Over the weekend, Hershey announced that poor results were causing it to replace 8 of its directors. The Hershey Trust, which is the company's controlling shareholder, asked 6 of its directors to resign and the remaining 2 decided to resign of their own accord. The company is spending more on advertising and commodities (dairy products) used in production, a combination that is putting the firm under pressure as it is already undergoing previously announced restructuring.
Over on the Wall Street Journal's Deal Journal blog, it is theorized that, news of the massive shakeup at the candy maker's board over the weekend has renewed speculation about a possible combination with Cadbury's confectionery business. HSY has been struggling, but it will be interesting to see how the latest news is greeted on the Street. There is enough pessimism from analysts and short sellers to push the stock higher if the sentiment unwinds. Currently 10 of the 14 analysts following HSY rate it a hold or worse, leaving upgrades as a possibility. In addition, 5.4% of HSY's float is sold short and it would take 6.5 days to buy back these shorted shares. Watch for a short-covering rally should HSY's announcement be interpreted positively.