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    HSY
    Earnings call· Jun 2026(Q2 FY26)

    HERSHEY Q2 FY26 earnings call HSY

    Jul 30, 2026 Source

    Executive summary

    The Hershey Company Q2 FY26 — Strong First Half Performance and Narrowed Full-Year Outlook

    The Hershey Company delivered a strong Q2 FY26, narrowing its full-year net sales and adjusted EPS guidance to the top half of the prior outlook, driven by robust first-half performance. While supply challenges impacted the Salty Snacks segment and international margins faced headwinds, the company is investing in automation and brand support, maintaining confidence in its long-term growth framework despite a dynamic market.

    Highlights

    5

    • Reported net sales up nearly 9% and organic net sales up almost 6% in H1 FY26.

    • Adjusted EPS up 28% in H1 FY26 and 57% to $1.90 in Q2 FY26, ahead of expectations.

    • Adjusted gross margin expanded 350 bps in Q2 FY26, driven by pricing, productivity, and input cost deflation.

    • International segment outperformed expectations with 11% net sales growth and nearly 6% organic growth in H1 FY26.

    • New $500 million share repurchase authorization approved in June 2026, reflecting confidence in long-term outlook.

    Concerns

    4

    • North America Salty Snacks performance below expectations due to supply challenges on multipacks and Dot's pretzels in Q2 FY26, leading to a -3% net price realization.

    • Full-year gross margin expansion outlook slightly lowered to below 400 bps (from 400 bps) due to increased freight and logistics costs impacting the Salty Snacking segment.

    • North America Confectionery Q2 FY26 volume declined approximately 10% due to elasticity and shipment timing dynamics.

    • International segment experienced margin pressure from higher cocoa costs and logistics, with optimization programs expected to weigh on H2 FY26 performance.

    Guidance & targets

    10
    CategoryTargetConfidence
    Full-year Net Sales
    Top half of prior outlook (4% to 5%)
    high materiality
    High
    Full-year Adjusted EPS
    Top half of prior outlook
    high materiality
    High
    Full-year Organic Net Sales Growth (Total Company)
    3% to 3.5%
    high materiality
    High
    Full-year Adjusted EPS Growth
    32.5% to 35%
    high materiality
    High
    Full-year Gross Margin Expansion
    Slightly below 400 bps
    high materiality
    Medium
    Full-year International Organic Net Sales
    Increase modestly
    medium materiality
    High
    Full-year North America Salty Snacks Organic Net Sales Growth
    3% to 4%
    medium materiality
    Medium
    Long-term North America Confectionery Organic Net Sales Growth Algorithm
    2% to 4%
    high materiality
    High
    2027 EPS Outlook
    Achievable
    high materiality
    High
    Full-year Interest Expense
    $200 million to $210 million
    low materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    North America Confectionery
    Delivered 6% reported net sales growth in the first half. Q2 net sales increased 4.2% with net price realization of approximately 14%. Volume declined approximately 10% due to elasticity and shipment timing, partially offset by retailer replenishment. Elasticities increased slightly in Q2 but remained better than the full-year outlook. Significant brand investment and innovation planned for H2.
    Q2 Net Sales Growth: 4.2%Q2 Net Price Realization: ~14%Q2 Volume Decline: ~10%Q2 Retailer Inventory Replenishment Contribution to Growth: ~1 pointH2 Brand Investment Increase: 30% YoYH2 New Innovation Items Increase: 30% vs H1
    		—6%——
    North America Salty Snacks
    Delivered 24% reported net sales growth in the first half, but organic net sales grew only 3% due to Q2 supply challenges with multipacks and Dot's pretzels. Q2 net sales increased 22.9%, including a 22-point benefit from the LesserEvil acquisition. Net price realization declined 3% due to higher trade investment. Consumer demand remains strong, and capital is being deployed for automation and capacity to address supply constraints.
    H1 Organic Net Sales Growth: 3%Q2 Net Sales Growth: 22.9%Q2 Net Price Realization: -3%Q2 Organic Constant Currency Volume Growth: ~4%Q2 Retail Consumption (ex-LesserEvil) Growth: 6.5%
    		—24%——
    International
    Outperformed expectations with 11% net sales growth and nearly 6% organic growth in the first half, led by strong results in Brazil and the U.K. Q2 net sales increased 5.7% with a 4-point foreign currency tailwind and 10% net price realization. Volume declined approximately 8% due to elasticity and inventory depletion. Margin pressure from higher cocoa costs and logistics is expected, with H2 optimization programs planned.
    H1 Organic Growth: Nearly 6%Q2 Net Sales Growth: 5.7%Q2 Foreign Currency Tailwind: ~4 pointsQ2 Net Price Realization: ~10%Q2 Volume Decline: ~8%
    		—11%——

    Operational metrics

    20
    Reported Net Sales Growth
    Nearly 9%
    H1 FY26

    Total company performance.

