HERSHEY CO Q1 FY2025 earnings call

Key managerial messages include: Tariff mitigation efforts are underway, with focus on seeking exemptions for Cocoa and Canadian retaliatory tariffs. EPS expected to be down about 30% in the first half, with second quarter net sales strong due to Easter but gross margin down about 700 basis points and SG&A dollars up. Market share is positive year-to-date, with expectations of neutral to up in the second half driven by outperformance in sweets. Innovation plans for Reese's in the fall and continued growth in the sweets category, which is seen as having long-term potential. The new Reese's chocolate processing facility provides agility and flexibility in the supply chain. Consumer behavior shows value seeking, but chocolate remains resilient due to its emotional role, and elasticities in the category have held up well.

EPS expected to be down about 30% in the first half, with back half likely down about 40%. Second quarter net sales strong due to Easter, but gross margin down about 700 basis points. Expect earnings growth in 2026 despite tariffs, though the path is narrower. Revenue phasing in the back half is expected to be in line with long-term 2%-4% quarterly growth across segments.

Unmitigated tariff impact could be up to $100 million per quarter for Q3 and Q4, with two-thirds of the impact from Cocoa and Canadian retaliatory tariffs. Consumer sentiment weakness and value seeking behaviors affecting snacking. Uncertainty around Cocoa prices and their impact on the business.

Q: How to quantify risk if tariff exemption doesn't come through?

A: Unmitigated impact for Q3 and Q4 could be up to $100 million per quarter, with two-thirds from Cocoa and Canadian tariffs, and mitigation efforts are underway.

Q: Thoughts on 2026 earnings?

A: Still see path to earnings growth in 2026 despite tariffs, though path is narrower.

Q: Impact of consumer preferences on business?

A: Weak consumer sentiment, but chocolate holds up well due to emotional role, and elasticities in the category have held up.

Q: Capacity expansion and volume outlook?

A: New Reese's plant provides agility and flexibility, allowing stronger supply chain control and investment in innovation despite lower volume expectations.

Q: Impact of SNAP dollars on business?

A: Anticipate no material impact, as only about 2% of SNAP purchases are candy, and products have simple natural ingredients.

Q: Tariff transparency?

A: Focus on providing transparent information on unmitigated impact and mitigation efforts, with better view at mid-year.

Q: Reese's innovation timing?

A: Innovation hitting in fall, with confidence in its size based on research and consumer demand.

Q: Additives and sales?

A: Largely sweets portfolio and some refreshments and coated chocolate are affected, but small percent of ingredient costs.

Q: Demand shaping and sourcing strategies?

A: Focus on mix opportunities in less Cocoa-intensive areas and sourcing options to take advantage of price and generate sales.

Q: Salty snacks M&A ambitions?

A: Align with snacking powerhouse vision, looking for high margin, high growth brands to extend reach and add consumers.