The Hershey Co. said Friday it is raising prices on its products by an average of 11 percent as the nation's largest candy maker tries to stem the impact of soaring commodities costs, and trimmed its projections for 2008 and 2009.
The price increase was the second already this year for the candy company known for its Hershey's chocolate bars, bite-sized Kisses and Reese's peanut butter cups.
The immediate increase was necessary to offset "significant increases" in the cost of raw materials such as sugar, cocoa and peanuts - up as much as 45 percent since the start of the year - as well as the growing cost of fuel, utilities and transportation, Hershey said.
"Commodity costs have been volatile over the last several years and continue to remain at levels that are well above historical averages," Hershey's President and Chief Executive David J. West said in a statement.
The Hershey, Pa.-based chocolate said its commodities costs will grow by more than $110 million this year - a figure that could double in 2009.
Hershey's biggest domestic competitors, Mars Inc. and Nestle USA Inc., did not immediately respond Friday afternoon to questions about whether those companies have raised prices, or plan to.
Meanwhile, Hershey also narrowed its 2008 earnings and revenue guidance because of the price hikes.
The company it expects net earnings per share between $1.43 and $1.51. Excluding business alignment and impairment charges, the company predicts its earnings will be between $1.85 and $1.90. However, Hershey cautioned that due to current economic conditions, its profit would likely fall at the low end of that range.
It expects sales to grow 3 to 4 percent.
Analysts surveyed by Thomson Reuters expect the company to earn $1.85 per share on revenue of $5.11 billion, a 3 percent increase.
In 2009, Hershey said it expects sales to grow between 2 and 3 percent, down from its earlier projection of a 3 to 5 percent increase. The company also warned its 2009 adjusted profit would likely miss its target of 6 percent to 8 percent growth.
Analysts expect Hershey to earn $1.91 per share in 2009 on revenue of $5.31 billion, a 4 percent increase.
Hershey shares fell $2.44, or 5.8 percent to $39.20 in after hours trading, after closing regular trading up 43 cents at $41.62
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