Core Insights - The Hershey Company reported first-quarter 2025 results with net sales declining 13.8% year over year, missing the Zacks Consensus Estimate, while adjusted earnings per share (EPS) of $2.09 exceeded expectations despite a 31.9% decline from the previous year [1][12] Financial Performance - Adjusted gross margin contracted to 41.2%, down 370 basis points due to higher commodity and manufacturing costs, unfavorable product mix, and lower volumes [3] - Selling, marketing, and administrative (SM&A) expenses decreased by 9.6% year over year, driven by reductions in advertising and consumer marketing spend, lower compensation, and transformation program savings [4] - Adjusted operating profit fell 29.4% to $608.1 million, with the operating margin contracting 480 basis points to 21.7% [5] Segment Analysis - North America Confectionery segment net sales were $2,300.1 million, a 15% decrease, primarily due to volume headwinds [6] - North America Salty Snacks segment reported net sales of $277.8 million, a 1% increase, with volume growth partially offset by a decline in net pricing [8] - International segment net sales declined 15.9% to $227.5 million, with a profit margin contraction of 320 basis points to 12.6% [10] Future Outlook - Management expects net sales to increase by at least 2% in 2025, with adjusted EPS projected between $6.00 and $6.18, reflecting a mid-30% decline from 2024 [12] - Anticipated effective tax rate is approximately 16%, with tariff expenses expected to be between $15 million and $20 million in the second quarter [13]

Core Insights - Hershey reported $2.81 billion in revenue for Q1 2025, a year-over-year decline of 13.8% [1] - The EPS for the same period was $2.09, down from $3.07 a year ago, with a surprise of +7.73% compared to the consensus estimate of $1.94 [1] Revenue Performance - International net sales were $227.48 million, exceeding the average estimate of $224.36 million, but reflecting a year-over-year decline of 15.9% [4] - North America net sales reached $2.58 billion, slightly above the average estimate of $2.57 billion, with a year-over-year decline of 13.6% [4] - North America Confectionery sales were $2.30 billion, matching the average estimate, but down 15% year-over-year [4] - North America Salty Snacks reported $277.80 million, surpassing the average estimate of $272.06 million, showing a year-over-year increase of 1% [4] Segment Income - North America Confectionery segment income was $696.37 million, above the average estimate of $684.23 million [4] - Unallocated corporate expenses showed a loss of $158.84 million, better than the average estimate of -$194.85 million [4] - North America Salty Snacks segment income was $41.85 million, slightly above the average estimate of $41.35 million [4] Stock Performance - Hershey's shares returned +2% over the past month, outperforming the Zacks S&P 500 composite, which declined by -0.7% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market [3]

Core Viewpoint - Hershey reported quarterly earnings of $2.09 per share, exceeding the Zacks Consensus Estimate of $1.94 per share, but down from $3.07 per share a year ago, indicating a 31.9% year-over-year decline in earnings [1][2] Financial Performance - The company posted revenues of $2.81 billion for the quarter ended March 2025, missing the Zacks Consensus Estimate by 0.54% and down from $3.25 billion year-over-year, reflecting a 13.5% decrease [2] - Over the last four quarters, Hershey has surpassed consensus EPS estimates two times and topped revenue estimates only once [2] Stock Performance - Hershey shares have declined approximately 1.3% since the beginning of the year, while the S&P 500 has decreased by 5.3% [3] - The current Zacks Rank for Hershey is 3 (Hold), indicating expected performance in line with the market in the near future [6] Future Outlook - The consensus EPS estimate for the upcoming quarter is $1.17 on revenues of $2.47 billion, and for the current fiscal year, it is $6.10 on revenues of $11.42 billion [7] - The outlook for the Food - Confectionery industry, where Hershey operates, is currently in the top 38% of Zacks industries, suggesting a favorable environment for stock performance [8]

