The Hershey Company ((HSY)) has held its Q1 earnings call. Read on for the main highlights of the call.
The Hershey Company’s recent earnings call presented a balanced outlook, highlighting both challenges and opportunities. While the company faces significant hurdles due to tariffs and rising Cocoa costs, these are being actively addressed. On the brighter side, strong performances in international markets and the sweets and salty snacks categories offer a positive counterbalance to these challenges.
Strong Seasonal Chocolate Performance
The Hershey Company reported robust growth in its seasonal chocolate segment during the first half of the year, largely driven by Easter sales and innovative plans set for the latter half. This momentum suggests potential growth opportunities in the non-seasonal chocolate category as well.
Positive International Growth
International markets have been a bright spot for Hershey, with the segment outperforming expectations. Notable achievements include strong organic sales growth in Brazil and market share gains in India, propelled by successful Reese’s brand activation and innovation efforts.
Resilience in Sweets and Salty Snacks Categories
The sweets and salty snacks categories continue to show resilience, with sweets experiencing a 10% increase and gaining 100 basis points in market share. Despite reductions in private label offerings, salty snacks also demonstrated growth, underscoring the strength of these segments.
Tariff and Cocoa Cost Concerns
The company is grappling with potential unmitigated impacts from tariffs, which could reach $100 million per quarter in the latter half of the year. With significant exposure to Cocoa and Canadian tariffs, Hershey is exploring mitigation strategies, though the situation remains uncertain.
Decline in Q1 and Q2 EPS
Hershey anticipates a 30% decline in EPS for the first half of the year, attributed to a 700 basis point reduction in gross margin and increased SG&A expenses. This decline underscores the financial pressures the company is facing.
Retail Environment and Consumer Sentiment
The retail environment poses challenges, with softening consumer sentiment and increased value-seeking behaviors impacting the snacking segment. This trend reflects broader economic pressures influencing consumer purchasing decisions.
Forward-Looking Guidance
Looking ahead, Hershey provided significant guidance metrics, projecting a 15 to 20 base point impact on Q2 due to tariffs, with potential unmitigated impacts of up to $100 million per quarter for Q3 and Q4. The company expects a mid-30s decline in full-year EPS, with a 40% drop anticipated in the latter half. Despite these challenges, Hershey remains optimistic about mitigating tariff impacts and foresees a path to earnings growth in 2026, even with current Cocoa levels.
In summary, The Hershey Company’s earnings call painted a picture of a company navigating significant challenges while capitalizing on growth opportunities. The balanced sentiment reflects both the hurdles posed by tariffs and rising costs, and the promising performance in international markets and key product categories. Investors will be keenly watching how Hershey manages these dynamics in the coming quarters.