tapebrief

HSY · Q2 2025 Earnings

Neutral

Hershey Company (The)

Reported July 30, 2025

30-second summary

SENTIMENT: Mixed Hershey's Q2 net sales jumped 26% YoY to $2.61B, but the optical strength is almost entirely the lap of Q2-2024 ERP-related inventory destocking plus a later Easter — H1 net sales were +1.7% and management did not raise the FY sales guide. The more important news is on the bottom line: Hershey lowered its FY2025 adjusted EPS guide to down 36-38% (from down mid-30s) and reported EPS to down ~50% (from down high-40s), citing tariffs layering onto cocoa. Offsetting that, management's tone on 2026 is notably constructive — 500+ bps of gross margin recovery, mid-teens pricing flow-through, the Agility & Automation savings target raised to $150M (from $125M), and a path to on-algorithm EPS growth in 2026 with upside potential if cocoa and tariffs break favorably. Easter 2026 is the first fully repriced season.

Headline numbers

EPS

Q2 FY2025

$1.21

Revenue

Q2 FY2025

$2.61B

+26.0% YoY

Gross margin

Q2 FY2025

30.5%

Operating margin

Q2 FY2025

7.4%

Key financials

Q2 FY2025
MetricQ2 FY2025YoY
Revenue$2.61B+26.0%
EPS$1.21—
Gross margin30.5%—
Operating margin7.4%—

Guidance

Prior quarter data unavailable — comparison not possible.

Segment performance

Q2 FY2025
SegmentQ2 FY2025YoY
North America Confectionery$2.086B+32.0%
North America Salty Snacks$0.316B+8.8%
International$0.214B+4.4%

Platform metrics

Q2 FY2025
SegmentQ2 FY2025
U.S. CMG Retail Takeaway (MULO+ w/ Convenience)21.8% growth (12-week ended June 29, 2025)
CMG Market Share+90 bps
SkinnyPop Retail Takeaway4.0% growth
SkinnyPop Share+49 bps
Dot's Pretzels Retail Sales13.0% growth, +208 bps category share
Organic Constant Currency Net Sales Growth26.3%

Profitability

Q2 FY2025
SegmentQ2 FY2025
North America Confectionery Segment Margin24.2%
North America Salty Snacks Segment Margin21.1%

Management tone

A full prepared-remarks transcript was not available for this brief, so cross-quarter tone analysis is limited to what Q&A exchanges revealed. From those exchanges, management's posture reads as constructive on the 2026 bridge despite the 2025 EPS cut — CFO commentary on pricing flow-through, cocoa supply improvement, and the $150M savings raise (from $125M) all suggest a team that believes the worst of the cocoa cycle is identifiable and timeboxed. The framing of on-algorithm earnings growth in 2026 — with upside potential if tariffs or cocoa break favorably — is the dominant signal. Management is anchoring investors on a recovery story, not defending the current trough.

The CEO transition (Kirk incoming from PepsiCo) was handled as continuity rather than reset — Michelle's framing that Hershey "consistently invested in brands and capabilities during headwinds" is the company telling shareholders not to expect a strategic pivot.

Q&A highlights

Andrew Lazar · Barclays

Does the underlying health of the business need a reset, and what specifically made Kirk the right choice as incoming CEO?

Michelle emphasized Hershey has consistently invested in brands and capabilities during headwinds, with profit recovery plans underway and momentum ahead. Kirk was selected for 30 years of CPG experience at PepsiCo, relevant snacking/beverage expertise, consumer/customer focus, and performance orientation.

Continued brand investment during record cocoa pricesOngoing ERP platform and AI-enabled capability investmentsTop line momentum and profit recovery plans underwayKirk brings three decades of CPG experience from PepsiCo

Max Gumport · D&D PowerBus

How should investors model the impact of pricing on 2026 P&L, given pricing closes gap to COG inflation and supports 500+ bps gross margin expansion despite cocoa/tariff offsets?

Pricing makes material impact on margin recovery but doesn't fully compensate for all cocoa inflation through 2025. Still inflationary cocoa expected for 2026, but some optimism emerging. If cocoa or tariffs improve, path to better than algorithm earnings exists.

