Hershey Earnings: Q1 2025 Results Highlight Tariff Challenges and Strategic Progress
- Hardik Shah
- May 3
- 3 min read
TLDR
Sales and Profits Decline Sharply: Net sales fell 13.8% while adjusted EPS dropped 31.9%, pressured by lower volumes and commodity inflation.
Tariffs and Cocoa Costs Loom: Unmitigated tariff impacts could reach up to $100 million per quarter in H2, mainly driven by cocoa and Canadian retaliatory tariffs.
Innovation and Snacking Strength: Salty Snacks outperformed (+1% sales), and Reese's innovation planned for fall 2025 is expected to be a game-changer.
Hershey Earnings
The Hershey Company (NYSE: HSY) is a leading global snacking powerhouse anchored in Confectionery (North America and International) and Salty Snacks segments. Its product portfolio includes iconic brands like Hershey’s, Reese’s, KitKat, and newer acquisitions like SkinnyPop, Dot’s, and the recently announced LesserEvil.
Hershey serves U.S. and global markets with a focus on impulse-driven chocolate, seasonal offerings, and permissible snacking options.
Hershey Earnings Q1 2025 Performance:
Net Sales: $2.81 billion (-13.8% YoY)
Organic Constant Currency Sales: -13.2% driven by volume decline (ERP inventory lap, Easter timing, shipping days)
Adjusted EPS: $2.09 (-31.9% YoY)
Gross Margin: 41.2% (down 370 bps adjusted)
Operating Profit: $369 million (down 65% YoY)
Confectionery was hit hardest (-15%), while Salty Snacks grew modestly (+1%), and International declined (-15.9%).
As noted in the prior quarter, Hershey management highlighted "a balanced approach to pricing, innovation, and productivity to offset commodity headwinds and sustain consumer momentum in Salty and everyday chocolate." This quarter, that theme continued as pricing, product mix, and mitigation strategies remain critical amid tariff uncertainties.
"Despite heightened cost pressure, our strong balance sheet gives us flexibility to invest in the business and participate in strategic acquisitions." — Michele Buck, CEO
Forward Guidance
2025 Outlook (Reaffirmed):
Net sales: At least +2%
Adjusted EPS: Down mid-30% range YoY
Tariffs: $15M-$20M in Q2, potentially $100M/quarter unmitigated in H2
Management remains optimistic about 2026 EPS growth, albeit acknowledging the pathway has narrowed.
Operational Performance
Highlights:
Salty Snacks Strength: SkinnyPop +6.4%, Dot's Pretzels +20.7% led to share gains and 8.1% profit growth in the segment.
Chocolate under pressure: Instant consumable chocolate saw weakness early but rebounded in April; Reese's seasonal performance was solid.
Tariffs and Cocoa: Q2 gross margins expected down ~700 bps; unmitigated tariffs could hit $100M per quarter in Q3 and Q4.
Challenges:
ERP transition impact and seasonality
Cocoa and retaliatory tariffs pressure on margins
Retailer and consumer shifts to value channels (Club, Dollar stores)
"We’re exploring every lever—productivity, pricing, sourcing, and manufacturing—to mitigate tariffs." — Michele Buck, CEO
Market Insights
Consumer Trends:
Value-seeking behaviors accelerating (shift to Club, Dollar, Online)
Sweets showing durable demand among younger, diverse demographics
Salty Snacks benefiting from better-for-you positioning and premiumization
Competitive Environment:
Chocolate facing pressures from private label and premium players
Retailers focusing more on simple/natural ingredient products in shelf resets
"Our sweets portfolio is not just a moment. It has long-term growth potential driven by innovation and generational shifts." — Michele Buck, CEO
Strategic Initiatives
Growth and Optimization Efforts:
LesserEvil Acquisition: Adds scale in better-for-you salty snacks targeting young families
Reese’s Fall Innovation: Major new product expected to drive growth and incremental shelf placement
Price Pack Architecture (PPA): Ongoing efforts to balance price increases with value perception
Transformation Program: $125M expected in productivity savings in 2025
ERP System Transition: Continuing to optimize operations and cost control
Tariff Mitigation Strategy:
Aggressive lobbying for exemptions
Sourcing shifts and manufacturing adjustments
Strategic price increases and product mix optimization
Capital Allocation
Dividend and Buybacks:
No buybacks planned for 2025, with capital prioritized toward M&A (e.g., LesserEvil) and tariff mitigation.
Dividend policy remains intact, with focus on shareholder returns in the long-term as cash flow improves.
Liquidity and Debt:
Cash position: $1.5 billion
Interest expense expected at ~$185-$190 million for the year
Capital expenditures: $425-$450 million
The Bottom Line
Hershey’s Q1 2025 earnings reflect a business navigating significant commodity and tariff challenges while continuing to invest in growth drivers like Salty Snacks and innovation in core brands. Tariff impacts will weigh heavily in H2, but management’s multi-lever mitigation plan and strong consumer connection in seasonal and everyday treats provide a path to stability. With Reese’s major innovation on deck and international momentum building, Hershey remains focused on emerging from commodity pressures even stronger.
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