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HERSHEY CO (HSY)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered strong top-line growth but compressed margins: net sales rose to $2.615B (+26% YoY) on inventory lap, later Easter, and early Halloween shipments; adjusted EPS was $1.21 (-4.7% YoY), while reported EPS fell to $0.31 due to sizable derivative mark-to-market losses and higher commodity costs .
  • Results beat Wall Street consensus on revenue and adjusted EPS; revenue $2.615B vs $2.523B*, adjusted EPS $1.21 vs $1.00*, while gross margin came in below consensus (reported 30.5% vs 36.3%*) as cocoa inflation and mix drove pressure .
  • Guidance updated: net sales growth maintained “up at least 2%,” but reported EPS growth lowered to down ~50% and adjusted EPS growth to down 36–38%; tariff expense now $170–$180M for full year, tax rates raised, and transformation savings increased to $150M .
  • Management emphasized pricing actions (not tariff-related), productivity, and technology-enabled efficiencies to drive margin recovery into 2026; management sees “on-algorithm” earnings growth in 2026 with potential upside on tariff relief and easing cocoa costs .
  • Additional catalysts: OREO/REESE’S collaboration launching in September 2025 and dividend declaration ($1.370 common, $1.245 Class B) reinforce brand momentum and capital return .

What Went Well and What Went Wrong

What Went Well

  • Strong revenue and share gains: net sales rose 26%; CMG retail takeaway +21.8% and share +90bps on later Easter and everyday momentum; salty snacks takeaway +6.3% with Dot’s sales +13% and SkinnyPop share +49bps .
  • Resilient execution and pricing: organic constant currency net sales +26.3% driven by ~21 points volume and ~5 points price; NAC price realization ~6 pts; NAS price realization ~5 pts .
  • Strategic initiatives bolstered savings: “Advancing Agility & Automation” savings raised to ~$150M (from $125M), underscoring mix of productivity and tech-enabled efficiency .

Management quote: “Investments in our brands and impactful innovation… are driving solid sales and share gains… [and] mitigating cocoa inflation through strategic pricing, enhanced productivity, and technology enabled efficiency and speed.” — Michele Buck (CEO) .
Management quote: “Pricing has nothing to do with tariffs. This is strictly a touch-up on cocoa component.” — Steve Voskuil (CFO) .

What Went Wrong

  • Margin compression continued: reported gross margin 30.5% (-970bps YoY) and adjusted gross margin 38.1% (-510bps YoY) due to derivative mark-to-market losses, higher commodity/manufacturing costs, unfavorable mix .
  • Reported earnings dilution: reported operating margin fell to 7.4% (-650bps YoY) and reported EPS declined to $0.31 as mark-to-market losses and higher advertising and consumer marketing weighed on GAAP results .
  • International softness: International profit fell $5.2M YoY with margin down 290bps, citing commodity/manufacturing inflation, FX headwinds, and incremental category/regulatory challenges in Mexico; price realization ~1 pt below expectations .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$2.888 $2.805 $2.615
Reported Diluted EPS ($)$3.92 $1.10 $0.31
Adjusted Diluted EPS ($)$2.69 $2.09 $1.21
Gross Margin (Reported %)54.0% 33.7% 30.5%
Gross Margin (Adjusted %)44.8% 41.2% 38.1%
Operating Margin (Reported %)32.5% 13.2% 7.4%
Operating Margin (Adjusted %)24.1% 21.7% 15.7%
Net Margin (Reported %)27.6% 8.0% 2.4%

Consensus vs Actual (Q2 2025)

MetricConsensus*Actual
Revenue ($USD Billions)$2.523*$2.615
Adjusted Diluted EPS ($)$1.00*$1.21
Gross Margin (Reported %)36.34%*30.5%
EBIT ($USD Millions)$315.8*$192.8

Values retrieved from S&P Global.*

Segment Breakdown

SegmentQ2 2024 Net Sales ($MM)Q2 2025 Net Sales ($MM)YoY ChangeQ2 2025 Segment Income ($MM)Q2 2025 Segment Margin
North America Confectionery$1,579.8 $2,085.5 +32.0% $503.9 24.2%
North America Salty Snacks$289.9 $315.5 +8.8% $66.5 21.1%
International$204.8 $213.7 +4.4% $19.8 9.3%

KPIs

KPI (12 weeks)Q1 2025Q2 2025
U.S. CMG Retail Takeaway-4.2% +21.8%
U.S. CMG Share Change-44 bps +90 bps
U.S. Salty Snacks Takeaway+9.6% +6.3%
SkinnyPop Share Change+190 bps +49 bps
Dot’s Pretzels Category Share Gain+337 bps +208 bps

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales GrowthFY 2025Up at least 2% Up at least 2% Maintained
Reported EPS GrowthFY 2025Down high-40% range Down ~50% Lowered
Adjusted EPS GrowthFY 2025Down mid-30% range Down 36%–38% Lowered
Tariff ExpenseFY 2025$15–$20M (Q2 only) $170–$180M (full year) Expanded materially
Reported Effective Tax RateFY 2025~16% ~27% Raised
Adjusted Effective Tax RateFY 2025~16% ~24% Raised
Other ExpenseFY 2025$170–$180M $75–$80M Reduced
Interest ExpenseFY 2025$185–$190M ~$200M Raised
Capital ExpendituresFY 2025$425–$450M $425–$450M Maintained
Transformation SavingsFY 2025~$125M ~$150M Raised
DividendNext Pay DateN/A$1.370 common; $1.245 Class B payable Sep 15; record Aug 15 Declared

