How many Americans are projected to participate in Halloween this year? 71.5% according to a recent survey taken by the National Retail Federation (NRF). This is also the highest recorded number of Halloween participants in the last 10 years of the NRF's survey. This could create rising revenues for Hershey (HSY).
This is because Hershey has strong brand recognition, with many candy items that are considered standard, "go-to" products for Halloween. According to Bloomberg, two out of the three top selling candies are produced by Hershey.
The top spot was held by M&M's (a product of Mars). Second place, however, was grabbed by Reese's Peanut butter cups ($516.5 million annual sales), which is a brand of Hershey, while the third slot was taken by the company's iconic Hershey's milk chocolate bar ($475 million annual sales). Hershey also owns Kit-Kat, another Halloween staple.
Hershey's CEO John P. Bilbrey commented on the upcoming season, stating:
As we enter the third quarter, we are well-positioned to deliver on our financial objectives. We have good visibility into the orders for the upcoming Halloween and Holiday seasons where consumers will see higher price points. Seasonal specific advertising in the second half of the year will be greater than last year. For the full-year 2012, we expect advertising to increase low-double digits on a percentage basis versus the prior year, supporting seasons, new product launches and core brands in both the U.S. and international markets.
International markets are another strong point for Hershey's. The global chocolate market in general has been increasing, and can potentially provide an enormous opportunity for future growth. Hershey's is as close to a pure chocolate play as it gets, and is the largest chocolate manufacturer in North America.
CEO Bilbrey addressed international markets back in February at the end of Q4,
In 2011, Hershey continued to make good progress against its business model and strategy of investing in core brands and capabilities in the U.S. and key international markets...Our success is reflected in our solid net sales growth and market share gains, giving us flexibility to make broad-based investments while delivering on our earnings objectives.
Currently Hershey seems to be continuing its "strategy of investing" in "key international markets". The company recently announced that it plans to buy out a remaining stake in one of its joint ventures, located in India, in order to generate a presence in the gigantic, and still growing, emerging market of India. Hershey also focuses on these other global regions; the Americas (Canada, Mexico, Brazil, Central America, Puerto Rico), Asia, Europe, the Middle East and Africa. The company has even found success in Japan, with their Reese's Peanut Butter Cups. Hershey's is making a clear effort to expand globally, and is succeeding so far.
Hershey's, according to Forbes, trades in a range between $55.32 and $71.31. It sports a dividend of 2.1% with a market capitalization of $12 billion. Hershey's would make a great long-term holding, especially keeping in mind its future prospects for growth internationally, but appears to be overpriced at current levels.
It might be best to wait for a pullback to establish a long-term position in Hershey's, especially since it is currently trading near its 52 week high. To take advantage of the short-term catalyst of Halloween and book some quick profits, however, Hershey's may also be a stock to consider now. It all depends on the individual's personal investment goals and strategy.