    Adjusted EPS Growth
    28%
    H1 FY26

    Total company performance.

    Adjusted EPS
    $1.90Up 57% YoY
    Q2 FY26

    Ahead of expectations.

    Net Price Realization
    12%
    Q2 FY26

    Total company, in line with expectations.

    Volume Decline
    8%
    Q2 FY26

    Total company, primarily due to elasticity impacts in North America Confectionery and International.

    Retailer Inventory Replenishment Contribution
    1 point
    Q2 FY26

    Added to growth after inventories ran low during April transition to new pack prices.

    Tariff Refund
    $9 million
    Q2 FY26

    More than offset unfavorable freight and logistics costs in Salty Snacks and International.

    Advertising and Related Consumer Marketing
    Declined 3%
    Q2 FY26

    Primarily due to efficiencies and timing of nonworking media in North America Confectionery.

    Adjusted Operating Expenses (excluding advertising)
    Increased 5%
    Q2 FY26

    Driven primarily by incremental capability and technology investments.

    Adjusted Tax Rate
    24.2%Decrease of 860 bps YoY
    Q2 FY26

    Reflecting last year's one-time increase in incremental non-U.S. tax reserves. Full-year outlook unchanged.

    Capital Additions (including software)
    $90 million$5 million higher than prior year
    Q2 FY26

    Investment in the business.

    Dividends Paid
    $286 millionUp 6% YoY
    Q2 FY26

    Return to shareholders.

    Share Repurchases Executed
    $370 million
    Q2 FY26

    Executed in the quarter.

    Remaining Share Repurchase Authorization
    $270 million
    Q2 FY26

    Remaining under December 2023 authorization.

    New Share Repurchase Authorization
    $500 million
    June 2026

    Approved by the Board, reflecting confidence in long-term outlook and balance sheet flexibility.

    Cocoa Deflation Visibility
    Good visibility
    FY27

    Even if futures remain around current levels.

    SNAP Program Changes Impact
    Very modestSlightly better than planned
    H1 FY26

    Household spending reductions were more moderate than initially observed.

    Q3 Merchandising Shipments Pull-forward
    Little over 1 point
    Q2 FY26

    Shipments for Q3 merchandising happened in Q2, slightly ahead of expectations, but impact will largely neutralize against extra shipping day in Q4.

    U.S. Confection Retail Consumption
    3%Understated real demand by ~2 points
    H1 FY26

    Primarily due to non-measured channel growth and year-over-year concentration of Easter shipments.

    Q3 Earnings Growth
    Strongest of the year
    Q3 FY26

    Pricing net of commodity costs expected to be most favorable versus the year-ago period due to lapping highest cocoa cost and full brunt of tariffs.

    Industry KPIs

    8
    MetricValueDetails
    Gross marginExpanded 350 bpsbps
    Brand platform growth—
    Organic net revenue growthNearly 6%%
    Adjusted EPS operating income$1.90USD
    Retailer trade negotiation statusInvest in trade
    Volume mix vs pricing decompositionVolume declined ~8%, Net price realization ~12%%
    Elasticity consumer response commentaryIncreased slightly
    Category growth benchmark channel shift data5%%

    Product announcements

    2
    ProductTypeDetails
    Hershey's Creme Filled Barslaunch
    Reese's Pieces with Cookielaunch

    Deals & partnerships

    1
    LesserEvilAcquisition of LesserEvil brand.

    The acquisition of LesserEvil contributed significantly to reported net sales growth in the North America Salty Snacks segment.

    Capital programs

    1
    Dot's Pretzels Automation and Capacity Expansionunderway

    Benefit: Increased capacity and automation for Dot's pretzels production.

    Increased investment in automation and capacity to keep up with strong consumer demand for Dot's pretzels. Automation is helping now, with full capacity expected online in 2027. This addresses Q2 supply challenges that impacted Salty Snacks performance.

    Risks & headwinds

    8
    Soft Consumer Sentiment and Value-Oriented SpendingOngoing

    Consumer sentiment remains soft, shoppers continue to be value-oriented and selective.

    Mitigation: Portfolio positioned across broad range of snacking occasions, offering permissible and functional needs.

    Tough Year-over-Year Comparisons in H2H2 FY26

    Tougher comps in the second half, led by RESISOREO innovation last year.

    Mitigation: Strong H2 innovation and merchandising programs (Hershey Creme Bars, Hershey movie, robust Halloween plan), increased brand investment.

    Macro Factors and Moving VariablesH2 FY26

    Continued prudence for macro factors; still a lot of moving variables.

    Mitigation: Plan built with flexibility and multiple levers to manage uncertainty.

    Supply Challenges in North America Salty SnacksQ2 FY26 (largely behind us)

    Performance below expectations due to supply challenges on multipacks and Dot's pretzels in Q2.

    Mitigation: Increased investment in automation and capacity (automation helping now, capacity online 2027), strengthening customer programming.