Financial Data and Key Metrics Changes - The company expects EPS to decline about 30% for the first half of 2025, with Q2 expected to be down less than Q1, which was down over 30% [13][14] - Gross margin for Q2 is expected to decrease by approximately 700 basis points, influenced by tariff components and increased SG&A expenses [14][15] Business Line Data and Key Metrics Changes - The company reported a 10% increase in its business, with a 100 basis point gain in market share, particularly in the sweets category [22] - Seasonal chocolate is expected to be strong in the first half, with plans for low single-digit growth in everyday chocolate in the second half [36] Market Data and Key Metrics Changes - The company has seen strong growth in international markets, particularly in Brazil, with double-digit growth driven by Easter and innovation [98] - The competitive environment in the U.S. chocolate market remains stable, with no significant changes noted in competition from smaller players or private labels [124] Company Strategy and Development Direction - The company is focused on becoming a snacking powerhouse, leveraging its core capabilities to maximize consumer reach and snacking occasions [80] - There is an emphasis on innovation and investment in iconic brands to meet consumer demands, with significant plans for new product launches in the fall [70] Management's Comments on Operating Environment and Future Outlook - Management acknowledges a weak consumer environment but notes that chocolate and salty snacks have held up well, with everyday chocolate pricing up 8% and volume down 4.5% [32] - The company remains optimistic about a path to earnings growth in 2026, even with current tariff levels, emphasizing the importance of mitigation actions [20][85] Other Important Information - The company does not anticipate a material impact from potential SNAP restrictions, as only about 2% of SNAP purchases are candy [48] - The company is not planning any buybacks for the year but remains open to reengaging in buybacks if the tariff headwind diminishes [99] Q&A Session Summary Question: What is the risk of tariff expenses in Q2? - Management indicated that the unmitigated impact could be up to $100 million per quarter for Q3 and Q4, primarily from cocoa and Canadian retaliatory tariffs [10][11] Question: How should investors think about the magnitude of EPS decline in Q2? - EPS for the first half is expected to be down about 30%, with Q2 expected to be less impacted than Q1 due to strong net sales [14][15] Question: What is the outlook for balanced growth in 2026? - Management maintains a path to earnings growth next year, despite challenges, emphasizing the need for mitigation actions [20] Question: How is the company addressing changing consumer preferences? - The company has seen improvements in its instant consumable business and anticipates continued market share growth in the second half of the year [22] Question: What is the impact of cocoa prices on capacity expansion? - The new plant allows for greater agility and control over the supply chain, enabling the company to meet demand effectively despite high cocoa prices [42] Question: How does the company view the competitive landscape in the U.S. chocolate market? - The competitive landscape remains stable, with no significant changes noted in competition from smaller players or private labels [124] Question: What is the company's approach to pricing in light of cocoa inflation? - Pricing is expected to increase in Q2 and Q3 as seasonal pricing and price pack architecture are implemented [128]

Financial Data and Key Metrics Changes - The company expects EPS to decline about 30% for the first half of the year, with Q2 expected to be down less than Q1, which was down over 30% [12][13][14] - Gross margin for Q2 is expected to decrease by approximately 700 basis points, influenced by tariff components and increased SG&A expenses [14][13] Business Line Data and Key Metrics Changes - The company reported a 10% increase in its business, with a 100 basis point increase in market share, particularly in the sweets category [23] - The company anticipates low single-digit growth in everyday chocolate for the second half of the year, driven by strong innovation [35] Market Data and Key Metrics Changes - The company has seen strong growth in international markets, particularly in Brazil, where organic sales grew double digits [98] - The competitive environment in international markets has normalized, aiding the company's performance [98] Company Strategy and Development Direction - The company is focused on mitigating tariff impacts through various strategies, including lobbying and operational adjustments [10][9] - The company aims to continue growing its chocolate business while expanding into the salty snacks and sweets categories, targeting younger and more diverse demographics [79][78] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a path to earnings growth next year, despite current tariff challenges [20][21] - The company is actively monitoring consumer sentiment and adapting its strategies to maintain market share amid a weak consumer environment [31][30] Other Important Information - The company is not planning any buybacks for the year but remains open to capital allocation opportunities depending on how the year unfolds [99] - The company is investing in innovation and marketing to ensure long-term growth, particularly in the chocolate category [113][114] Q&A Session Summary Question: What is the risk of tariff expenses in Q3 and Q4? - Management indicated that unmitigated tariff impacts could reach up to $100 million per quarter, primarily from cocoa and Canadian retaliatory tariffs [8][9] Question: How should investors think about the magnitude of EPS decline in Q2? - Management expects EPS to be down about 30% for the first half, with Q2 showing a decline less than Q1 due to strong net sales [12][14] Question: What is the outlook for earnings growth next year? - Management maintains a positive outlook for earnings growth next year, despite the challenges posed by tariffs [20][21] Question: How is the company addressing consumer trends towards healthier eating? - Management noted that while consumer sentiment is weak, the chocolate category remains resilient, and they are focusing on premium and permissible products [31][30] Question: What is the competitive landscape in the U.S. chocolate market? - Management reported no significant changes in the competitive landscape, with smaller players softening and larger players increasing innovation [124] Question: How will the company approach pricing in light of cocoa prices? - Management confirmed that pricing will increase in Q2 and Q3 as part of their seasonal pricing strategy [128]

