Hershey Q1 Earnings Call Highlights

Key Points

• Q1 net sales rose 10.6% (organic constant-currency +7.9%) driven by pricing, brand momentum and timing benefits, and Hershey reaffirmed its full-year outlook for organic net sales growth of 2.5%–3.5%.
• Salty snacks and LesserEvil powered outsized growth: North America Salty Snacks sales climbed 26% (about 20ppt from the LesserEvil acquisition) and LesserEvil retail sales grew >65% on strong trial, repeat and distribution gains.
• Profitability and guidance remain intact despite a near-term margin dip: adjusted gross margin fell 80 bps in Q1 but management expects a meaningful recovery beginning in Q2 and kept full-year targets of ~400 bps gross margin improvement and 30%–35% adjusted EPS growth.

The Hershey Company opened fiscal 2026 with what management described as a strong first quarter, driven by pricing, brand momentum across core confection, and continued growth in salty snacks and newer platforms. Hershey NYSE: HSY reported first-quarter net sales growth of 10.6%, while reaffirming its full-year outlook for organic net sales growth of 2.5% to 3.5% and adjusted EPS growth of 30% to 35%.

First-quarter sales up 10.6% as pricing and timing effects lift results

President and CEO Kirk Tanner said the company is “on track to hit our financial targets for 2026,” pointing to progress against priorities laid out at the company’s Investor Day. Organic constant currency net sales rose 7.9% in the quarter, which Tanner attributed to “the resilience and relevance of our categories and brands,” alongside investments in media, innovation, and seasonal and cultural programs.

CFO Steve Voskuil said reported net sales increased 10.6% year over year, with the LesserEvil acquisition contributing about two points and foreign currency providing a 70-basis-point tailwind. Net price realization was approximately 10%, reflecting pricing actions in North America Confectionery and International.

Voskuil added that volume declined, but by “approximately 2 points better than expected,” helped by resilient demand and earlier-than-planned shipments in North America Confectionery and International. He said earlier shipments from the second quarter contributed around two points to first-quarter sales growth, a timing benefit the company expects to reverse in the second quarter.

Confectionery trends: brand gains, seasonal execution, and macro watchpoints

Tanner said price elasticities in North American confectionery were comparable to the fourth quarter of 2025 and “favorable versus planned levels,” though he noted headwinds from “unfavorable winter weather and consumer macro pressure.” He also said SNAP program changes had only a mild impact so far, given limited state participation where waivers have taken effect.

Across key brands, Tanner highlighted retail performance in non-seasonal confection:

• Hershey’s and Reese’s posted non-seasonal retail sales lifts of 11% and 10%, respectively.
• JOLLY RANCHER takeaway increased nearly 5%, outpacing the sweets category, according to Tanner.
• Ice Breakers retail sales increased more than 8% during the quarter.

On seasonal performance, Tanner said Valentine’s Day category sales rose about 3.5%, with Hershey gaining nearly 25 basis points of seasonal share. Easter participation was in line with last year, and sell-through exceeded expectations. He also cited March Madness merchandising, which he said drove a 10% to 15% increase in display activity and a double-digit increase in net sales.

From a segment perspective, Voskuil said North America Confectionery net sales increased 8.3%, with net price realization of approximately 12% that came in “slightly below our expectations, reflecting seasonal mix.” Volume declined about 4%, which he attributed in part to Easter shipment dynamics tied to a shorter season and one fewer shipping day, partially offset by earlier shipments of summer activations planned for the second quarter.

Salty snacks and “functional snacking” show momentum, including LesserEvil

Tanner said “functional snacking” is a high-growth platform for the company, and he pointed to a 17% increase in protein bar portfolio consumption in the first quarter, driven by targeted marketing and strength in the club channel.

In salty snacks, Tanner said the North America Salty Snacks segment continued to show momentum, with retail sales excluding LesserEvil up nearly 10% and a roughly 25-basis-point share gain. He highlighted Dot’s Pretzels retail sales growth of 13% and said Reese’s Filled Pretzels added 130 basis points of pretzel category share. Tanner also pointed to Dot’s Snack Mix, which he said debuted by capturing more than 200 basis points of snack mix market share in the quarter.

