Hershey Earnings Call Highlights Margin Turn and Brand Strength
The Hershey Company ((HSY)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The Hershey Company’s latest earnings call struck a confident tone, with management underscoring resilient demand for its core confection brands, strong seasonal execution, and a clear path to margin expansion beginning in the second quarter. While acknowledging timing-related softness and macro risks, executives framed most headwinds as temporary and highlighted broad-based momentum across chocolate, snacks, and international markets.
Strong Easter Sell-Through and Confection Resilience
Easter performance was a bright spot, with sell-through surpassing expectations and the broader confection category growing at a high single-digit rate versus last year. Hershey exited the spring shelf resets in a net positive position, gaining presence across key items and channels and reinforcing the durability of its seasonal execution playbook.
Branded Growth Momentum for Hershey and Reese’s
Nonseasonal growth for Hershey’s flagship brands remained robust, signaling healthy underlying demand beyond holiday peaks. The Hershey brand delivered roughly 11% nonseasonal growth while Reese’s advanced about 10%, helped by tentpole events like March Madness and stepped-up marketing that deepened consumer engagement.
Snacks Performance and Salty Core Strength
The snacks segment posted about 5% growth in the quarter, with salty brands nearly 10% higher year-over-year, highlighting the strength of Dots, SkinnyPop, and LesserEvil. Management expects salty operating income to grow at a double-digit pace, positioning the snacks business as a meaningful earnings contributor alongside its confection core.
Margin Inflection Expected Starting in Q2
A key message from the call was a looming margin inflection, with gross margin projected to expand by nearly 300 basis points in the second quarter versus last year. That improvement should accelerate in the back half as Hershey laps elevated input costs and benefits from productivity initiatives, signaling a more profitable growth profile ahead.
Favorable Price Elasticities and Stable Consumer Behavior
Price elasticities have been better than the company’s conservative models anticipated, suggesting consumers remain willing to absorb higher prices for Hershey’s products. Management said consumer behavior through the first quarter tracked within expectations and characterized the effects of GLP-1 drugs and SNAP changes as mild and manageable so far.
Product and Portfolio Innovation Pipeline
Hershey continues to lean into innovation, planning an elevated premium Hershey offering in the second half and ongoing work on brands like Brookside and Cadbury. Smores activations and investment in sweets, premium, and better-for-you research and development are expected to keep innovation contribution in the mid-to-high single digits as a share of sales.
International Expansion Progress for Reese’s
Reese’s remains a growth engine abroad, with momentum in the U.K. and other European markets as Hershey scales through imports and selective local manufacturing. The company is also pushing into new geographies such as Brazil and Mexico, signaling a deliberate effort to extend the brand’s global footprint beyond its U.S. stronghold.
Tentpoles and Seasonal Execution to Drive H2
Second-half momentum is expected to be fueled by major brand activations, including Americana programming and a Hershey-themed movie tie-in ahead of summer holidays. Management believes these tentpoles, supported by shelf resets, expanded facings, and perimeter merchandising, could add roughly one full percentage point of growth for the year.
Near-Term Organic Sales Timing Pressures in Q2
Despite solid first-quarter trends, Hershey guided to a slight organic sales decline in the second quarter, driven largely by timing issues rather than demand weakness. Pull-forward of spring program shipments, particularly smores, stronger-than-expected Easter sell-through, and earlier international shipments are expected to distort quarterly comparisons.
Competitive Pressure and CMG Share Weakness
North American confection is seeing heavier competitive activity, with rivals accelerating innovation and merchandising moves earlier in the year. Hershey acknowledged recent CMG market share softness, reflecting intensified shelf competition and earlier competitor activations, but framed this as an environment where strong brands and execution can still win.
SNAP and GLP-1 Macro Headwinds
The company has built potential SNAP benefit cuts and rising GLP-1 drug adoption into its models, recognizing these as evolving macro risks. While current impacts are modest, management expects SNAP-related pressure to grow over time and is monitoring shifting consumer habits and any confusion these medicines may create around snacking behavior.
Discrete Snacks Operating Headwinds in Q1
First-quarter snacks profitability was hit by one-off factors, including a voluntary product withdrawal and delayed distribution center opening that drove higher logistics expenses. Executives emphasized that these issues are behind them, though they did trim near-term profits and temporarily masked the underlying strength of the snacks portfolio.
Private Label and Noncore Mix Drag in Salty Segment
Within salty snacks, a deliberate pullback in private-label and nonbranded volumes created a drag relative to category consumption, even as core brands outperformed. Management expects this mix shift away from lower-margin offerings to persist, aligning the business more tightly with its strongest branded franchises over time.
Marketing and SM&A Timing Effects
Selling, marketing, and administrative expenses came in light during the first quarter, but Hershey reiterated plans for a double-digit full-year increase in marketing and advertising. Some spending and nonworking media will shift into the second quarter and back half, creating choppy quarterly comparisons but supporting brand health and future growth.
Commodity and Macro Cost Risks
On the cost side, Hershey sees the cocoa market moving into surplus in 2025 to 2026, suggesting potential price relief, yet management remains cautious on longer-term commodity volatility. Oil-related cost pressures in packaging and freight are currently limited but are being watched as a contingent risk should elevated levels persist and broaden.
Forward-Looking Guidance and Outlook
Hershey reaffirmed its full-year guidance, balancing a strong first quarter with the expected second-quarter organic dip tied to shipment timing. Management highlighted a second-quarter margin inflection, double-digit snacks operating income growth after one-time costs, tentpole contributions of about one point to annual growth, and reaffirmed a 2027 organic sales target of 2% to 4% while keeping a close eye on macro risks.
The overall message from Hershey’s earnings call was one of resilience and disciplined optimism, with strong brands, innovation, and margin tailwinds offsetting near-term timing and competitive pressures. For investors, the story centers on a stable confection franchise, a strengthening snacks platform, and a credible pathway to profitable growth even as the macro environment remains uncertain.
