Hershey Q2 Earnings Call Highlights

Key Points

• Hershey expects growth in the second half of 2026, supported by product innovation, merchandising, seasonal demand and Halloween, despite tougher comparisons and continued consumer pressure.
• Management reaffirmed its long-term 2%–4% organic net sales growth framework and anticipates cocoa-cost deflation in 2027, while emphasizing that margin recovery will also depend on pricing, productivity, volume restoration and innovation.
• Strong Dot’s pretzel demand has strained salty-snack capacity and increased freight and logistics costs, prompting a slightly lower full-year gross-margin outlook; automation and new capacity are expected to support improvement over time.

Hershey NYSE: HSY executives said the company expects growth in the second half of 2026 despite tougher comparisons, continued consumer pressure and supply-chain costs in its salty-snacks business.

During the company’s second-quarter earnings Q&A session, President and CEO Kirk Tanner said Hershey is positioned to deliver growth in the back half through innovation, merchandising programs and seasonal demand, including Halloween. However, he noted that the company will be lapping the prior-year success of its Oreo Reese’s innovation, which remains a strong performer but creates a difficult comparison.

“We really like our position in the second half to deliver growth,” Tanner said, adding that the company expects growth on both a one-year and two-year basis. He cited planned launches including Hershey’s n’ Creme products, programs tied to an upcoming Hershey movie and a “robust Halloween” plan supported by customer orders.

Shipments, Consumption and Second-Half Cadence

Chief Financial Officer Steve Voskuil said reported U.S. confection retail consumption growth of about 3% in the first half understated underlying demand by roughly two percentage points. The difference reflected growth in non-measured channels, particularly food service, as well as the timing of Easter shipments.

Voskuil said retail inventory replenishment after the April transition to new pack prices added another percentage point of growth. He expects the gap between consumption and shipments to narrow in the second half.

Hershey also shipped a little more than one percentage point of third-quarter merchandising programs during the second quarter, Tanner said. That timing was somewhat ahead of expectations, but the effect is expected to be largely offset by an additional shipping day in the fourth quarter.

For North America Confectionery, Voskuil said the company expects organic net sales growth in both the third and fourth quarters, although everyday confection retail sales could be negative in some periods. Seasonal performance is expected to be strong, he said.

The third quarter is expected to produce the strongest year-over-year earnings growth of the year because Hershey will lap its highest cocoa costs and the full impact of tariffs from the prior-year period, according to Voskuil. He said third- and fourth-quarter absolute EPS are expected to be relatively close.

2027 Framework and Cocoa Outlook

Management reaffirmed that its longer-term framework remains achievable based on current conditions. Tanner clarified that the company’s 2% to 4% organic net sales growth range applies to North America Confectionery as a long-term algorithm. For 2027, a shorter Easter season would make 2% the starting point for that segment, with salty snacks and international operations expected to add to enterprise growth.

“Nothing we see today, commodities or otherwise, would cause us to move away from that framework,” Tanner said.

Voskuil said Hershey has good visibility into cocoa cost deflation in 2027, though he did not quantify the expected magnitude. He said the company has multiple tools to navigate commodity volatility, including hedging, pricing, productivity initiatives and investments.

Tanner said recent concern about potential El Niño effects has influenced cocoa prices, but management does not expect prices to remain at current levels over the long term. He pointed to healthier inventories, diversified supply, greater industry agility and encouraging 2026 and 2027 West African crop data after a slow start. “There is plenty of cocoa supply globally,” he said.

Management also said it does not view cocoa deflation as the sole driver of future margin recovery. Voskuil cited top-line growth, innovation, volume restoration, retailer partnerships, technology investments and productivity savings as additional levers.

Salty-Snack Supply Chain and Margin Pressure

Hershey said demand for Dot’s pretzels has been strong, though the business experienced supply-chain challenges as it worked to keep up with demand. Tanner said the company had already increased spending on automation and capacity, with additional capacity scheduled to come online in 2027. Automation is expected to begin helping in the near term.

Voskuil said the supply-chain issues pressured salty-snack margins during the quarter through higher spot freight use, logistics costs and limited volume throughput. Hershey expects modest margin improvement during the second half as it captures demand and further optimizes its supply chain, though elevated freight and logistics costs are expected to persist for some time.

The company slightly reduced its full-year gross-margin outlook to just below a 400-basis-point improvement. Tanner said commodity benefits should be more meaningful in the second half, while strong productivity performance should partly offset the salty-snack challenges.

Dot’s was not a major component of Hershey’s Fourth of July execution, Tanner said, and its supply constraints did not materially affect the event. He expects the brand to have greater visibility in future salty-snack occasions, including fall football programming.

Innovation, Pricing and International Operations

Tanner said innovation is the primary driver of year-to-date share dynamics in confectionery, while pricing gaps and elasticities have tracked largely as expected. Hershey plans to invest in trade during the second half to support innovation and merchandising programs.

The company expects volume trends to improve over time as commodity inflation moderates and pricing elasticities normalize. Tanner said Hershey expects early signs of improvement in its core Hershey’s brand portfolio, as well as momentum for Jolly Rancher and premium brands such as Cadbury.

In salty snacks, Tanner said Hershey has taken a disciplined approach to pricing and considers its brands, including SkinnyPop, Dot’s Pretzels and LesserEvil, to be positioned competitively despite their premium positioning.

Internationally, Voskuil highlighted Brazil, the United Kingdom and India as particularly strong markets in the first half, while noting that macroeconomic conditions remain challenging in Mexico. Higher cocoa, logistics and freight costs have pressured international margins, he said. Hershey expects optimization work in the second half to weigh on margins temporarily but support longer-term profitability.

On capital allocation, Voskuil said the company has no additional share repurchases planned for the second half at this time. He said Hershey continues to prioritize organic investments and potential acquisitions, while remaining opportunistic with its authorization to repurchase shares.

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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