Q1 2020 Earnings Call

Greetings and welcome to the Hershey Company's first quarter 2020 earnings call.

At this time all participants are in listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded I would now like to turn the conference over to your host Melissa pool, Vice President of Investor Relations for the Hershey Company. Thank you you may begin.

Thank you know what's a good morning, everyone. Thank you for joining us for the Hershey Company's first quarter 2020 earnings Conference call My Cat well, yes, it's a hard for Michele Buck Chairman, President and CEO and Ivankoe Senior Vice President and CFO, followed by doing that.

During the course of today's call management will make forward looking statements that are subject to various risks and uncertainties. These statements include expectations and assumptions regarding the company's future operations and financial performance.

Leading expectations and assumptions related to the index impact of the cobot 19th.

Actual results could differ materially from those projected as a result of the Kobin 19 pandemic as well as other factors. The company undertakes no obligation to update these statements based on subsequent event you detailed lifting of such risks and uncertainties can be found in today's press release and the company that's easy filing.

Finally, please note that on today's call, we will refer to certain non-GAAP financial measures that we believe will provide useful information for investors.

The patient of this information is not intended to be considered in isolation worthy substitute for the financial information presented in accordance with GAAP reconciliations to GAAP results are included in this mornings press release, it's now my pleasure to turn the discussion over to me.

Thank you Melissa.

Good morning, everyone and thank you for joining us today.

I hope first of all that you and your loved ones are safe and healthy.

We are all experiencing an unparalleled and rapidly evolving global pandemic.

Our thoughts go out to those that have been impacted and we'd like to extend our sincere. Thank you to all of this euros working to keep people say during this difficult time.

As you all know food companies play an important role during this crisis.

Helping to ensure study food supply and supporting local economy.

We recognize that Hershey is not only a food manufacturer, but also an important link in the broader food supply chain, particularly with farmer and other raw material suppliers that rely on us.

I could not be more proud of the person team and how they are responding to this situation.

First and foremost what's the Karen support the are showing for each other their family partners and communities.

But also with their relentless energy and passion to continue to safely operate with excellent.

I'd like to extend a heartfelt thank you to all of them.

Especially to those in our manufacturing plant and those working at retail to make moments of goodness for our consumers during these difficult times.

The situation continues to evolve so rapidly, but it's difficult to predict the future with much certainty.

Well comparisons can certainly be drawn to weather related disruption or natural disasters or recession.

The reality is that we have never seen so many factors at play at the same time on such a global scale.

But we are committed to being transparent about what we're seeing in the marketplace.

And what we are doing to respond.

We will continue to be forthcoming as we navigate the uncharted territory and we believe we will have more visibility in the coming month, that's the situation stabilizes.

Let me start placing free coded our business what is on track versus our expectation both in Q1 and our outlook for the full year.

Now, let me share some details around what you're doing from an operations perspective before I discuss what we're seeing in terms of consumer behavior.

The health and safety of our Hershey team remains Paramount and our decision, making an action.

Food safety has always been epicenter of our day to day operations and that will continue.

As the pandemic spread we are monitoring that changing environment daily and we're adapting as this situation evolves.

We've put in place more stringent operating procedures safety protocols to help ensure the well being up our employees their families and everyone with them they interact.

We are doing our best to enable social distancing and other safety and cleaning protocol across all functions and meet our commitment to support consistent community food supply and the needs of our retail partners.

As you would expect all of our corporate and commercial employees, who were able to are working remotely.

A big Thank you to our IP team, who have done an outstanding job, making the transition to virtual work as seamless as possible and also to our HR team for the wealth of resources. They continue to provide our employees to effectively manage work remotely.

Currently [noise].

All of our manufacturing plants remain open and we continue to operate our supply chain with limited disruption.

That's the situation began to unfold, we built inventory in both raw material and finished goods to mitigate risk and to help us to continue meeting demand.

This proactive approach coupled with that work experience and dedicated team has enabled us to consistently deliver strong customer service levels.

Our first quarter case fill rate with over 98.5% within 99% case fill rate in March.

And despite incremental marketplace challenges in April our case bill rates remain close to 98%.

Utilizing flexible scheduling the majority of our sales reps remaining doors partnering with our retailers to provide much needed support.

This continued in store presence combined with our strong customer service has driven confectionery share gains of all of those 300 basis points during the past month.

Our manufacturing and retail employees have shown amazing dedication and resilience and we get implemented incentives to recognize these contributions for employees, who can safely work to keep our operations running.

We have closed our own retail locations, including our chocolate World store in Hershey, Pennsylvania Times Square in New York and Las Vegas from most of Q2.

While sales in our retail locations are relatively small in proportion to our total business. We do expect several months of closures to have an effect.

In addition to our retail stores there are several other parts of our business that or seeing an outsized impact, including our foodservice business.

And our travel retail business.

Both of which are seeing channel decline of 75% to 80%.

And we saw a meaningful category decline in China during a key seasonal gifting window in the first quarter.

Combined these businesses represent approximately 6% of our sales [noise].

Now, let me share a little bit about what we're saying with the consumer as it relates to our core business in the U.S.

Free Cobot 19, our business was tracking in line with expectations with retail takeaway up a little over 2% and confectionary share gains of about 20 basis points.

Easter and see double a March madness were sold in and Merchandised in store.

Our key innovation was largely in market, including Reese's take five kit Kat do.

And many of our key customers began selling our new thins items before any retail disruption occurred.

Similar to many other food manufacturers, we saw a benefit from consumer stuck up in March though to a lesser degree the meal oriented categories.

This was consistent with our expectations and what we typically see with weather related pantry loading.

Total Hershey retail sales growth accelerated to 10% in March.

This growth was across all classes of trade with particular strength in food math and dollar channels.

We were in a great position to support this increased foot traffic in demand as we had strong merchandising and ample inventory in stores as we geared up for Easter and art and see double a promotion.

We delivered a solid Easter season, despite the significant disruptions we saw in both the retail environment and consumers' lives.

Recall, we did expect the season to declined versus last year, given Easter was a week earlier this year.

Overall, our solid was inline with expectations.

Retail takeaway got off to a strong start and sell through was pacing ahead of expectations heading into the final week.

We did however, see large changes in the macro environment during that final week.

This impacted consumer trips and overall category performance in sell through.

Throughout the season, including a difficult twice a week our teams executed well.

We delivered retail take away and sell through ahead of competition.

Wow older Sellthrough came in slightly below expectations, we expect minimal impact to the piano or to retail takeaway in the coming weeks.

As a reminder, confectionery retail takeaway for the beginning of April is elevated due to the earlier Easter we anticipate take away in the second half of April to be pressured as a result of this shift please keep in mind when you're evaluating retail trends in the next few weeks, particularly as it relates to quantifying.

