This announcement may leave you with a bitter taste in the mouth rather than a sweet taste like chocolate. The chocolate maker Hershey Co has made a huge job cut of 300 positions. The announcement came Friday that the positions will be slashed by the year’s end. It is a major cut to its full-year sales growth forecast.
While Hershey had predicted previously sales growth for this year to be between six and seven percent, it now says the numbers will likely be lower. The company’s expectation is for a four to five percent increase in sales for the entire year. Due to the lower number than previously predicted, there are jobs to be cut to be able to get revenue.
In addition, Hershey is revamping its leadership team, rolling in a new productivity program. The company predicts that the program will save them significant money in 2016. Savings are expected to be between $65 million to $75 million (pretax). Hershey, which makes chocolate goodies such as Hershey’s Kisses and Reese’s Peanut Butter Cups, is valued currently at $19.67B. The Hershey Company (HSY) opened on the market on June 19 at $90.37.
HSY shares are priced at 21.08x this year’s predicted earnings, right now. That means they are pretty expensive in comparison to the 15.10x forward p/e ratio of the industry. The lower-than-projected full-year sales for Hershey is due largely to low sales in China. The slowdown in China’s economic growth, which was a six-year low of seven percent in its first quarter, meant that consumers had little money to spend on presents or treats.
Even Chinese New Year was not a major money maker for Hershey. Sales in China were nearly half what they were in the first quarter as compared to what they were at the same time last year.