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    HSY
    Earnings call· Jun 2025(Q2 FY25)

    HERSHEY Q2 FY25 earnings call HSY

    Jul 30, 2025 Source

    Executive summary

    The Hershey Company Q2 FY25 — Strong Performance Amidst Commodity Headwinds

    Hershey delivered a strong second quarter, exceeding expectations in North America confectionery and salty snacks, driven by effective execution and innovation. The company is actively addressing significant cocoa inflation and tariff impacts through strategic pricing actions and enhanced productivity initiatives, aiming to restore margins in 2026. Michele Buck's retirement and Kirk Tanner's appointment as the new CEO mark a leadership transition, with a focus on continued strategic growth.

    Highlights

    5

    • First half net sales growth of 1.7% exceeded expectations, driven by strong performance in North America confectionery and salty snacking.

    • U.S. retail sales for candy, mint, and gum increased 21.8% in the 12 weeks ended June 29, resulting in a share gain of approximately 90 basis points.

    • Expanding suites portfolio delivered 14.8% growth in Q2, up from 3.7% in 2024, leading to approximately 110 basis points of share gains.

    • Salty snacks portfolio led in share gains among top 10 manufacturers, with Dot's retail takeaway up 13% and SkinnyPop consumption up 4%.

    • Raised Advancing Automation and Agility transformation program savings target to $400 million from $350 million.

    Concerns

    5

    • Full year adjusted EPS guidance is expected to decline between 36% and 38%, reflecting higher taxes and current tariff policy.

    • Adjusted gross margin decreased 510 basis points in Q2, impacted by commodity inflation and $2 million of incremental tariff expenses.

    • Full year adjusted gross margin is expected to decline approximately 675 to 700 basis points, at the high end of prior outlook due to tariffs.

    • International segment net sales were below expectations, reflecting unfavorable currency translation, softer category growth in Mexico, and reduced export demand.

    • Q2 adjusted tax rate increased 840 basis points versus last year to 32.8%, driven by incremental non-U.S. tax reserves.

    Guidance & targets

    11
    CategoryTargetConfidence
    Full year net sales growth
    at least 2%
    high materiality
    High
    Second half net sales growth
    2% to 4%
    medium materiality
    High
    Full year adjusted EPS decline
    36% and 38%
    high materiality
    High
    Full year net price realization
    approximately 5 points
    medium materiality
    High
    Full year tariff expense
    $170 million to $180 million
    high materiality
    High
    Full year adjusted gross margin decline
    approximately 675 to 700 basis points
    high materiality
    High
    Full year interest expense
    approximately $200 million
    medium materiality
    High
    Full year adjusted tax rate
    approximately 24%
    medium materiality
    High
    Full year capital investments
    $425 million and $450 million
    medium materiality
    High
    Q3 adjusted EPS
    decline sequentially from Q2
    high materiality
    High
    Adjusted gross margins restoration
    over 500 basis points
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    North America Confectionery
    Growth was ahead of expectations, with strong volume driven by the lap of prior year ERP-related inventory changes, Easter timing, and early Halloween orders. Pricing also contributed positively.
    Net price realization: 6%Volume increase: 25%Volume increase from ERP lap: 13 pointsVolume increase from Easter timing and early Halloween orders: 2-3 pointsSour Strips acquisition benefit: 60 basis pointsForeign currency exchange headwind: 20 basis points
    		—32%——
    North America Salty Snacks
    Volume growth was seen across Dot's and SkinnyPop, with incrementality from variety multipacks and Reese filled pretzels, offsetting a planned reduction in private label production. Net price realization was driven by promotional timing and lapping prior year expenses.
    Volume growth: over 4%Net price realization: nearly 5%
    		—8.8%——
    International
    Net sales were below expectations due to unfavorable currency, softer category growth in Mexico, and reduced export demand. Organic constant currency growth was strong, but underlying volume, excluding ERP lap, was below expectations.
    Foreign currency translation headwind: 6 pointsOrganic constant currency net sales increase: 10%Volume increase: around 9 pointsVolume increase from ERP lap: 10 pointsNet price realization: around 1%Brazil constant currency net sales growth: double digitsEurope constant currency net sales growth: mid-single digitsReese international growth (H1): nearly 8%
    		—4.4%——

    Operational metrics

    30
    First half net sales growth
    1.7%
    H1 FY25

    Smooths the impact of ERP-related inventory lapse and Easter timing.

    U.S. retail sales (Candy, Mint, Gum)
    21.8%vs. category increase of 17.9%
    12 weeks ended June 29

    Slightly ahead of outlook.