He cobot 19 related impacts.

Now, let me spend a few minutes discussing some of the changes we are seeing on our everyday performance.

As I mentioned, we experienced the lift in March due to consumer stock up.

Our grocery <unk> snacks businesses in particular, so increases in both household penetration and basket size.

Hershey syrup, baking chips and cocoa all grew approximately 30% during March and trends have remained strong as families are spending more time together at home baking.

Our skinnypop in Pirates booty businesses grew approximately 20% and gain share.

Well I'm March trends were strong the situation has evolved rapidly in April as a result, we've seen shifting consumer behavior.

More regions have enacted shelter in place guideline retailers have limited the number of consumers in stores as well as operating hours and the medical community is recommending individuals wear masks in public and limit grocery store trips unless you central.

A significant number of American households are not working and experiencing meaningful financial pressures.

All of this has impacted traffic into stores length of time in stores and the amount of discretionary goods people are purchasing.

While many consumers have shared our categories are helping them coke during this time as bond with their families. They also shared how they're shopping priorities have changed.

Within salty snacks DST brands have begun to outperform due to stronger in stock and merchandising levels.

In addition, we've seen a shift to lower price per ounce offerings as many consumers experience financial constraints.

As a result, skinny popping pirates booty have experienced share declines in softening performance over the past three to four weeks.

For our confectionary business, we've seen declining sales in the convenience class of trade as trips have slowed this represents approximately 15% of our north American sales.

Well, we still have an opportunity to capture impulse purchases at checkout and other classes of trade. The significant changes we've seen an overall trips and basket size over the past several weeks has limited the amount of flow back we've seen to other classes of trade.

In addition, the gum and mint category has been significantly impacted by social distancing.

These categories are much more functional than emotional and they've experienced declined to 40% to 50% over the past several weeks.

One of these trends that I've, just discussed have softened growth in other areas of our portfolio remained strong.

[noise] ecommerce growth has accelerated meaningfully.

As many of you would expect and have likely observed yourselves the number of consumers purchasing groceries online has increased significantly over the past several weeks.

Our research indicates that 45% of consumers have used one or more online grocery options in the past four weeks 23 points of them, 23% of which used to be services for the first time.

We've seen similar trends for confection with household penetration also doubling over the past month.

Consistent with these broader trends our overall ecommerce growth rate has accelerated significantly with growth over 120% in March versus 60% in January and February.

We are seeing growth across fulfillment models and across occasions, including in our tandy dish offering seasonal items and our single serve items.

At one retailer 80% of the full year digital sales plan was achieved in the month of March alone.

In a week, leading up to Easter 43% of Easter sales that this retailer were purchased online.

And then another retailer we were able to make more Easter items available online and shift inventory to maximize sell through as consumer behaviors changed mid season.

As we've shared in the past profitability in this key E. Commerce segment is relatively in line with total company average margins and that continues to be the case as trends have recently evolved.

We believe we are well positioned to capitalize on these trends given the strong investment and enhanced capabilities, we have implemented over the past several years.

I would take home confection business, such as our bags of kisses and miniatures are growing nicely.

Baking chips cocoa and syrup are also seeing elevated growth that's family spent more time together in the kitchen.

[noise] threw out this pandemic, our proactive approach with our supply chain is paying dividends strong customer service has enabled us to partner with our retailers to consistently capture these consumer opportunities and maintain a strong presence in store.

As I mentioned earlier, our K still rate for the first quarter was very strong and has continued into April despite the increasingly difficult operating environment.

Just tremendous work by our manufacturing and sales teams is evident in our recent market share performance Hershey Confectionary Patty category share gains were up over two points in March and are up over three point to date in April.

Now, let me spend a few minutes discussing our international markets.

As you all know these markets represent a smaller percentage of our overall sales, but there are an important growth driver for our business.

Well specifics varied by country, we have consistently seen more covance 19 related pressure in these markets than in the United States.

This is driven by several factors, including more restrictions on manufacturing and retail in some countries as well as less discretionary income, which impacts consumers' ability to afford non essential goods like chocolate.

[noise] parts of our business continue to perform well, including non confectionary products like syrup spreads and no.

And we're winning confectionery share in the modern modern trade and ecommerce channel.

However, some of our 2020 growth initiatives that focused on increasing geographic and traditional trade distribution have been delayed by the Cobas 19 pandemic.

We believe theres still tremendous long term opportunity for us in our international markets and we're maintaining an appropriate level of investment to capture these opportunities once the situation stabilizes.

In both our U.S. [noise].

And international markets, we are actively reevaluating priorities and resourcing to adjust as the situation if goals like.

Like many companies, we're partnering with our retailers to make sure we have the right level of promotional support during these unique times.

Our best in class retail sales force is a tremendous asset to help continue executing important promotional programs such as season small cars and Reese's lovers.

We are evaluating our media plans and adjusting both levels of support messaging and channel when appropriate.

For example, we've adjusted our Seymour's copy to emphasize family consumption at home versus larger community and friend to gatherings.

We have taken savings from events like NC, doubling March Madness, and Olympics and re allocated some to digital and our Reese's lover promotion. This summer while leveraging some of that to cover incremental cobas 19 related manufacturing and selling costs.

We are proactively planning for Halloween and partnering with our retailers to be prepared for a strong recovery, while also making smart choices to mitigate risks if consumer behavior remains impacted.

Includes optimizing our portfolio and pricepoint mix and activation timing as well as amplifying our ecommerce plants.

Our ability to quickly pivot and adapt to the changes along with our strong balance sheet and cash flow gives us confidence in our ability to manage through these disruptions and emerge stronger.

While we are highly focused on managing to pandemic. We're also continuing to advance strategic imperatives that will be critical levers for us to drive the business going forward.

We are however, taking a prudent approach and moderate in the pace of some of these work streams. So the teams can adequately focus on the situation at hand.

Specifically, we've chosen to selectively pause aspects of our ERP project until all of our functional experts are able to focus on the critical design phase.

We will continue to advance the finance and data Workstream efforts of our ERP project, why we delay supply chain and order to cash efforts. We expect this to delay our overall implementation by about one year.

Given the current demands on our supply chain team as well as a desire for cash flow flexibility. We've also altered the pacing on our recently announced supply chain project.

We do not expect any of these delays to have a material impact on our future growth ambitions, including those we have plans for 2021.

Now before I turn it over to Steve to share details on our Q1 performance I wanted to take a minute to update you on some strategic choices, we're making unrelated to the cobot 19 pandemic.

In order to better prioritize resources against assets that fit our business model and scale capabilities, we are working to divest or crave Scharffen Berger and to go brands.

