San Francisco, Nov. 12 - The revamped board at Hershey Co. is likely to direct near-term efforts more at boosting sales of the company's core chocolate brands than at seeking a sale of the company, analysts said Monday.
Hershey's board room endured a dramatic facelift this weekend. Eight independent directors resigned Sunday. Six of them were forced out by the Hershey Trust, which controls 31% of the company's stock and 79% of the voting shares. Two other directors resigned on their own accord.
"The trust wants a freer hand to reaccelerate growth, whatever the near-term challenges," wrote Wachovia Securities analyst Jonathan Feeney.
Last month, the trust was said to be in exploratory talks with U.K. candy giant Cadbury Schweppes about possibly buying Cadbury's candy business or selling itself.
"While Cadbury speculation is likely to remain in the background, we question the ability to absorb this business, without significant earnings dilution," wrote Goldman Sachs analyst Marc Kandel.
The trust, which almost sold Hershey (HSY) in 2002, has become impatient with the company's sagging performance. It pledged Oct. 10 to resolve Hershey's "unsatisfactory performance" and "current business challenges."
Changes in the CEO office went down last month. CEO Rick Lenny said he plans to step down Dec. 1 and will be replaced by COO and board member David West.
Hershey shares, down 20% over the past 12 months, have lagged those of rivals Cadbury (CSG) and Nestle SA (NSRGY) . Hershey has been plagued by underspending on key brands and misreading consumer trends, analysts say.
For the three months ended Sept. 30, Hershey reported its net income sank 66% from a year ago, stung by restructuring charges and soaring costs for dairy milk. Total sales slipped 1.2% to $1.39 billion. Among other items, management blamed inventory reductions and tighter credit conditions at distributors.
Hershey shares rose almost 1% to $41.41 in afternoon trading.