standpoint, yes, up year-over-year.
Robert Moskow
Okay. All right, thank you.
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ViaVid has made considerable efforts to provide an accurate transcription. There may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. This transcript is being made available for information purposes only.
1-888-562-02621-604-929-1352www.viavid.com
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The Hershey Company published this content on 03 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 February 2022 19:10:04 UTC.