Earnings Call Themes & Trends

TopicQ4 2024 (Prior)Q1 2025 (Prior)Q2 2025 (Current)Trend
Pricing & ElasticityNet price realization aided margins; promotional mix impacts Tariff modeled only for Q2; outlook reiterated; elasticity considerations ongoing Mid-teens price flow-through in 2026; elasticity modeled carefully; pricing not tariff-related Increasing price realization focus
Cocoa Market DynamicsDerivative M2M gains benefited margins; high commodity backdrop Heightened cost pressure; hedging benefits carried into 2025 Signs of easing: lower grinds, butter ratios down; potential surplus; origins outside West Africa investing Gradual improvement expectations
Tariffs/MacroNot a major 2024 factor Included Q2-only tariff expense ($15–$20M) Full-year tariff expense $170–$180M; optimism on cocoa tariff relief discussions Greater headwind but potential relief
Supply Chain & ERP/AutomationProductivity and transformation savings; ERP timing benefits Productivity + transformation savings; ERP lap dynamic Agility & Automation savings raised to $150M; tech-enabled efficiency Savings accelerating
CMG Product PerformanceSeasonal strength; everyday chocolate share pressured Seasons strong; CMG takeaway -4.2% on later Easter CMG takeaway +21.8%; share +90bps; everyday mid-single-digit growth Re-acceleration
Salty Snacks (Dot’s, SkinnyPop)Volume strength; margin expansion Salty takeaway +9.6%; SkinnyPop share +190bps; Dot’s +20.7% sales Salty takeaway +6.3%; SkinnyPop share +49bps; Dot’s +13% sales; margin +310bps Sustained momentum
Tax Rate/Other IncomeAdj tax rate negative in Q4 on credits Effective tax rate raised as credits lower; economic tax rate headwind Reported ~57.9% in Q2; FY reported ~27% and adjusted ~24%; 250bps economic rate headwind likely into 2026 Higher tax burden
Innovation/AI/TechnologyAgile innovation highlighted Innovation pipeline; brand investments OREO/REESE’S collab; tech-enabled efficiency; expanded shelf programs; multi-packs Elevated innovation cadence

Management Commentary

  • Strategic positioning: “We remain committed to delivering balanced growth and have taken pivotal steps toward mitigating cocoa inflation through strategic pricing, enhanced productivity, and technology enabled efficiency and speed.” — Michele Buck .
  • 2026 outlook: “Based on what we can see today… we see on-algorithm earnings growth and top-line growth for next year.” — Steve Voskuil .
  • Pricing clarification: “The pricing has nothing to do with tariffs. This is strictly a touch-up on cocoa component.” — Steve Voskuil .
  • Supply/demand for cocoa: “Grinds have come down… butter ratios… current crop modest surplus… next year’s main crop looking quite strong… other origins growing double digits.” — Steve Voskuil .
  • Execution levers: Tech-enabled capabilities and ERP underpin efficiency; agility and automation savings increased to $150M .

Q&A Highlights

  • Pricing magnitude and elasticity: Management modeled elasticities exhaustively; mid-teens price flow-through expected in 2026 with ~80% profit benefit realized next year; pricing focused on cocoa inflation, not tariffs .
  • Tariff relief prospects: Increased optimism for cocoa tariff exemption; administration engaged; potential upside to 2026 algorithm if relief materializes .
  • Seasonal dynamics: Some Halloween shipments pulled into Q2; retailers targeting strong Halloween; “Summer Ween” trend noted .
  • Salty snack strength: Dot’s and SkinnyPop momentum; permissible indulgence positioning; innovation (e.g., Reese’s Peanut Butter-Filled Pretzels) and multi-packs expanding distribution .
  • Tax rate modeling: Economic tax rate headwind (~250bps) likely carries into 2026; tax credit strategy less accretive near term .

Estimates Context

  • Q2 2025 beat: Adjusted EPS $1.21 vs consensus $1.00*; revenue $2.615B vs consensus $2.523B* .
  • Operating metrics: Reported gross margin 30.5% vs consensus 36.3%; EBIT $192.8M vs consensus $315.8M — reflecting derivative mark-to-market losses and higher commodity/manufacturing costs .
  • Outlook implication: Consensus may need to revise near-term margin/EBIT trajectories lower given full-year tariff inclusion, higher effective tax rates, and continued cocoa cost inflation; price realization and productivity are partial offsets .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Quality of revenue beat: Strong top-line driven by inventory lap, seasons, and early Halloween shipments; everyday CMG improving, salty snacks sustaining gains — constructive for H2 sell-through and shelf space .
  • Margin recovery is a 2026 story: Near-term margins pressured by commodity/tariffs; pricing and $150M savings program set groundwork for 500bps+ gross margin recovery in 2026, contingent on cocoa/tariff path .
  • Estimates likely recalibration: Expect upward adjustments to revenue and adjusted EPS for Q2 prints, but cautious margin/EBIT tracks given GAAP pressures and tax rate elevation .
  • Watch policy developments: Any cocoa tariff exemption would be a material earnings catalyst; management’s commentary grew more optimistic this quarter .
  • Brand/inno pipeline supports share: OREO/REESE’S collaboration and salty innovations (multi-packs, flavor extensions) provide volume resiliency against pricing actions .
  • Capital returns maintained: Dividend declaration sustained cadence; balance sheet supports investment and selective M&A (e.g., Sour Strips) to expand BFY portfolio .
  • Trading setup: Near-term narrative hinges on margin optics vs strong revenue momentum; catalysts include tariff updates, cocoa pricing trends, Halloween execution, and elasticity tracking from pricing implementation .