Pricing doesn't fully recover all cocoa inflation to dateCocoa has improved from peak but still inflationary for 2026Tariffs not contemplate in Cagney $10-12 guidance500+ bps gross margin expansion expected in 2026

Leah Jordan · Goldman Sachs

What is the phasing of pricing actions in H2 and 2026, and why does taking pricing at this magnitude make sense given 1% elasticity assumption?

Pricing covers continuous cocoa pressures and supports long-term margin recovery strategy. Portfolio remains competitive with >75% items under $4. 40% of H2 orders unaffected by pricing due to seasonality. Pricing impact is ~2 points to enterprise top line in 2025, mid-teens in 2026 (80% profit benefit in 2026). Easter 2026 is first season impacted.

40% of H2 orders not impacted by pricing (seasonality)~2 points top-line impact in 2025Mid-teens pricing impact in 202680% of profit benefit flows through 2026

Chris Carey · Wells Fargo Securities

How much of 2026 EPS headwind comes from tariffs vs. residual cocoa inflation vs. pricing elasticity impact? How durable are elevated tax rates?

Tax rate elevated ~250 bps with limited near-term improvement; driven by cocoa-sourcing tax consequences and lower tax credit returns. 2026 EPS paths depend on pricing realization, elasticity absorption, and tariff/cocoa outcomes. Multiple paths to double-digit EPS growth if tariffs/cocoa break favorably.

~250 bps economic tax rate headwind expected to carry into 2026Tax headwind from cocoa sourcing strategies and reduced tax credit availabilityElasticity absorption factored into 500 bps gross margin recoveryMultiple paths to double-digit EPS growth pending tariff/cocoa resolution

Scott Marks · Jeffreys

How much cocoa recovery is expected from West African regions vs. new origins? How is the company driving category growth in convenience stores despite traffic declines?

Cocoa supply improvement expected from multiple channels: West Africa (better fertilizer use, agriculture practices), new origins (growing double digits, declining in ban), inventory building (butter ratios improving), and speculator position reduction. C-store success driven by gold standard planograms, category growth partnerships, and innovation driving conversion despite trip declines.

Grinds down high single digits, potentially heading lowerButter ratios improved from peak, suggesting inventory buildingCurrent crop expected modest surplus; next year's main crop looking strongNew origins growing double digits

What to watch into next quarter

Q3 sales normalization: With ~2 points of FY top-line pricing impact and 40% of H2 orders already locked pre-pricing, watch whether Q3 net sales growth decelerates sharply from the Q2 +26% print as the ERP destock lap and Easter timing benefit roll off. A print below mid-single-digit growth would confirm Q2 was largely a timing/lap artifact.

Gross margin trajectory: Q2 came in at 30.5%. Watch whether Q3 holds the line or compresses further as full cocoa hedge mark-to-market flows through; a sub-29% print would pressure the FY adjusted EPS range.

Elasticity read on Easter 2026 pricing: First indications from trade discussions and shelf resets in Q4 will determine whether the ~1:1 elasticity assumption embedded in 500+ bps of 2026 GM recovery is credible.

Cocoa grind data: Watch whether West African grinds continue declining high single digits and butter ratios keep improving — management's 2026 cocoa optimism rests on this supply normalization continuing.

Tariff resolution: $170-180M FY tariff expense is included in the current guide. Any reduction (or escalation) directly flows to the 2026 EPS bridge — management flagged increased optimism on a potential cocoa exemption following Secretary Lutnick's public comments.

Kirk's first public commentary as CEO: Watch the Q3 call (or any interim communication) for whether the incoming CEO endorses the existing pricing-led recovery thesis or hints at incremental cost actions beyond the $150M Agility & Automation target.

Sources

  1. Hershey Q2 2025 earnings press release, filed via SEC, July 30 2025: https://www.sec.gov/Archives/edgar/data/47111/000004711125000109/exhibit991_2025xq2.htm
  2. Hershey Q2 2025 earnings call Q&A exchanges (transcript snippets, analyst attribution as cited)

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