LesserEvil, acquired by Hershey, grew rapidly in the quarter. Tanner said LesserEvil retail sales increased more than 65% on high trial and repeat rates and expanded distribution, and that the company plans to build on the performance through “continued distribution expansion, adjacent category entry, and brand building investment.”

Voskuil said North America Salty Snacks net sales increased 26%, including a 20-percentage-point benefit from the LesserEvil acquisition. He said organic constant currency volume increased about 5%, driven by Dot’s, Reese’s Filled Pretzels, and SkinnyPop, partially offset by a planned reduction in private label production and a voluntary temporary product withdrawal during the quarter. Net price realization was neutral, in line with expectations.

International growth aided by FX; shipment and inventory actions expected to reverse

Tanner said Brazil and the U.K. showed category strength, while Mexico continued to face “economic and regulatory headwinds.” He said the company’s “anchor markets delivered mid-single-digit organic net sales growth excluding shipment timing,” and that the company maintained or grew market share across key regions.

Voskuil reported International segment net sales growth of 16.1% in the first quarter, including an approximate seven-point tailwind from foreign currency translation. Net price realization was around 12%, reflecting pricing actions across key markets. Volume declined about 2%, reflecting elasticity impacts, partially offset by stronger-than-planned performance in Brazil and earlier shipment timing.

He also noted that inventory stocking in the Middle East and Asia Pacific—driven by actions taken “to mitigate near-term global shipping disruptions”—contributed about five points of volume growth in the first quarter and is expected to reverse in the second quarter.

Margins, investment levels, and guidance: gross margin recovery expected from Q2

On profitability, Voskuil said adjusted gross margin declined 80 basis points in the first quarter, as commodity inflation and tariff costs outweighed price realization, productivity, and transformation savings. However, he said Hershey expects a “meaningful recovery in gross margin to begin in the second quarter,” driven by continued net price realization, productivity, and lapping prior-year commodity costs. The company maintained its full-year expectation of approximately 400 basis points of gross margin improvement.

Advertising and related consumer marketing investment increased about 6% in the quarter, which Voskuil said was temporarily lower than planned due to timing of North America confectionery media production and alignment with spring activations. He reiterated expectations for advertising and related consumer marketing spending to rise at a double-digit rate versus the prior year across segments.

Operating expenses increased 2.2%, reflecting capability and technology investments, partially offset by lower compensation and benefits costs, lower consulting fees, and transformation program savings. Voskuil said the company remains on track to deliver $100 million in savings in 2026, the final year of its AAA initiative, primarily within cost of goods sold. He said $26 million of savings were delivered in the first quarter.

Adjusted EPS rose 12.4% in the quarter, according to Voskuil. For the second quarter, he said the company expects adjusted EPS to increase at least 15% as pricing net of commodity costs improves, while reinvestment increases year over year. Hershey kept its full-year adjusted EPS growth outlook at 30% to 35%.

Voskuil also detailed cash and capital allocation items: capital expenditures were $115 million in the quarter, and the company maintained its full-year capex outlook of $425 million to $475 million. He said Hershey increased its dividend by 6% earlier in the year and paid $288 million in dividends during the first quarter. The company repurchased $69 million in shares during the quarter to offset dilution from equity compensation grants.

Looking ahead, management cited several variables it is monitoring, including SNAP waiver implementation, health and wellness trends, GLP-1 adoption, and consumer spending pressures amid geopolitical uncertainty. Tanner said the company expects post-reset improvements from shelf changes and innovation, including “REESE’S OREO in the take-home aisle,” and outlined second-half demand drivers across seasonal, cultural activations, and innovation. He added that “Americana and the Hershey movie are expected to contribute almost one percentage point to company sales in 2026.”

About Hershey NYSE: HSY

The Hershey Company NYSE: HSY is a leading North American chocolatier and snack manufacturer headquartered in Hershey, Pennsylvania. The company develops, produces and markets a wide range of confectionery and snack products for retail, foodservice and international customers. Hershey's business spans manufacturing, branded product marketing, packaging and distribution across grocery, convenience, mass merchant and e-commerce channels.

Hershey's product portfolio centers on chocolate and sugar confectionery, including core brands such as Hershey's, Reese's, Hershey's Kisses and Twizzlers, alongside non-chocolate snacks and confectionery brands.

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