Hershey (HSY -1.53%), the U.S. chocolate and snack company behind iconic brands like Reese's, delivered its earnings results for the quarter ending June 29, 2025 on July 30, 2025. The most notable news: Revenue (GAAP) surged 26.0% to $2,614.7 million, far surpassing analyst expectations by $90.9 million (GAAP). Non-GAAP earnings per share (EPS) came in at $1.21, ahead of the $0.99 estimate. However, significant inflation in cocoa and other input costs weighed heavily on profitability, leading to a sharp 65.2% decline in net income versus the prior year. Overall, the quarter showcased strong demand and brand strength, but also exposed the challenges from commodity inflation and tariffs that are pressuring margins.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $1.21 | $0.99 | $1.27 | (4.7%) |
| Revenue (GAAP) | $2,614.7 million | $2,523.8 million | $2,074.5 million | 26.0% |
| Gross Margin (Non-GAAP) | 38.1% | 43.2% | (5.1 pp) | |
| Operating Profit Margin (Non-GAAP) | 15.7% | 18.5% | (2.8 pp) | |
| Net Income (GAAP) | $62.7 million | $180.9 million | (65.3%) |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Hershey’s Business and Strategy
Hershey is best known as a leading producer of chocolate and confectionery products in North America, with a growing portfolio in salty snacks. Its powerhouse lineup includes chocolate bars, candies, gum, and increasingly, snacks like popcorn and pretzels. The company also owns and acquires emerging brands to tap into changing consumer tastes.
Recent business focus has targeted five key areas: brand strength and reputation, innovation through new products and acquisitions, efficient supply chains, raw material price management, and long-term sustainability. Success for Hershey hinges on keeping its core brands relevant, expanding its product mix, managing costs and production, and aligning with consumer trends on sustainability and nutrition.
Quarterly Developments: Sales Strength Meets Margin Pressure
Hershey saw a significant boost in sales, Volume rose 21%, helped by a favorable comparison to last year’s inventory cuts and the later timing of Easter. Additional price increases contributed approximately 5 percentage points to the sales jump, suggesting the company could offset part of its higher costs by raising prices at retail.
Innovation played a visible role. New products, including additions through the company’s acquisition of Sour Strips, contributed 0.4 percentage points to total sales growth. This product extends Hershey’s reach into the non-chocolate sweets category. Management highlighted that more “major innovation” is coming to Reese’s, its leading peanut butter cup product, in the fall of 2025. The Reese’s brand, a favorite among U.S. consumers, is slated for what company leaders call their “biggest innovation ever.”
Hershey’s salty snack business also delivered results. Products like SkinnyPop (ready-to-eat popcorn) and Dot’s Homestyle Pretzels each posted solid year-over-year gains, particularly Dot’s with double-digit sales growth. The segment benefited from both higher sales and effective supply chain improvements, as seen in a 3.1 percentage point rise in salty snacks profit margin to 21.1%. At the same time, investments in automation are intended to reduce long-term costs. These actions generated $150 million of annualized productivity savings, up from the prior $125 million guidance.
Yet despite higher sales, cost pressures were severe. Cocoa prices soared and new tariffs took effect, driving steep declines in reported gross margin. Non-GAAP gross margin dropped 5.1 percentage points, while Reported net income decreased 65.2%. The reported effective tax rate also spiked to 57.9%, reflecting a combination of international tax changes and additional reserves. Mark-to-market losses on commodity derivatives—basically, paper losses from re-valuing contracts due to rising input costs—also hit earnings. Advertising and marketing costs climbed 35.5%, as Hershey increased spend to grow and defend market share, though this put further pressure on operating profit.
The international business showed some momentum, with organic, constant currency sales up 10.0%. However, Profit margins for the International segment retreated due to commodity costs and higher marketing spend, especially in Mexico where regulatory headwinds were cited. U.S. candy, mint, and gum (CMG) retail takeaway growth of nearly 22% over twelve weeks reinforced Hershey's resilient demand and brand health.
On the corporate responsibility side, continued investment in sustainability and ethical sourcing were referenced, but no major new initiatives or milestones were announced in the quarter. Hershey declared no new share buybacks for 2025.
Looking Ahead: Guidance and Key Risks
Management updated its guidance for fiscal 2025. The company now expects net sales growth of at least 2%, with adjusted earnings per share (non-GAAP) projected to decline by 36% to 38%. The drop is attributed to persistent input cost inflation, including cocoa and tariffs, as well as higher interest expense from new debt. The EPS range offered is $5.81 to $6.00 (non-GAAP), down from $9.37 on an adjusted basis. The latest full-year outlook incorporates the full-year impact of tariffs, now expected to cost the company $170–$180 million.
Management did not provide solid guidance beyond this year, instead noting that the path to earnings growth in 2026 is “narrower” and “more challenging." Investors should closely watch the evolution of commodity costs, especially cocoa prices and tariff developments. Key factors that could shift results in coming quarters include further raw material inflation, the success of new product launches such as the upcoming innovation in the Reese’s franchise, and how effectively Hershey can pass on its higher costs without losing customers. The quarterly dividend was not raised or reduced this period and remains in place.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