We will share more information regarding these divestitures in the future.

It's important to note that our learnings from recent acquisitions have underscored the importance of assets scale and margin profile.

We are as best with scale assets closer to $100 million with high margins, but an able brand investment to drive growth.

These are great brands that continue to resonate with consumers, but they require a different go to market model that we believe it's better supported by other owners.

These actions will enable us to prioritize our recently acquired scale assets within salty snacks and nutrition bars.

Now, let me turn it over to Steve [noise].

Thank you Michelle and good morning, everyone. I Hope you your families and colleagues are safe and well I just wanted to start with highlights from our first quarter results, including the impact from Kobin 19, and then pivot to expectations for financial performance moving forward in light of the evolving pandemic.

During the first quarter reported net sales increased 1% versus the same period last year with organic constant currency sales grow a 0.5%.

This was inline with expectations with only a modest impact from koby of 90.

North America organic constant currency sales growth of 1.2% versus prior year was driven by net price realization.

As expected a shorter Easter offset solid every day sales growth by approximately one point in Q1.

We did see a larger increasing consumer demand from stock up trips.

The core with total Hershey us retail takeaway up over 10% in March.

However, this did not materially contribute to net sales growth in the quarter as retailer inventory whats depleted to satisfy much of this demand.

As we look to the balance of it here, we do not expect cobot 90 to permanently change our base inventory level assumptions, though we expect continued volatility in trend over the coming month due to the virus disruption.

The international and other segment reported and organic constant currency sales decline of 5.8% versus the prior year work.

This was largely attributable to co bid 19 related softness, particularly in China.

Also included in this segment, our owned retail location and our travel retail business that Michelle mentioned earlier.

While these businesses saw a minimal kobin 90 impact during Q1, we expect a more significant impact in the second quarter given the shelter in place restrictions that were implemented in late March in early April.

Now turning to profitability for the quarter.

Our lever for gross margin expansion continued to be effective with a 90 basis points improvement in the first quarter, increasing adjusted gross margin to 46.6%.

Net price realization drove the majority of these gains in addition to some benefit from productivity as we proactively built inventory to mitigate risks related to co bid 19.

Recall, we expect Q1 to be our strongest pricing quarter of the year as we benefited from both the final phase of our July 2018 price increase.

And the implementation of our July 29 team price increase.

Pricing in Q1 was in line with expectation and remain on track for the year.

These gross margin gain enabled strong investment in our brands and capabilities.

Selling marketing and administrative expense increased 4.8% versus prior year, driven by planned elevated advertising level and investments in strategic growth capabilities.

Operating expense for capabilities, including our ERP and supply chain program or slightly ahead of expectations for the quarter due to timing however remain on track for the year.

Recall, we also increased our incentive program for key levels in our organization in Q4 of 29 fee.

For the full year, there's minimal impact from these changes versus 2090, however, due to the timing of the decision last year the related incentive expense will be unfavorable in Q1, two and three and favorable in Q4.

Adjusted operating profit increased 5.2% in the first quarter versus the prior period.

Adjusted operating profit margin came in at 23.1%, reflecting a 20 basis point decline versus the same period last year.

Gross margin gains were more than offset by operating expense timing.

Adjusted earnings per share dilutive right Dollarssixty three for the quarter increase of 2.5% versus the same period last year.

Continued growth margin strength and favorable tax enable additional business investment and offset the Easter sales headwind in the international Cobras 19 pressures to deliver solid overall earnings growth.

No the favorable tax in Q1 was driven by the timing of tax credits and we do not expect material changes to the full year tax outlook, we provided in January.

Given our strong cash flow and balance sheet, we're confident we will be able to manage through the current prices, including maintaining strong liquidity.

We believe we have adequate liquidity to meet our operating investing and financing needs through operating cash flow further supported by access the bank lines and commercial paper.

At the end of the first quarter, we had approximately 1.1 billion cash cash equivalents on our balance sheet.

With 261 million in operating cash flow from the first quarter.

We will continue to evaluate the situation moving forward and plan to prioritize cash utilization to meet our liquidity needs.

Our strong free cash flow and healthy balance sheet continued to remain core strength and competitive advantage in these uncertain time.

[noise] recall in January we announced two significant investments for 2020, and 2021, including that ERP transformation and the supply chain capacity and capability initiative.

We plan to continue to move these projects forward as both investments are strategically important for long term growth.

That said as Michelle mentioned, we did pause certain aspects of these projects in Reprioritized other capital project to enable our teams to focus on the current prices.

This is anticipated to delay our ERP implementation by approximately one year.

As a result, we now expect capital spending in 2020 to be approximately 400 to 450 million dollar rather than the $500 million we communicated in January.

In addition to investing for growth returning cash to our shareholders remains a key priority now and over our 126 year history.

This morning, we announced the second quarter dividend, which is our 362nd consecutive quarterly dividend on the common stock.

Additionally, the company repurchased $150 million of common stock in the first quarter ponder the 500 million dollar authorization approved by the board in July 2018.

$260 million remain available for repurchases under this program.

We also repurchased $19 million of common stock in connection with the exercise of stock option.

We remain confident that our capital stewardship and allocation priorities will allow for continued strong sustainable shareholder returns.

Let's move now to a discussion of our financial outlook on expectations for the balance of the year.

Due to the rapidly evolving situation in the high degree of uncertainty we do not believe we were able to estimate the full year financial impact with reasonable accuracy and therefore believe it is prudent to withdraw our fiscal 2020 full year guidance at this time.

As we navigate this dynamic situation, we understand transparency is more important now than ever before.

The uncertainty around a few key variables and the subsequent impact these could have to our outlook.

Influenced our decision to withdraw guidance.

These variables, including the length and severity of the pandemic the shape and timeline for recovery.

Associated impact on retail restrictions, both in the U.S. and internationally.

The changing consumer behavior from shelter at home restrictions, including potential impact to participation in key season.

Dan the ability of our supply chain to execute and meet customer and consumer needs.

Each of these variables could have significant implications to our growth and profitability.

Michelle shared with you the trends that are impacting the retail environment and consumer behavior.

Some of these sales risks and opportunities also have impacts on profitability.

Namely risks related to our high margin instant consumable products, particularly in the convenience class of trade and our refreshment brands could dilute profitability.

The announced compensation program for the manufacturing team along with increased points annotation and personal protective equipment will add approximately $25 million to $30 million of incremental costs.

However, we are seeing some efficiencies in the plan from running our largest most efficient FC use which is helping to partially offset some of these expenses.

Let me now spend a minute on our supply chain productivity initiatives.

We had a strong start to productivity in Q1 with over 20 million of savings.

