Ongoing supply chain pressures amid strong consumer demand make for a scary combination as Hershey warned there will be a Halloween and holiday candy shortage.
“Seasonal consumer engagement is expected to remain high, and we expect high single digit sales growth for both our Halloween and Holiday seasons,” Hershey Chairman and CEO Michele Buck said during the earnings call. “Despite this strong growth, we will not be able to fully meet consumer demand due to capacity constraints.”
Trick-or-treaters can partially blame a scarcity of raw ingredients and workers for the lack of Reese’s pumpkins this year. The CEO also mentioned that the Russia-Ukraine war and geopolitical tensions strained supply chains when explaining that the company had to make the difficult decision to prioritize producing its everyday candy offerings over seasonal confections.
Buck warned that the supply constraint would put pressure on the stock in the second half of the year, though she noted that the shortage was expected to be short-lived. Hershey anticipates it will have inventory back up to meet consumer demand into 2023.
The chocolate manufacturer saw 19% sales growth in the second quarter versus a year ago as consumers continued to buy up sweets and snacks despite the rise in inflation. The company said it didn’t see increased competition from private-label brands that other consumer packaged goods purveyors have been facing.
Here’s how Hershey performed in the second quarter compared to Wall Street estimates:
The company also raised its full-year earnings guidance to 12% to 14% growth (up from 10% to 12%). Hershey shares were up more than 2 in Friday afternoon trading.
“We feel really good about having high single-digit growth,” Buck said on the company’s outlook, “but we also feel good about as we get into the future being able to have more capacity to really fulfill more of the demand that we see during the season.”
Grace is an assistant editor for Yahoo Finance.
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