Hershey Earnings: Sweet Sales Growth Meets Sour Commodity Pressures
- Hardik Shah
- Oct 30
- 4 min read
TLDR
Revenue Strength: Net sales grew 6.5% driven by innovation and pricing across confectionery and salty snacks.
Margin Trends: Gross margin fell 850 bps as cocoa and tariff costs surged, offsetting productivity gains.
Forward Outlook: FY25 sales outlook raised to ~3%, with EPS decline narrowed to 36–37%, reflecting resilient execution.
Business Overview
The Hershey Company (NYSE: HSY) is a global leader in chocolate, confectionery, and salty snacks with an expanding portfolio that includes iconic brands such as Reese’s, Hershey’s, SkinnyPop, Dot’s Pretzels, and Pirate’s Booty. The company operates through three main segments: North America Confectionery, North America Salty Snacks, and International. Hershey’s products are sold through retail, e-commerce, and away-from-home channels, with a growing presence in emerging snacking categories and markets like Brazil, Mexico, and Europe.
Hershey Earnings
Consolidated Performance:
Net Sales: $3.18 billion, up 6.5% YoY; organic constant currency sales rose 6.2%.
Net Income: $276.3 million, down 38% YoY.
Adjusted EPS: $1.30 (↓44% YoY).
Gross Margin: 32.6% (↓870 bps); Adjusted Gross Margin: 31.8%.
Operating Margin: 13.3%, down 860 bps from last year.
Margin compression stemmed from steep increases in commodity and tariff costs, particularly cocoa—up over 70% versus 2023—and unfavorable product mix. Productivity gains from the Advancing Agility & Automation (AAA) Initiative and pricing actions partially offset these headwinds.
Segment Breakdown:
North America Confectionery: Sales up 5.6%, driven by 7% pricing and successful innovations like Reese’s Oreo. Segment margin fell to 21.8% due to cost pressures.
North America Salty Snacks: Sales up 10%; strong volume gains from SkinnyPop, Dot’s, and Pirate’s Booty. Margin declined slightly to 18.0%.
International: Sales up 12.1%, led by Brazil and Europe; segment posted a ($13.6M) loss on higher costs.
“Third quarter results surpassed expectations, as strong innovation, strategic brand investments, and market-leading execution drove momentum across business segments,” said Kirk Tanner, President and CEO.
Forward Guidance
Hershey raised its 2025 full-year net sales growth outlook from “up at least 2%” to around 3%, and expects adjusted EPS to decline 36–37%, tightening toward the upper half of prior guidance. The forecast excludes the pending LesserEvil acquisition.
Additional 2025 expectations include:
Tariff expense: $160–$170M
Interest expense: ~$195M
Capital expenditures: ~$425M
Transformation savings: ~$150M
Effective tax rate: ~26% adjusted
CFO Steve Foskel noted, “Our higher sales outlook and improvement in tariffs are offset by supply chain costs, unfavorable mix, and strategic brand investments in Q4”.
Operational Performance
Despite margin headwinds, Hershey’s execution remained strong across brands and geographies:
Reese’s Oreo collaboration topped innovation charts with strong trial and repeat, over-indexing with Gen Z and millennials.
Jolly Rancher Ropes and Shackalicious Gummies extended brand relevance among younger consumers.
The salty snacks portfolio gained ~50 bps of U.S. share, with Dot’s Pretzels achieving the #1 position and SkinnyPop showing renewed momentum.
Internationally, Reese’s brand grew double digits, supported by Halloween activations with the Scream movie franchise.
Market Insights
The U.S. confectionery category remained resilient, with 5.4% retail sales growth and sustained household engagement. Everyday (nonseasonal) chocolate sales rose 12% in October, offsetting a slower Halloween season caused by late consumer purchases and warmer weather. In Mexico, economic and regulatory challenges pressured category growth, while Europe and Brazil benefited from innovation and pricing.
Consumer Behavior & Sentiment
Consumers continued to show strong elasticity resistance in core indulgence categories, while gravitating toward “Better for You” options—up 8.5% led by Zero Sugar and Brookside. Hershey emphasized connecting with younger cohorts via social media activations, pop-up experiences, and sports partnerships to maintain relevance and drive trial.
Strategic Initiatives
Innovation Engine: Hershey led five of the top ten confectionery innovations in Q3.
Digital Transformation: Plans to expand AI-driven demand forecasting and consumer data insights in 2026.
M&A Expansion: Pending acquisition of LesserEvil signals continued focus on scaling its “better-for-you” snacks portfolio.
Advancing Agility & Automation (AAA): On track to deliver $150M in annual savings, supporting reinvestment in brands and capabilities.
Capital Allocation
Dividends: $271M paid in Q3, consistent with the company’s long-standing payout tradition.
Buybacks: None executed in Q3; $470M remains under the $500M authorization.
Leverage: Total debt rose to $5.39B, partly reflecting acquisition funding and capital investments.
The Bottom Line
Hershey delivered solid topline growth and strong brand momentum amid one of the toughest input cost environments in years. Pricing, productivity, and portfolio diversification kept the business on track, but margin recovery remains a 2026 story.
Investors should watch for:
Commodity normalization and tariff relief impacts on gross margin.
Reese’s Oreo and Salty Snacks scaling as key growth catalysts.
LesserEvil integration as a test of Hershey’s expanding snacking strategy.
“We’ll focus on delighting consumers and delivering results as we unlock our full potential as a snacking industry leader,” said CEO Kirk Tanner.
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