Mar 01, 2017 09:55 AM EST
The Hershey Company plans to reduce global workforce by 15 percent as part of its "Margin for Growth" that seeks to drive continued net sales, operating profit and earnings per share-diluted growth.
Hershey aims for a steady and increased output over the next two years to beat changing eating habits of consumers in the United States as well as slower economic growth in its emerging markets.
Hershey announced the 2,700 job cuts as an effort to reach an adjusted operating margin of about 22 percent to 23 percent by the end of 2019. The number is comparatively higher than the targeted 20 percent last 2016. Moreover, the employment reduction will mostly apply to Hershey's hourly employees outside the US. It must be noted that Hershey had about 16,300 full-time and 1,680 part-time employees across the world at the end of last year.
Michele Buck, incoming president and chief executive officer of Hershey, said the move would contribute to the progress of its Margin for Growth intended to provide the flexibility and fuel to continue the brand and capability investments. "Our objective is to ensure that we always have the right level of innovation, marketing plans and consumer and customer expertise to drive net sales growth," she said in a press release statement on Feb. 28. "In addition, we're working to return our international businesses to profitability as soon as possible."
Several analysts noted that most of the job cuts to be imposed by Hershey will most likely take place in China. The headcount costs there increased since Hershey acquired a candy company in 2014. Notably, Hershey's sales only went up a reported 0.7 percent last year.
Due to this, Hershey is looking for ways to improve its profit margins to achieve the vision. Hershey further affirms its outlook for 2017 with net sales growth of about 2 to 3 percent. This also includes the net benefit from acquisitions of about 0.5 points and unfavorable foreign currency exchange rates of about 0.25 points and full-year adjusted earnings per share-diluted growth of seven to nine percent.
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