However to enable our teams to focus on cobot 19 priorities, we have de prioritized some plant productivity initiatives worth approximately $5 million to $10 million in Q2.

We remain confident in our ability to deliver against our long term productivity goals.

While commodity prices for some of our key ingredients have recently decline given our hedging program, we expect minimal benefit to 2020.

These declines due however improved the profile for 2021 versus our outlook in January.

Operating expenses are expected to increase approximately 10 to 15 million dollar as a result of a new incentive program for sales representative and increased sanitation and personal protective equipment.

We anticipate savings related to travel and entertainment given travel restrictions and social dispensing practices to at least partly mitigate these impacts.

While we feel there's too much uncertainty at this point to provide a reasonable estimate of the full year financial impacts related to co bid 19.

We want to provide reassurance that we are being both proactive and agile in managing our performance as a pandemic unfolds.

We built inventory in the first quarter to anticipate demand in limits disruption, we've taken a hard look at capital spending and reprioritize to ensure adequate resources to address both co bid 19 related project and those critical for strategic growth.

We are dynamically adjusting our trade and advertising plan.

We are actively monitoring the commodity in financial markets for long term opportunities.

All of these decisions are being made with the priority of ensuring the safety of our employees and communities, while being fully prepared for the recovery.

Michelle and I couldn't be prouder of our team for bringing their best every day.

This forward leaning agile mindset and high performance culture will help us persevere through this crisis and seize opportunities in the recovery.

We are confident the uncertainty we face is temporary and then our decisions and adaptive operating model will help us Ford relationship with customer and consumer.

Allowing for sustained long term growth.

Now, let me turn it back to the shell for some closing remarks.

Thanks, Dave as we look ahead, we expect the environment to remain volatile as the cobot 19, pandemic and consumers financial security both evolve.

But we remain confident in the strength and resiliency of our category and brands over the long term and in our remarkable leaders and employees, who are executing against our strategy reacting to current changes and capitalizing on the opportunities that this change presents.

The Hershey company has more than 125 years of experience managing through tough fast moving an unprecedented moments in time to world Wars, economic depressions and recessions and other momentous event.

Each time, we plan, we took action and we learned and adapted.

And we kept our focus on making the best decision for our employees our partners our stockholders our communities and the consumers that we serve.

This moment in time is no different it calls for us to be our best working together with compassion and understanding to do what's best for our Global Society and we believe that this resilience will only make a stronger in the days and the years ahead stainless and I are now available to take.

Any of your question.

Thank you at this time will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation total indicate your line and the question Q.

You mean fresh start to if you'd like to remove your questions from the Q.

All participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

To allow for as many questions as possible we request that you each ask one question and one follow up.

Our first question comes from the line Evangelism <unk> with Barclays. Please proceed with your question.

Good morning, everybody and I hope, everyone is doing well and thanks for for a lot of any granularity in my prepared remarks.

Thanks, Andrew Good morning, Good morning wanted to start with.

Obviously things are still incredibly fluid and then they will remain so for quite some time and none of us know exactly how or if ultimately consumers will alter the way they sort of.

Along the way they celebrate key seasons and things like you mentioned Michel a couple of them a couple of actions to sort of mitigate risk or making some smart choices around.

Being able to pivot quickly if there are changes.

Having three the things you mentioned, we're optimizing the portfolio potentially some some changes to net price realization and activation timing.

I was wondering if you could just maybe comment just briefly on each of those just wanted to drive a sense of what are some of the levers you could pull if there are some changes in the way, we all think about and celebrate key holidays.

Yes, absolutely so relative to Halloween I know that Youre, asking about and there was actually a fourth lever of E. Commerce. So let me talk about each of those so first of all if we are looking at the the portfolio because we have seasonally dressed items for Halloween. We also have in this season every.

Day assortment bags that play a key role so one area. We're looking at is how do we mitigate potential risks could not knowing what consumer behavior will be by really optimizing what's the right balance of seasonal and everyday type items.

We're evaluating the price point.

Relative to understanding that some consumers may be financially strapped how do we look at some of those higher price points and make sure that we have enough entry level price points and that the balance of the portfolio across price points accounts for the fact that there will be some consumers going through financial pressures.

Activation timing is really trying to keep our pulse all and we know that we can impact the seasons based on when we set the season, we know that consumers will buy a season to bring the product in their house and there's some celebration in the house before the community events of trick or treat and so leaning in.

A little bit earlier on some of the timing is a very reasonable option that we're discussing with with our retail partners to be able to capture more celebration outside of just the trick or treat occasion.

And then lastly, we are seeing E commerce really dial up in Easter we saw it and so we are increasing our our investments and activity to really have.

A great presence in Halloween, the REIT portfolio, a bundled solutions across the holiday needs for Halloween. So those are really the the key actions there.

That's very helpful. And then took you follow up I think you mentioned the number of 6% of sales was for foodservice.

Some of the retail locations and I wasn't clear does that include also China or was trying to separate from that number yes. No that includes China and also are a world travel retail business, which of those stores that product, we sell and duty free stores an airport.

Great. Thanks, so much hope everyone stay as well.

Thank you are saying to you.

Thank you. Our next question comes from the line of Robert Moskow with Credit Suisse. Please proceed with your question.

Hi.

Thank you for the question I appreciate it.

I guess.

There's a lot to cover here.

He asked about two Q.

Sure visibility a better for Twoq. You then it is for the rest of year.

And and can you give us maybe Steve some of the puts and takes here.

Gross margin benefit you've gotten first quarter or does that come out to you and then secondly, the retail sales growth as measured by Nielsen was really high.

Much higher than your shipments.

And is there any timing impact with respect to Twoq you like will that come back at all or is that yes.

Is that just a function of the Easter being a weaker earlier thanks.

Hey, Rob let me start by addressing some of that so first of all I would say, we do have greater visibility to Q2, because we're already.

Halfway into the quarter. So we do have stronger visibility there as you may recall, we had planned for a difficult Q2 prior to co bid as result of some of our year on year last and then you know our decision to close our retail locations for most of the second quarter. That's a known this within our control.

Certainly the impacts that we're seeing with restaurants closed in the <unk> in second quarter, that's a known.

That we can see then don't impact on foodservice you know the reduction in flights. We can see that that's a down relative to travel retail and then we also have some elements of costs better known as which include manufacturing and retail incentives.

Onetime costs on PT and safety protocols.

So so we do have a lot of visibility around those things.

Relative to the.

Kind of the GAAP or the disconnect in Q1 between retail and shipments let me address that and then I'm going to let Steve make some other comments about Q2. If you look at Q1, you can really breakout that differential with about half the differential with retail being ahead of shipments was driven by Easter as.