    Higher Freight and Logistics CostsQ2 FY26 and H2 FY26

    Unfavorable freight and logistics costs in Salty Snacks and International; full-year gross margin expansion slightly below 400 bps due to this.

    Mitigation: Optimizing supply chain, expecting margin improvement in H2 as optimization progresses, but still a tail of elevated costs.

    Margin Pressure in International SegmentH1 FY26 and H2 FY26

    Higher cocoa costs flow through with delay, higher logistics and freight impacting International margins.

    Mitigation: Optimization programs planned for H2 to unlock long-term profitability.

    Volume Decline due to Elasticity in North America ConfectioneryQ2 FY26

    Q2 volume declined approximately 10%, reflecting elasticity impacts.

    Mitigation: Expect volume trends to improve over time as commodity inflation eases and elasticities normalize; strong innovation pipeline for H2, 2027, 2028.

    Hypercompetitive MarketOngoing

    The market is hypercompetitive.

    Mitigation: Focus on innovation that drives growth and profitability, building share momentum with strong pipeline.

    What to watch in Q3 FY26

    5

    Salty Snacks Margin Improvement

    H2 FY26
    CurrentOperating margin below expectations in Q2 due to supply challenges, elevated freight/logistics.
    TargetModest margin improvement in H2 as supply chain optimizes.

    Why it matters

    Indicates successful resolution of supply chain issues and improved profitability for a key growth segment.

    We do expect modest margin improvement as we go through the second half. So we're expecting improvement but we'll be in better shape as we get to 2027, and I'd say we've got the supply chain more fully optimized.

    Q&A highlights

    5

    Given strong Q2 performance and better-than-expected elasticity, why wasn't full-year guidance raised more significantly, especially with healthy category trends?

    Management clarified that U.S. confection retail consumption understated real demand by about 2 points due to non-measured channels and Easter, plus 1 point from retail inventory replenishment. The modest guidance increase reflects replenishment largely completed in Q2 and continued prudence for macro factors, with planned reinvestment in H2 innovation.

    “The modest guidance increase reflects the replenishment that was expected to happen more gradually over the course of the year, but was largely completed in Q2. And the balance is really just continued prudence for the macro factors.”

    asked by Andrew Lazar · answered by Steven Voskuil

    2 min read6 chapters

    Detailed Narrative

    01

    Operating Environment and Consumer Trends

    Consumer sentiment remains soft, with shoppers continuing to be value-oriented and selective in their spending. The impact from SNAP program changes in the first half was very modest, tracking slightly better than planned, with household spending reductions more moderate than initially observed. Evolving health and wellness trends, including GLP-1 adoption, are also tracking in line with expectations, with the company's portfolio well-positioned across a broad range of snacking occasions.

    02

    North America Confectionery Performance and Outlook

    The North America Confectionery segment delivered 6% reported net sales growth in the first half. Marketplace demand, including non-measured channels and Easter shipments, was strong, up approximately 5%. Elasticities increased slightly in Q2 but remained better than the full-year outlook, demonstrating the strength of the brands. The company expects a 30% year-over-year increase in brand investment and a 30% increase in new innovation items in the second half to support growth.

    03

    North America Salty Snacks Challenges and Capital Deployment

    North America Salty Snacks reported 24% net sales growth in the first half, but organic net sales were only up 3% due to Q2 supply challenges with multipacks and Dot's pretzels. Consumer demand for the portfolio remains strong, and the company is deploying capital for automation and capacity to address these issues. Capacity for Dot's is expected online in 2027, with automation helping immediately, aiming to capture full demand benefit and improve H2 margins.

    04

    International Segment Strength and Optimization Initiatives

    The International segment continues to outperform expectations, with 11% net sales growth and nearly 6% organic growth in the first half, driven by strong results in Brazil and the U.K. While the segment experienced margin pressure from higher cocoa costs and logistics, optimization programs are planned for the second half. These programs are expected to weigh on short-term performance but are designed to unlock further margin improvement and long-term success for the business.

    05

    Cocoa Outlook and Hedging Strategy

    The company has good visibility into cocoa deflation for 2027, even if futures remain at current levels. Management believes the market is already pricing in El Nino speculation, and does not expect cocoa prices to remain at current levels long-term due to historic surpluses, diversified supply, and an agile industry. Hedging strategies are in place to allow flexibility to participate in further deflation as markets normalize, supporting the 2027 earnings outlook.

    06

    Capital Allocation and Shareholder Returns

    The company repurchased $370 million of common shares in Q2, with $270 million remaining under the December 2023 authorization. In June 2026, the Board approved an incremental $500 million share repurchase authorization, reflecting confidence in the long-term outlook, balance sheet flexibility, and commitment to returning excess cash to shareholders while continuing to invest in the business. Dividends paid totaled $286 million, up 6% year-over-year.

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