The Hershey Company — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing; the supplied text does not provide a clear standalone Q4 results summary. Hershey sells confectionery and snack products through North America Confectionery, North America Salty Snacks, and International segments.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Net sales | $11.165 billion | $10.419 billion | +7.2% |
| Gross profit / margin | $4.998 billion / 44.8% | $4.499 billion / 43.2% | Margin +160 bps |
| Operating profit / margin | $2.561 billion / 22.9% | $2.261 billion / 21.7% | Profit +13.3% |
| Net income attributable to Hershey | $1.862 billion | $1.645 billion | +13.2% |
| Diluted EPS | $9.06 | $7.96 | +13.8% |
| Operating cash flow | $2.323 billion | $2.328 billion | Down $4.6 million |
Sales growth was primarily price-led: favorable price realization of 8.3% and foreign exchange of 0.2% were partly offset by a 1.3% volume decline. Gross-margin improvement reflected pricing and productivity, partly offset by higher supply-chain costs, unfavorable product mix, waste, foreign exchange, and commodity-derivative mark-to-market effects. Cocoa futures prices rose about 32% on average in 2023.
- Segments: North America Confectionery sales increased 6.9% to $9.123 billion and segment income rose 10.9% to $3.117 billion. North America Salty Snacks sales grew 6.1% to $1.093 billion, but segment income fell 1.0% to $158 million. International sales increased 11.2% to $949 million and segment income rose 37.4% to $148 million.
- Cash and investment: Capital expenditures, including capitalized software, were $771 million, versus $519 million in 2022. Investing activities used $1.199 billion, including $166 million for the Weaver popcorn assets.
- Debt and liquidity: Year-end cash was $402 million and total short- and long-term debt was approximately $4.814 billion. Hershey reported $822 million available on its revolving facility and $219 million under other bank lines; it was in compliance with credit covenants.
- Shareholder returns: Cash dividends were $889 million, up from $775 million in 2022. Common-stock dividends per share increased 15% to $4.456.
Material changes and notable items
- FY2023 sales and earnings increased, but everyday core U.S. confectionery volume declined; U.S. CMG takeaway rose 6.0% while market share declined 83 basis points. Salty-snack takeaway increased 5.6%, with market share down 9 basis points.
- North America Salty Snacks segment income was affected by higher advertising and costs related to the voluntary removal of certain Paqui products.
- Hershey completed its acquisition of certain Weaver popcorn manufacturing assets in May 2023 for $166 million, adding capacity. The acquisition represented 1.4% of year-end total assets and was excluded from management’s internal-control assessment; the auditor’s opinion on the financial statements and internal controls was unqualified.
- In February 2024, the Board approved the multi-year Advancing Agility & Automation initiative. The company estimates $200–$250 million of pre-tax costs through 2026, including $175–$225 million cash costs, and expects approximately $300 million of annual savings at program completion.
Outlook, risks and contingencies
- The filing gives no clear 2024 net-sales or EPS guidance. Hershey expects 2024 capital expenditures of approximately $600–$650 million and long-term debt repayments of approximately $300 million. It expects share repurchases to follow its traditional strategy.
- Management said inflation had slowed but cited continued pressure from commodity prices, especially cocoa, and noted that consumer behavior and recession risk could affect demand. The Russia-Ukraine conflict had no material impact on 2023 commodity prices or supply availability, but remains a monitored risk.
- Key exposures include volatile cocoa and other input costs, supply-chain or manufacturing disruption, consumer price sensitivity, intense competition, climate and agricultural risks, international-market uncertainty, customer concentration, and cybersecurity and ERP implementation risks. McLane accounted for approximately 28% of consolidated sales and 24% of year-end receivables.
- Hershey disclosed a September 2023 smishing incident in which some employee and third-party personal information was exposed; it did not affect the consolidated financial statements. The company reported no material cybersecurity incidents for 2023.
- Raw-material purchase obligations totaled approximately $2.892 billion at year-end, primarily due within one year. The company said ordinary-course legal proceedings were not expected to have a material effect. It noted asbestos at certain facilities but said it could not estimate related asset-retirement obligations.
Important facts for investors to verify
- Whether further pricing can offset cocoa and other input-cost inflation without materially worsening volume or market-share trends.
- Whether North America Salty Snacks can restore segment profitability after the 2023 income decline and Paqui-related removal costs.
- Execution, costs, and realized savings from the new productivity initiative, alongside the final ERP rollout in 2024.
- Liquidity and refinancing needs, including short-term borrowings, the 2024 note maturity, and large near-term raw-material commitments.
- Progress in resolving tax audits and unrecognized tax benefits; the filing expects approximately $51 million of reductions within 12 months, but timing and outcomes remain uncertain.