You know, we always ship Easter in Q1, but the amount of Easter that gets consumed in Q1 is all dependent on the timing of the Easter holiday. This year Easter was a bit earlier than last year and therefore much more of the season was actually consumed taken away in Q1 versus last year.

The other half of the differential in the retail sales to shipments part of it is innovation, we shipped to take five and kit Kat duals in December to set up for strong merchandising in Q1. So you got shipments in December you got the takeaway in Q1 and then the other component is some inventory.

Yes, I would add a.

A complete answer the we have good visibility into the costs I think for Q2 and Michelle went through most of those things like incentives in the sanitation are well known and we talked about those in the prepared remarks.

Productivity piece, the 20 that we saved in Q1 doesn't come old doesn't go away in Q2, but we would have expected to add to that and you need to grow and that's the piece that won't happen.

The plan and then maybe the third piece that we touched on a little bit with sort of implied as we talk about the topline is there's probably going to be some negative mix impact coming through again thinking about refreshment and convenient store going back to the total mix and that's probably a five to 10.

Gross profit impact for the year.

Okay I do a follow up you mentioned, a you're in store execution and your sales incentives as a way to maybe mitigate some of the category declines and take share what are some of your retail partners limiting.

The amount of people that's all while in the stores just.

Just for social distancing reasons and does that impact your execution at all.

So some of course are but you know as we've worked out with our retail sales reps and partnered closely with retailers.

Even before that we had worked with them with a lot of our partners to have our team go enduring off hours to try and bring out product and set displays when they're either work consumers into store or at the very lowest periods of time.

So I would say while there is some impact I would say largely we've partnered really closely with retailers to work around that.

Both in terms of the you know the safety and social distancing of our employees as well as helping the retailers to kind of you know.

Protect and manage the number people in their store, but largely they've been really supportive and appreciative of the extra help which they desperately need obviously as a as consumers are purchasing a lot.

Got it okay. Thank you.

Thank you. Our next question comes from the line of David Driscoll with DD Research. Please proceed with your question.

Great. Thank you and good morning.

David warning that the here so.

Oh, what a pleasure. Thank you could be here. So let me let me follow up on Rob's, because I I well like I said, you guys gave us a good list of things into Q.

Maybe there's some numbers that you gave that I feel like we're annual like the PE expense the personal protective equipment, and then something specific to second quarter. So I'm just a little confused on what expenses were allocating to the second quarter that you know of right now versus the sell side and then Tonight could I just follow up on this I mean, you've said.

You think twice now, but I still think I'm not I'm not clear.

It sounds like.

There are some there's at least one positive with how the retailer inventories ended at the end of the first quarter and I think you said in the script you haven't made any changes to your retailer inventory assumptions, so that sounds like there's going to be a recovery of those retailer inventories.

In Q2, which would be favorable to sales so.

Again, if you you know I apologize your I guess I do appreciate you said this but are you, saying that you know Q2 sales or or maybe a little bit better than expected versus where you previously had it but on the expense side that's.

Significantly more negative because of the P E costs the incentive costs and then and then there's Oh I think a couple other a couple other items that you wanted to call out right there and into Q that we're hitting at the mix sorry appreciated the mix of what's going on in the business. Thank you yeah, David the large.

30 of the cost increases really do hit in Q2, if you think about the biggest pieces of that the manufacturing and retail incentives.

Onetime costs around P.T.D. the pullback on productivity was around Q2, there is some mix impact with the pressure around refreshment and C store and so if you look at that the by far the biggest impact is is in Q2.

To some of the PPD and safety will continue throughout the year and then there are some potential offsets you know less travel that we'll have to benefit of throughout the year. We continue to kind of look at trading DMV optimization.

There could be commodities, but not a large number and as it relates to the inventory I think might my gut would be that at some point, we get a little bit of that back, but we don't know for sure and we definitely don't know that it will be in Q2. In fact, if I was just looking at what's going on in the world right now and.

Retail.

Like that would be that likely wouldn't be in Q2, but instead would be some point later in the year.

All right that colors really helpful. Just one follow what for me up I don't think you said, how your China business was performing in April is there any insights we can gain like where are you seeing any any sign a recovery I mean, a nearly 50% decline in that business. In Q1 is really large so is there any color you can give us on how to Q might shape up.

For Hershey China.

Yeah, I mean, it's better than we anticipated it's better than we saw in February but it's clearly in a ramp up recovery. So it's it's not close to back to normal yet.

But we're watching that often lead to leverage any any insights and I think the biggest insight. There is just the move from offline to online is very real it's continued and just like we think it will here in the U.S.

Thank you so much.

Thank you. Our next question comes from the line of Ken Goldman with Jpmorgan. Please proceed with your question.

Hi, good morning, Thank you.

My first question is is there anything you can do to protect yourselves right now whether its buying product ahead of time or potentially considering diversifying your geographic.

Hi, sourcing because there's there's obviously western Africa has not been hit very hard by coded yet.

There have been some suggestions that maybe it will get hit harder later in this year.

What are your concerns about that just given how much cocoa you source from one region and again, what can you do to maybe mitigate some of those concerns potentially.

Yeah right now.

That's our lighting he has done a fantastic job and so aside from cocoa some of our more specialty small ingredient even starting in the first quarter is covis started to get traction they bought some of those ahead.

To get it get ahead of it right now I think we feel pretty strong about our coal supply I can tell your procurement team is very deep into that market on a good day and they're even deeper I'm here and looking at alternative supplies and so so far harvest looks strong and we don't see anything in the they'd your medium term that causes.

Lot of concern on cocoa supply yeah, what we need for the year like those those quantities are already here. So they're out of that region. So as we look at this year. We're in good shape and that gives US you know time and we're working closely with those governments as well obviously this is important crop for.

That geography, and we're working closely with them to make sure that they are set up to handle it.

Okay. Thank you for that and then one quick follow up thanks.

Thank you for the color on what's in the 6% number in terms of branded stores in world travel locations and so forth.

One question that I was asked I wasn't sure how to answer was how big are movie theaters sporting events things that maybe are not captured in Nielsen first of all is that in that 6% number as well in second can you give us any kind of any kind of rough size for.

What you would think those types of channels might be and I know I'm being paid with the question there.

No that's okay.

Some of that fold into our broader specialty business and that might be another.

2% to 3% of sales not get some impact.

Great. Thanks, so much.

Thank you. Our next question comes from line of Alexia Howard with Bernstein. Please proceed with your question.

Good morning, everyone.

Good morning.

Hi, so again focusing on the trends that youre seeing in Q2 now that the dust settled on the panic buying phase.

Could you give us.

