HERSHEY, Pa., Dec. 6 /PRNewswire-FirstCall/ -- The Hershey Company today announced that due to a slower than anticipated improvement in U.S. marketplace trends and the financial impact related to the product recall and temporary plant closure in Canada, it has reduced its earnings expectations for 2006. "While we're seeing areas of improvement in the U.S. retail marketplace, particularly with selected new products and across key customers, the progress is below expectations," said Richard H. Lenny, Chairman, President and Chief Executive Officer. "Further, the costs and business disruption associated with the product recall in Canada have placed additional pressure on the business. Therefore, we now anticipate net sales growth for 2006 to be slightly below our long-term 3-4 percent range and the increase in diluted earnings per share from operations to be in the mid-single digits.
"Over the past five years, we've delivered strong financial performance through a combination of new products, superior retail execution, and solid expense control. We've expanded Hershey's leadership position within an attractive, on-trend category. In 2006, however, we haven't executed the types of competitively advantaged consumer and customer programs that are required to deliver superior sales and marketplace performance. This must and will change for 2007.
"For 2007, revitalizing Hershey's iconic brands through increased consumer and customer support is a key priority. We're making progress in shifting our growth strategy from line extensions and new varieties to innovative platforms. These platforms capitalize on consumer insights, and thus represent more sustainable growth arenas, as evidenced by our success in dark chocolate and refreshment. This portfolio transformation will accelerate next year. In addition, we're pursuing opportunities in selected high potential global markets representing attractive sources of growth.
"Our number one goal is to restore Hershey's performance to the levels that we've achieved in the past and remain capable of delivering. We're maintaining our long-term expectations of sales growth of 3-4 percent and growth in diluted earnings per share from operations of 9-11 percent. For 2007 we anticipate net sales growth to be in this 3-4 percent range. Given the increased investment behind Hershey's core brands and strategic growth initiatives, we anticipate the increase in diluted earnings per share from operations in 2007 to be in the 7-9 percent range," Lenny concluded.
Safe Harbor Statement
This release contains statements which are forward-looking. These statements are made based upon current expectations which are subject to risk and uncertainty. Actual results may differ materially from those contained in the forward-looking statements. Factors which could cause results to differ materially include, but are not limited to: our ability to implement and generate expected ongoing annual savings from the initiatives to advance our value-enhancing strategy; changes in raw material and other costs and selling price increases; our ability to implement improvements to and reduce costs associated with our supply chain; the impact of future developments related to the recent product recall and temporary plant closure in Canada; pension cost factors, such as actuarial assumptions, market performance and employee retirement decisions; changes in our stock price, and resulting impacts on our expenses for incentive compensation, stock options and certain employee benefits; market demand for our new and existing products; changes in our business environment, including actions of competitors and changes in consumer preferences; changes in governmental laws and regulations, including taxes; risks and uncertainties related to our international operations; and such other matters as discussed in our Annual Report on Form 10-K for 2005.