    Everyday chocolate retail takeaway
    6.7%
    Q2 FY25

    Highest level since mid-2023.

    Hershey nonseasonal Candy, Mint, Gum retail takeaway
    4.7%outpaced category
    Q2 FY25

    Growth balanced across portfolio.

    Instant consumable chocolate growth
    2.7%
    Q2 FY25

    Part of balanced portfolio growth.

    Take-home chocolate growth
    4.6%
    Q2 FY25

    Part of balanced portfolio growth.

    Refreshment growth
    3%
    Q2 FY25

    Part of balanced portfolio growth.

    Hershey's takeaway in convenience channel
    2%
    Q2 FY25

    Achieved despite decline in in-store trips.

    Reese growth
    4%
    Q2 FY25

    Strong consumption across top chocolate franchises.

    Hershey brand growth
    nearly 8%
    Q2 FY25

    Strong consumption across top chocolate franchises.

    KitKat growth
    3%
    Q2 FY25

    Strong consumption across top chocolate franchises, behind summer limited edition programs.

    Variety business takeaway
    2%
    Q2 FY25

    Solid results from Cadbury, Whoppers, York, and Heath.

    Gold standard planogram category growth
    8%well ahead of national trends
    2 months following implementation

    Driving higher conversion and lifting category results where implemented.

    Gold standard planogram adoption
    60%from 50%
    this year

    Increased adoption in convenience stores and take-home aisles.

    Gold standard planogram adoption
    over 60%
    this year

    Increased adoption in convenience stores and take-home aisles with renewed sell-in effort ahead of spring '26 planograms.

    Pokémon Kisses velocities
    3xvs. select other limited time offers
    Q2 FY25

    Showing the power of product and partnership.

    Pokémon Kisses earned media impressions
    $2.2 billion
    Q2 FY25

    Overwhelming positive sentiment, driving consumer engagement and repeat purchases.

    SkinnyPop consumption growth
    4%
    Q2 FY25

    Driven by new packaging, media campaign, and flavor innovations.

    Dot's retail takeaway growth
    13%
    Q2 FY25

    Outpaced expectations, driven by barbecue flavor innovation and summer activations.

    Salty variety pack retail takeaway growth
    32%
    Q2 FY25

    Driven by innovation and distribution gains.

    Adjusted gross margin
    38.1%decreased 510 basis points
    Q2 FY25

    Higher than expected due to timing of cocoa hedges, higher volume leverage, and lower tariff expenses than anticipated.

    Advertising and related consumer marketing
    35.5%increased
    Q2 FY25

    Reflecting timing of expenses in North America confectionery and International segments in the prior year.

    Adjusted operating expenses (excluding advertising)
    2.2%increased
    Q2 FY25

    Driven by higher incentive compensation, partially offset by fewer technology investments and transformation program net savings.

    Triple A initiative net savings (this year)
    $150 millionup from $125 million
    FY25

    Raised outlook for the year.

    Adjusted tax rate
    32.8%increase of 840 basis points
    Q2 FY25

    Driven by incremental non-U.S. tax reserves.

    Other expenses
    $75 million to $80 million
    FY25

    Full year expectation.

    Capital expenditures (including software)
    $231 million$113 million lower than prior year
    Q2 FY25

    Several capacity and technology projects have concluded.

    Dividends paid
    $271 million
    Q2 FY25

    Paid to shareholders.

    Share repurchase authorization remaining
    $470 millionof $500 million authorization
    as of Q2 FY25

    No shares repurchased in Q2, prioritizing capital for acquisitions.

    Pricing contribution from new action
    16 points
    FY25

    Projected to benefit adjusted gross margin with no significant effect on sales anticipated for 2025.

    Industry KPIs

    8
    MetricValueDetails
    Gross margin38.1%%
    Brand platform growth14.8%%
    Organic net revenue growth26.3%%
    Adjusted EPS operating income-4.7%%
    Retailer trade negotiation statusdone
    Volume mix vs pricing decomposition26.3%%
    Elasticity consumer response commentaryno significant effect on sales anticipated
    Category growth benchmark channel shift data17.9%%

    Product announcements

    5
    ProductTypeDetails
    Pokémon Kisseslaunch
    SHAQ-A-LICIOUS XL gummieslaunch
    New multi-texture product (suites)launch
    Reese's Oreo Cuplaunch
    Dot's Buffalo flavorlaunch

    Deals & partnerships

    2
    Fulfill North AmericaAcquisition

    Prioritizing capital for this acquisition.