Sure I know how things are looking.

For example, how big are you overall in E Commerce, and how quickly is that growing right now and it's not different from from the policy.

The C store channel I think you mentioned that was about 15% decide how to substitute that right now.

And we assume that the foodservice in China that six essentially businesses wells, how that alignment and then also taking a look at it by product type you think about impulse such as seasonal buses every day, how fall through each of those growing or shrinking if I imagine some with the maybe relative to what you would normally expect thank you.

Okay. Let me do my best done that willing to try to break that out. So C store is about 15% of our sales it's declining about 10%.

E Commerce is about 2% of our sales and we're seeing the growth rate double their now of course, that's just what we've seen recently so all of these are the recent trends. So ups of course, I can't predict exactly how that will play forward well.

Smart and.

Mass channels and dollar stores grocery have had you a pretty good trends as people are really shopping there. They are a frequent bank frequenting those places and also all of those places tend to have or many of them an E commerce.

First leg, that's being leveraged.

I tell you the other place we're seeing some softness is around drugs.

So drug in C store or the two channels that I think we've seen the biggest softness clubs <unk> initial huge stock up of the initial stuck up behavior with huge at club.

That's moderated a bit milissent might have to come back and give you may be more of the details around the specifics on each pieces of.

Trade, but I would say C store 15, and drug in that probably 8% range of our total business and those are the places that are most pressured and then of course.

The rest kinda fall in the middle.

If we look at impulse take home and seasonal clearly the softness on impulse is a little bit less than you see in terms of that 10% decline and C store, because we do still have business coming through food drug mass so less than that 10% take all the obviously.

Really driving our growth and seasons, we had really good Easter. So at this point, what we're gearing up to do is too you know we met our expectations our sell in our net sales shipments. We fell just short on takeaway. So seasons I'd call up you know kind of a wash and then take home is where we're seeing strength, but Melissa can give more details I think.

Offline on that.

Okay, and then a super quick follow up I think he said the Easter was down as expected because it's a shortened season, but it would also be weaker than expected, presumably because of a pandemic is that the way that we should be thinking about that.

The selling was on expectation the sell through was yes was a little bit weaker than we anticipated really strong sell through up until the final week. The final week of Easter happened. The same week that the government started to recommend that consumers not gonna grocery stores unless it was essential and many of the big retailers started limiting the number of consumers.

It would allow in their store at one time and we saw a direct impact on that on that last week of Easter, but basically that will not cause that softness in the sell through in the last week really shouldn't impact the piano.

So not effect.

Yep.

Thank you so very much I'll talk to them.

Thank you. Our next question comes from line of Brian Spelling of Bank of America. Please proceed with your question.

Hey, good morning, everyone.

Hi, Brian.

I had a question just on just one question around the end of light manufacturing flexibility you have with packaging and I guess my question is around if we're looking going forward at a scenario, where it's more E. Commerce, which is you know sort of a different type of requires a different type of packaging.

Maybe more.

You know grocery and mass more at home what can be gas and then also maybe needing packaging flexibility to to address affordability you don't may be different pack sizes are different type.

Do you feel like you would the investment you've made in recent years that you have.

The flexibility to sort of make those shifts.

And be able to kind of services, if that's where the business skews over the next six to nine months.

Yeah, I would say largely we have flexibility in our manufacturing I mean, we already have a portfolio of products that were meeting E commerce demand and that demand has been across every pack type whether its candy dish whether it is you know instant consumable et cetera, we already have a loan.

Attitude of pack sizes that we've always done. This is a you know a category, but that lives on many different pack types for many different occasions, and then certainly as we're doing some of our supply chain work going forward one of our goal is to.

You know, putting even more automation to hopefully improve margins as we do that but we are we are well set up to be able to adapt to different packs and sizes right now.

And if I could just one.

Follow up to that as we've seen in other categories, where retailers are kinda narrowing skews you don't want to be in stock with the highest philosophy skews I have you seen any of that yet in your categories.

Yeah, we are and we think we're well positioned there as you know we had just gone through a big S.K. you rationalization program to get rid of some of the smaller SK his and on a normal course of businesses. We run our business. We have all of our SK use categorized with you know the height very highest movers. There is a must have.

Must be protected at protected at all costs and that we kind of go through our portfolio. So we've always managed our business in that way. So we've been well set up to up to serve in that priority environment. Okay. Thanks Michelle.

Thank you. Our next question comes from the line of teaching English with Goldman Sachs. Please proceed with your question.

Hey, good morning, Thank you for sliding in I guess I'll pick up on wants threat from Mr. screening in terms of you call. Some as we think about maybe what could be different in 2021, assuming all these issues come to pass.

The amount of sales going to recall sounds like it could be the wonderful change.

So quick question just to get a little more catch Randy.

And I guess, what really my angle here, so I understand the impacting your impulse oriented sales I think historically you said about a third of your portfolio impulse and you just answered at 15% of that's going through C store.

How much of that is going through food drug mass.

I mean, the other that would be the other 15, you know basically together between the difference between 33 and 15 I would say largely let me just think about and it's a little bit attending in there too I think so yes, that's what I was trying to think how much would be in those specialty channels.

[noise] vending would be the biggest piece of that.

We have some in club as well in terms of reseller packs at Sam I mean, I guess I would estimate.

I'm going to say maybe.

15%.

Maybe fundraising lending club and specialty or five so I'd say, maybe 15% goes through.

Food drug enough.

And how say 15 tracking today.

You know, it's tracking a much better than the C store it really varies by channel the drug piece would be the softest piece because overall drug is just not getting as much traffic I think a lot of people are using drive through options people are trying to stay away from smaller stores. So the larger mature.

Worthy of that is really going through math and grocery its still softer than take home, but it is still growing in some of our retailers.

Okay.

So is that sort of reflective of what what life's looks like in a lower trip frequency environment and people stick with the sort of online replenishment trip frequency is lower.

I think it's reasonable to assume that if there is risk to like lost business that can be a bit more durable batch the risk. So we're talking about a couple of points of sales pitch it may or may not come back.

Is there anything else that you would highlight that we should be talking itself as we think about the impact your earnings power in 21 or beyond.

Yeah, I mean, I think with with less trips certain certainly there is some risk there and that creates some of you know some bit of a mix and sales risk. However, I guess the other thing I'd ask you to think about is as we look at our E. Commerce business, we have instant consumable strength in E commerce. So.

So you know one of our biggest selling items has been instant consumables both singles as well as we sell case packs that have maybe 24 instant consumable items in them and given that our margins are strong we don't really discount you know and bulk the instant can.

T mobile items, you know driving the growth there. Our goal there is to continue to drive the growth, there, which which offsets how the consumer behavior is is evolving and changing.