Financial Performance - Consolidated net sales for Q1 2025 were $2,805.4 million, a decrease of 13.8% compared to Q1 2024[6] - Reported net income was $224.2 million, or $1.10 per diluted share, reflecting a decrease of 71.7% year-over-year[6] - Adjusted earnings per share-diluted were $2.09, down 31.9% from the previous year[6] - Reported net income for Q1 2025 was $224.2 million, down from $797.5 million in Q1 2024, with diluted EPS of $1.10 compared to $3.89 in the prior year[45] - Non-GAAP net income for Q1 2025 was $425.4 million, compared to $628.3 million in Q1 2024, with non-GAAP diluted EPS of $2.09 versus $3.07[35] - Operating profit decreased significantly by 65.1% to $369,221 from $1,058,100 year-over-year[48] - The company reported a 67.2% decrease in income before income taxes, down to $323,654 from $986,258[48] Segment Performance - North America Confectionery segment net sales decreased 15.0% to $2,300.1 million, with organic, constant currency net sales down 15.2%[23] - North America Salty Snacks segment net sales increased 1.0% to $277.8 million, driven by a 4-point volume increase[26] - International segment net sales decreased 15.9% to $227.5 million, with organic, constant currency net sales down 7.9%[28] - The International segment reported a profit of $28.7 million in Q1 2025, a decrease of $14.1 million from the prior year, with a segment margin of 12.6%, down 320 basis points[29] - Total segment income declined by 25.5% to $766,953, with North America Confectionery segment income down 26.6% to $696,374[48] - Segment income as a percentage of net sales for North America Confectionery decreased to 30.3% from 35.0% year-over-year[48] Cost and Expenses - Reported gross margin was 33.7%, down from 51.5% in Q1 2024, primarily due to higher commodity and manufacturing costs[18] - Selling, marketing, and administrative expenses decreased 9.6% in Q1 2025 compared to the same period last year[19] - Hershey's unallocated corporate expense in Q1 2025 was $158.8 million, a decrease of $9.9 million or 5.9% compared to Q1 2024, driven by lower compensation and benefit costs[31] - The company reported a non-GAAP operating profit margin of 21.7% in Q1 2025, down from 26.5% in Q1 2024[37] - Hershey incurred business realignment costs of $16.4 million in Q1 2025, reflecting ongoing restructuring efforts[45] - Costs associated with business realignment initiatives rose by 55.1% to $25,854, indicating ongoing restructuring efforts[48] Future Outlook - The company expects full-year net sales growth of at least 2%, with reported earnings per share projected to decline in the high-40% range[8] - Tariff expenses for Q2 2025 are estimated to be between $15 million and $20 million[11] - The company is focused on enhancing long-term profitability through initiatives like the Advancing Agility & Automation Initiative, aimed at optimizing costs and processes[40] Balance Sheet and Liquidity - Cash and cash equivalents increased to $1,515,252 from $730,746, reflecting a strong liquidity position[50] - Total assets rose to $13,967,764, up from $12,946,861, indicating growth in the company's asset base[50] - Long-term debt increased significantly to $5,177,251 from $3,190,210, suggesting higher leverage[50]