    LesserEvilAcquisition

    Prioritizing capital for this pending acquisition, expected to close later this year.

    Capital programs

    1
    Advancing Automation and Agility (Triple A) transformation programunderway$400 million

    Benefit: organizational efficiency and speed through technology

    Raised 3-year program target from $350 million to $400 million, accelerating a strong pipeline of opportunities including Smart Complexity.

    Risks & headwinds

    4
    Higher taxes and current tariff policyFY25

    Full year adjusted EPS expected to decline 36-38%; Q2 adjusted tax rate 32.8% (up 840 bps); full year tariff expense $170M-$180M.

    Mitigation: Fully embedded incremental costs in full year outlook; robust plan underway to mitigate tariff exposures over time if they endure.

    Cocoa commodity inflation and volatilityFY25, FY26

    Q2 adjusted gross margin decreased 510 bps due to commodity inflation; anticipate inflation in cocoa input costs year-over-year in 2026.

    Mitigation: Robust hedging practices for 2025 and 2026; new price action on U.S. confection portfolio (16 points pricing contribution); Smart Complexity initiative to optimize manufacturing efficiency; innovative sourcing strategies.

    International segment underperformanceQ2 FY25

    Net sales below expectations; 6-point FX headwind; underlying volume below expectations (excluding ERP lap); net price realization around 1% (below expectations).

    Mitigation: Executing playbook to turn Reese into a global juggernaut with expected acceleration in H2 supported by distribution, media, and new Halloween partnership.

    Global tax landscape changesFY25

    Q2 adjusted tax rate increased 840 bps to 32.8%; full year adjusted tax rate expected ~24%.

    Mitigation: Changes have affected the execution of tax strategies; company is adapting.

    What to watch in Q3 FY25

    5

    LesserEvil acquisition closing

    later this year
    CurrentPending regulatory approval
    TargetClosed

    Why it matters

    Completion of this acquisition will contribute to portfolio diversification and growth in the salty snacks segment.

    We continue to expect the LesserEvil acquisition to close later this year.

    2 min read6 chapters

    Detailed Narrative

    01

    Leadership Transition

    Michele Buck announced her retirement as CEO after 9 years, transitioning to an advisory role. Kirk Tanner has been appointed as the new President and CEO, bringing over 30 years of industry experience. He will start on August 18, with a focus on continuing Hershey's strategic priorities as a leading snacking powerhouse.

    02

    North America Confectionery Performance

    The North America confectionery segment saw net sales growth of 32%, driven by strong retail takeaway and share gains. Hershey's candy, mint, and gum U.S. retail sales increased 21.8%, outpacing the category and resulting in a 90 basis point share gain. Everyday chocolate retail takeaway accelerated to 6.7%, the highest since mid-2023, reflecting continued consumer relevance and innovation.

    03

    Salty Snacks Momentum

    The salty snacks portfolio led in share gains among top 10 manufacturers. SkinnyPop consumption increased 4%, delivering a 50 basis point share gain in ready-to-eat popcorn. Dot's retail takeaway was up 13%, resulting in over 200 basis points of share gains in pretzels, driven by flavor innovation and summer activations. The company expects momentum to build in Q3 with media investment and promotional activities.

    04

    Cocoa Inflation and Mitigation Strategy

    Cocoa prices remain volatile and significantly elevated, with anticipated inflation in 2026 despite year-to-date retreats. Hershey is implementing a new price action on 80% of its U.S. confection portfolio, projected to deliver an estimated 16 points of pricing contribution. This, combined with innovative sourcing, hedging strategies, and productivity initiatives like Smart Complexity, aims to restore adjusted gross margins by over 500 basis points in 2026.

    05

    Tariff and Tax Headwinds

    The company faces significant headwinds from higher taxes and current tariff policy, which are expected to more than offset benefits from pricing and cocoa procurement. Full year tariff expense is now modeled at $170 million to $180 million, and the adjusted tax rate increased to 32.8% in Q2. These factors are driving a projected 36-38% decline in full-year adjusted EPS.

    06

    Innovation and Brand Building

    Hershey continues to drive growth through impactful innovation and brand investments. Key initiatives include the successful Pokémon Kisses program, the launch of SHAQ-A-LICIOUS XL gummies, and the highly anticipated Reese's Oreo Cup collaboration. These efforts are supported by gold standard planogram principles and experiential marketing campaigns, driving strong consumer engagement and retail category growth.

    AI-generated summary of the company’s earnings call. Not investment advice.