I think the other opportunity is really for us to just kind of drive against.

You know that kind of the push that as consumers are have less trips, they're also executing bigger baskets, and so really focusing on that as an opportunity as well.

Yeah got it. Thank you very much I'll pass it on stay safety well.

Thank you too.

Thank you. Our next question comes from the line, Rob Dickerson with Jefferies. Please proceed with your question.

Hi, great. Thank you so much.

So.

Question on pricing I mean, it seems like.

Yeah, you're saying philosophy.

I'm pretty sure weakness really shouldn't impact the personnel in the near term.

Maybe that suggests that the promotional plans have really been altered but then I think you also it also sounded like you said promotional spend could be increasing your price mix sharpened as you go through the year right to maybe.

Increased demand overall, but then I also heard that maybe your pricing plans remain on track so.

I see there there there were just a number of comments in there I just wanted to clarify I've just in general pricing environment, So I'd be purge.

Easter Didnt go so well seasonally.

Let's say in Europe, but obviously, because the cobot buying right you tie it back some of you know that seasonal weakness.

Is there too much product still on the seasonal based on the shelf that you sold through sounds like inventory levels come down pricing sounds to be okay. So any comments or you can just skip kinda around the overall pricing dynamic will be great. Thanks.

Yeah, I guess first I'd start by saying you know we feel good about our pricing strategy for the year and our current initiatives are on track and we really don't expect any material changes as a result of coated. So yes, we were expecting in that two to two and half points of pricing in 2020, and we continue to believe that.

But but that will be the case.

As we look at promotional spending you know at this point in time in our category a lot of our promotional spending is utilized to drive display. So we are unlike some other categories that or less you know impulsive.

Where people use price to have a temporary price reduction and really load pantries, that's not really our category work. So given our retail sales team is out there and force we're continuing to get display and so we aren't seeing up a bit pullback there could be some small you know coupled with a couple of million dollars that come back from trade, but I think engine.

The real we're continuing to drive against that.

And then really relative to the you know, we're just trying to be sensitive to the consumer environment around the financial constraints, which is one reason that we continue to believe some of our promotional support makes sense and the display.

And then during the holidays, just making sure we have the right array of price point. So I don't think about that as being an absolute reduction in price because that's really not about the price realization for packets just more what is the absolute price point, so that consumers have options if they want to buy multiple.

All or a bigger pack they can and if if they're going to buy less so that's less kind of about the price per pound does that answer your question.

Yeah, no that's actually very helpful him. It sounds like basically if there is somewhat of a mitch but some talk about mix in terms of margin from time to Mexico pack size et cetera.

Pricing, but it sounds like maybe you could offset some of that with potential reduced promotional spending displays to kind of net that at this point do you feel like we're kind of okay.

Makes sense bacteria I would say net net we think we're okay. Yeah.

Okay Cool and then just quickly more broadly look over time, we've heard a number of larger properties of said.

They actually do better online right there on share can actually be better just given page one display and overall brand awareness.

Obviously, there's a whole conversation around the channel shift.

If we just think about online specific ways, nor the other channels, which you just say yeah. We think given our investment brand awareness what have you. If we do shift into more of an online purchase society over the next few years.

So we should be taking more share of category. That's it thanks a lot.

Sure Yeah, I mean, we feel good about our ability to drive the business and capture share online you're looking at total unless shared a little difficult because there are a lot of unique businesses that have direct to consumer businesses online, but if we look at kind of the the big retailers and the.

A pure play big retailers in that space, Yeah, I feel pretty good that that we should be able to continue to drive share there.

Thank you Michelle they say.

Thank you. Our next question comes on line of Nik Modi with RBC. Please proceed with your question.

Yeah, Good morning, everyone Michelle.

Sure gains you know look really healthy and obviously you indicated they accelerated so I'm just wondering what do you think is driving that is a function of just the fact that your fill rates are so good. So you have the product available. We are hearing that one of your major competitors and scaling back on some of their ask you count So I'm just.

I'm curious, what you're seeing in and what you would attribute some of that market share gain too.

Yeah, I would absolutely attributed to our customer service levels. So we've been able to maintain incredibly high customer service levels at that you know 90, 898 and have 99, depending on the bond I think within that we have had very good availability across.

That's our portfolio. So we've been pretty much able to meet the specific product demand as well.

So you know huge kudos and credit to our manufacturing team who has just done an outstanding job of being ahead of this building inventory ahead of this getting raw materials and ahead of that.

Working with their teams and all of our manufacturing employees who've. So supported doing that and then I'd also say, having our retail sales reps out there building displays stocking shelves that has also been a very positive impact. So yeah, I would say a lot of it is about the strength of our company in the past has always been a lot around.

Operational excellence in execution, and I think that's really benefiting us on top of course, the fact that we feel great about the brands and the programs. We've had out there, but I do think that's been a difference maker.

And just going back to the question any changes in the competitive landscape. We are hearing again one of your major competitors is looking to do their own ASCII rationalization program. So I'm just curious if you've seen that in the marketplace or have you heard the same.

No I mean, I'd say the only you know we've probably heard similar things as you had Rick regarding a couple of competitors in the category, who may have you know supply I'm not as not a solid position on supply.

Great and then just.

Quickly on you know the.

By the skew. So you think about a lot of the volume that was probably sold over the past couple of weeks. My suspicion is and maybe you can confirm it that it was all large bag multi packs.

Just curious how you guys are thinking about at home inventory depletion is just given general consumer behavior, meaning my sense is it's going to take some time for them to work that inventory down, but I'd just love your thoughts about I could be wrong.

Yeah, I mean, obviously, we didn't get as big of a stock up as like say some of the main meal categories. So I don't think that.

There is a huge backlog, but certainly as we get through the quarter that'll be something that we will learn more about we do know that the things that are selling best or things that are around take home occasions, you know snacks eyes assortment bags six packs of Hershey bars for people to make some more is at home Twizzlers, which one of the key usage.

As for Twizzlers is when you're watching movies or TV. So yeah, I think we know which which items are getting consumed the most rapidly and like I said, we don't have a huge stockpiled, but that is something that will play out in Q2, and we'll get a better feel for how how how quickly people utilize those we also though.

They are making a lot at home and so there are other you know there are other indulgent categories that were competing with for those usage occasions at home.

Great. Thanks, a lot stay healthy.

Thank you.

Thank you. Our next question comes on line of course growing with Stifel. Please proceed with your question.

Hi, good morning.

Hi, good morning.