Core Insights - The Hershey Company is experiencing increased investor interest ahead of its Q1 2025 earnings release, despite a 14% decline in stock price over the past year [1][2][3] - Investors are potentially shifting focus from cost pressures to Hershey's strong brand portfolio and strategic evolution, which may provide defensive positioning and growth potential [2][3] Financial Performance - Hershey's management has guided for a significant drop in Adjusted EPS for fiscal year 2025, projected to decline in the mid-30% range due to rising cocoa prices [5] - Cocoa futures have recently retreated by as much as 30% from record highs, indicating a potential easing of cost pressures [6][7] Business Strategy - Hershey is diversifying its product offerings beyond confectionery, with successful salty snack brands and a pending acquisition of LesserEvil, which aligns with consumer trends towards healthier snacks [9][10] - The company is expected to achieve at least 2% net sales growth in fiscal 2025, reflecting strong brand loyalty and effective pricing strategies [8] Operational Efficiency - Hershey's "Advancing Agility & Automation Initiative" is projected to deliver approximately $125 million in savings during 2025, aiding in cost management and funding for innovation [12] - The company maintains a strong dividend yield of 3.28%, supported by a 15-year track record of annual dividend increases [11][13] Market Positioning - The stock price decline from its 2023 peak may present an entry point for investors seeking quality in a defensive sector [16] - The upcoming Q1 2025 earnings report is crucial, with investors looking for updates on volume performance, margin management, and cocoa cost outlook [15][16] Investment Consideration - Hershey offers a combination of defensive stability and growth potential, making it a compelling option for investors amid easing cost pressures and ongoing strategic initiatives [17][18]

Core Insights - The Hershey Company reported a significant decline in net sales and earnings for the first quarter of 2025, with net sales decreasing by 13.8% to $2,805.4 million compared to the same period in 2024 [6][12][41] - The company is facing challenges due to heightened cost pressures and ongoing tariff negotiations, but maintains a strong balance sheet that allows for continued investment in strategic initiatives and acquisitions [2][3] Financial Performance - Consolidated net sales for Q1 2025 were $2,805.4 million, down 13.8% from $3,252.7 million in Q1 2024 [6][41] - Reported net income was $224.2 million, or $1.10 per diluted share, representing a decrease of 71.7% compared to $797.5 million, or $3.89 per diluted share, in the prior year [6][41] - Adjusted earnings per share for Q1 2025 were $2.09, down 31.9% from $3.07 in Q1 2024 [6][41] Segment Performance - North America Confectionery segment net sales decreased by 15.0% to $2,300.1 million, with organic, constant currency net sales down 15.2% [18][41] - North America Salty Snacks segment net sales increased by 1.0% to $277.8 million, driven by a volume increase of approximately 4 points [22][41] - International segment net sales decreased by 15.9% to $227.5 million, with organic, constant currency net sales down 7.9% [25][41] Cost and Margin Analysis - Reported gross margin for Q1 2025 was 33.7%, a decrease of 1,780 basis points from 51.5% in Q1 2024, primarily due to higher commodity and manufacturing costs [13][41] - Adjusted gross margin was 41.2%, down 370 basis points from the previous year [13][41] - Selling, marketing, and administrative expenses decreased by 9.6% compared to Q1 2024, reflecting reduced advertising and lower compensation costs [14][41] Outlook and Guidance - The company expects net sales growth of at least 2% for the full year 2025, with reported earnings per share projected to decline in the high-40% range and adjusted earnings per share expected to decline in the mid-30% range [4][5] - The impact of the Sour Strips acquisition is anticipated to contribute approximately 30 basis points to net sales growth for the full year 2025 [4]

Financial Data and Key Metrics Changes - First quarter net sales reported a decline of 13.8% year-over-year, impacted by a 90 basis point headwind from foreign currency translation and a 15-point volume decline due to inventory lapses and fewer shipping days [23][24][29] - Adjusted earnings per share decreased by 32% in the quarter, with expectations for a less severe decline in the second quarter as seasonal impacts reverse [29] - Adjusted gross margin decreased by 370 basis points, with expectations for further compression in the second quarter due to ongoing commodity inflation [26][27] Business Line Data and Key Metrics Changes - North America Confectionery segment net sales declined by 15%, with volume down nearly 18%, partially offset by net price realization of around 3% [24][25] - The North America salty snacks segment saw a 1% increase in net sales, with volume growth of nearly 4% driven by brands like Dots and Skinny Pop [25][26] - The salty snacks portfolio is positioned for growth, with Skinnypop consumption increasing by 5.4% and Dots retail takeaway growing by 20.6% [14][15] Market Data and Key Metrics Changes - International segment organic constant currency net sales declined by 7.9%, with performance ahead of expectations in key markets like Brazil and Mexico [25][15] - The global cocoa grind declined by 3.4% in Q1, marking the eighth consecutive quarter of declines, indicating ongoing demand challenges [20] Company Strategy and Development Direction - The company is focused on becoming a leading snacking powerhouse, with strategic acquisitions like Lesser Evil and Fulfill to enhance its portfolio [6][7] - Investment in technology and automation is expected to deliver $125 million in cost savings this year, supporting long-term growth [17][28] - The company plans to launch several new products and partnerships, including a collaboration with Pokémon, to drive consumer engagement [12][13] Management's Comments on Operating Environment and Future Outlook - Management noted heightened cost pressures but emphasized a strong balance sheet that allows for continued investment in the business [6] - The company anticipates a strong second quarter with net sales expected to increase by more than 20% as seasonal impacts reverse [24] - Management remains committed to its financial outlook, despite uncertainties related to tariffs and commodity costs [32] Other Important Information - The company did not repurchase any shares in the first quarter, prioritizing capital for acquisitions instead [30][31] - The adjusted tax rate for the quarter was 24.4%, reflecting challenges in executing tax strategies in a changing global landscape [28] Q&A Session Summary Question: What are the expectations for the second quarter? - The company expects total net sales to increase by more than 20% in Q2, reversing the impacts seen in Q1 due to Easter and inventory lapses [24] Question: How is the company addressing cocoa price pressures? - The company is engaging with the US government for tariff exemptions and is preparing strategies to mitigate inflation and protect margins [20][21][32]

Financial Data and Key Metrics Changes - First quarter net sales reported a decline of 13.8% year-over-year, impacted by a 90 basis point headwind from foreign currency translation and a 30 basis point benefit from the Sour Strips acquisition [22][23] - Adjusted earnings per share decreased by 32% in the quarter, with expectations for a less severe decline in the second quarter as seasonal impacts reverse [29] - Adjusted gross margin decreased by 370 basis points, primarily due to commodity inflation and negative sales mix, with expectations for further compression in the second quarter [26][27] Business Line Data and Key Metrics Changes - North America Confectionery segment net sales declined by 15%, in line with expectations, with volume down nearly 18% [23][24] - North America salty snacks segment net sales increased by 1%, with volume growth of nearly 4% driven by brands like Dots and Skinny Pop [24][25] - The salty snacks portfolio showed strong performance, with Skinnypop consumption increasing by 5.4% and Dots retail takeaway growing by 20.6% [14][22] Market Data and Key Metrics Changes - International segment organic constant currency net sales declined by 7.9%, with performance ahead of expectations in key markets [24][15] - Constant currency net sales increased mid-teens in Brazil and mid-single digits in Mexico, driven by improved category dynamics [15] - The global cocoa grind declined by 3.4% in Q1, marking the eighth consecutive quarter of declines [19] Company Strategy and Development Direction - The company is focused on becoming a leading snacking powerhouse, with strategic acquisitions like Lesser Evil and Fulfill to enhance its portfolio [6][7] - Plans to build momentum in everyday business through innovation and programming, including new product launches and partnerships [12][13] - Continued investment in brands is expected to drive long-term growth, with a full-year advertising spend increase projected in the mid-single digits [16] Management Comments on Operating Environment and Future Outlook - Management noted heightened cost pressures but emphasized a strong balance sheet that allows for continued investment [6] - The company anticipates total net sales to increase by more than 20% in Q2, reversing the impacts seen in Q1 [22] - Cocoa prices are expected to build cost pressure each quarter, with robust planning underway to mitigate inflation and protect margins [19][20] Other Important Information - The company is pursuing an exemption request for cocoa tariffs, which cannot be mitigated through sourcing strategies [20][31] - Capital expenditures in Q1 were $146 million, lower than the prior year, with full-year expectations of $425 million to $450 million [30] - The company did not repurchase any shares in Q1, prioritizing capital for announced acquisitions [31] Q&A Session Summary Question: What are the expectations for net sales growth in the upcoming quarters? - The company expects total net sales to increase by more than 20% in Q2, reversing the impacts from Q1 [22] Question: How is the company addressing cocoa price pressures? - The company is implementing robust planning to mitigate inflation and protect margins, with a focus on pricing and sourcing strategies [19][20] Question: What is the outlook for advertising spend this year? - The company anticipates a mid-single digit increase in full-year advertising spend, reflecting a commitment to brand investment [16]