Hi, I just had a two questions if I could I was curious first of all Michel if you could speak to your thought your your the concept of the thought around guidance and it sounds like an i. I've taken good notes and there's a lot of little factors you given her on second quarter, but you seem to have pretty good pretty good visibility into that quarter is there a factor to that that.

Worried you about giving guidance for the upcoming quarter or having to go to read on the quarter. Given you seem to have good visibility across a number to for the they're different areas with other people.

Yes, so as we mentioned we do have a lot of visibility into Q2 of some of the things that we know will hit US Yeah. We mentioned the 6% of the business I'm a lot of those businesses essentially being closed four down based on governmental regulations. We certainly know that we've got in that you know.

40 $45 million of cost that will hit in Q2, if you add up manufacturing and retail productivity. Some of those elements. So we do have that at the same time, yeah. We still don't know how the rest of the quarter will play out and we're seeing that every single week, we get new pieces of news or information.

That make it difficult to know if something else is coming our way and certainly then I think as we look to the the rest of the here you know we have significant significantly less visibility. There. We certainly have tried to share what we think the biggest risks and opportunities are in the portfolio the opportunities we're driving at.

How we're managing against the risks.

But you know much less visibility there. So so yeah I would say, that's where we kinda Stan.

Okay, and then I just was curious a quick question about your international business, Obviously, China has gotten better although still down as you noted our the is the other countries in India, Brazil, and Mexico or the just the bigger risk of declines is that one area of uncertainty you have also in the second quarter.

Yes International is definitely and area that remains a risk you know each country. Each area is in a different state in the in the growth or or stage of the pandemic and each government is acting you know quite differently. So you know.

We have some markets like Mexico, or India, India is really on a lock down for four weeks, we have some of those markets, where it's difficult for our employees to actually get to work based on you know what's happening with public transportation based on governmental regulations about you know people in certain areas.

Not traveling to other areas. So we are facing a lot in those markets and I'd say, that's really primarily in Mexico, and India as the two biggest impacts, but but yes. It is it isn't that camp of of more uncertain at this point in time.

Just a one final one of the is it likely that the international business could be weaker in Q2 that it wasn't Q1, even though you don't have that unique China experience.

Yeah, I would say, there's a lot of uncertainty in international such that I'm, not really sure that I could say for sure how that's going to play out.

I think that's one of the uncertainties for Q2.

Okay.

That's fine I appreciate it and again they say thank you.

Thank you. Our next question comes on line of my collaborate with Piper Sam. Please proceed with your question.

Morning.

Good morning warning.

Well the heavy traffic at retail are you what adjustments are you, making if any to promotional spending and if there's any change in plans or are those things that can drive savings or is it just shifting timing to a different point in the year.

Yeah, you know, we haven't made a lot of big wholesale changes in promotions.

Because our promotions are really geared against display because our retail sales teams are still out there and are able to build those displays and obviously the remains a lot of space in stores given outages in certain categories. We continued to be focused on making sure that we are really driving as much of our spending as possible to display.

Okay any place that we didnt have any kind of temporary price reduction we are trying to pull back on those and then certainly we are trying to gear. The spending around you know the right programs that are relevant at this point in time. So we continue to look at you know at where we are there we continue to partner with retailers in terms of how we.

Are we meet their needs you know at this point in time I would say we are largely executing according to our plans for the year, but always looking if there's opportunity where promotions aren't going to make sense, they aren't going to drive consumers like at like a temporary price reduction I don't think well, how we convert that more to a a display driving initial.

For two or use it for something else.

Okay. That's helpful. And then you talked about a lot of the puts and takes on the cost side.

Specifically a lot of of cost headwinds that are more twoq focused you also have some of the marketing savings you mentioned and efficiencies from the bigger SK use running it to the extent that it goes both ways on a full year how does it net out is it the mets negative or is it about a push how did.

You see.

I mean, just at least what you know now.

Are you thinking that negative or a push on total cost impact to the business.

Exactly yeah.

Yes, they do you want to talking on a GAAP or the cost impact on a full year basis will be a net negative I think we were not getting guide for the full year and so all the other puts and takes and the variables that we're watching rule will come into play.

You know obviously, depending on the shape of the recover we we'd expect to see improvement in those costs. After we get past the challenge in Q2.

But I don't think there's enough new savings to offset some of the deeper incremental costs were going to face in Q2.

Okay. Thanks, and just the last quick one on the Hershey World stores, how much seasonality is there to that with the percentage of sales in two or three Q typically be much higher.

So it depends on the location clearly for the Hershey based store there is big seasonality in the summer because we are right outside Hershey Park, so that when it's highly seasonal Las Vegas, I would say not so much and time square has a bit of.

Skewed to summer into holiday, because it's driven by that traffic, but not quite as much of a seasonal skew.

Okay. Thank you very much.

Thank you, ladies and gentlemen, we have time for one more question.

Well come from the line of Steve powers with Deutsche Bank. Please proceed with your question.

Yes, hey, thanks for.

Taking the question I guess you know if we just wrap all of US up I mean before we before we before this the covert 19 situational started we were looking forward to at Investor Day update from due in March which seems like a long long time ago, but as you think back and think about what you intended to communicate that day.

How much of the content do you feel would remain unchanged as it relates to your medium to long term strategy at this point versus what degree do you think what we're all going through now is likely to have lasting impacts on hershey's future playbook.

I don't think that what we're going through right now would have any impact on that content on our long term strategies. What I would say is some of it may shift a bit. So certainly I think I think there's been a step change in E. Commerce that jumped now occurred [laughter], that's probably would've taken longer.

Her to occur in society around consumers adoption of E commerce around retailers readiness, you know it would be smaller things like that but largely our strategies remain unchanged our big initiatives in terms of what we think is important.

Remain unchanged as well.

Okay, and I guess, maybe just quick follow up.

Hi, good tied to your comments that you made today on the on the plans to divest the businesses that you highlighted I guess you know how much was that a march communication or is that a decision that youve definitively come to more recently, it's Phil just a little bit.

Surprising in the context of what we're all you know what we're in the mid stuff. So just wanted some clarity there is too I mean, obviously, you've made comments about those business in the past, but yep Yep no tend to divest that was pretty covance. That's been underway. You know what has been Q1 late Q4, [laughter], probably probably started in Q4 early Q1 activity too.

To explore and to begin that work, yes. They were always looking at everything in the portfolio testing were worth best places and so no cobot impact on that Okay and is there any anyway, you can do mentioned the.

Size 2019 sales profitability those businesses just for some frame of reference.

Yeah, I mean, they're small yet.

Okay fair enough. Thanks, so much.

Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Miss pool for any final comments.

Thank you all for joining us this morning, I'm sure there's still additional questions I'll be around all day to answer as many of them as I can think so much they wealthy stay healthy.

Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.