Profits Tumble 60% on Unprecedented Cost Pressures (Image Credits: Pixabay)
The Hershey Company delivered sales growth across its 2025 fiscal year, yet soaring input costs eroded profitability in a challenging market environment.
Profits Tumble 60% on Unprecedented Cost Pressures
Fourth-quarter net income plunged 60% to $320 million, or $1.57 per diluted share, from $797 million the prior year.[1][2] Net sales rose 7% to $3.1 billion, fueled by pricing actions and acquisitions. Full-year results mirrored this trend, with net sales climbing 4.4% to $11.7 billion while net income fell 60% to $883 million, or $4.34 per share.[1]
Higher commodity expenses, particularly from cocoa inflation, combined with tariff volatility to squeeze gross margins. Reported gross margin dropped 17 percentage points to 37% in the quarter, and adjusted margin fell 650 basis points to 38.3%.[2] Operating profit declined 52.6% to $444.9 million. Executives highlighted these headwinds but praised efforts in pricing and productivity.
Salty Snacks Shine Amid Confectionery Volume Dip
North America Salty Snacks led growth, with fourth-quarter sales surging 28% to $357 million, including a 10-point boost from the LesserEvil acquisition.[1] Skinny Pop popcorn sales increased 8%, and Dot’s Homestyle Pretzels rose 21%. Full-year salty snacks revenue grew 12% to $1.27 billion.
North America Confectionery sales advanced 5.3% to $2.48 billion in the quarter, supported by 10% organic price hikes, though volumes declined 5% due to elasticity.[2] Full-year sales for the segment reached $9.48 billion, up 4%. The International segment struggled, posting a $32 million loss in the quarter and a 97% net income drop to $3.3 million for the year, hit by higher costs and lower volumes.[1]
- Salty Snacks margin expanded 160 basis points to 21.1%.
- Confectionery income fell 10.7% to $722 million.
- International margin turned negative at -12.4%.
Strategic Moves to Counter Volatility
Hershey’s procurement team employed agile hedging and sourcing to mitigate cocoa impacts. Chief Financial Officer Steven Voskuil noted, “While earnings were pressured by unprecedented cocoa inflation and tariff volatility, we provided strong support for our brands, prioritized the strategic acquisition of LesserEvil, and took decisive action with strategic pricing and cost efficiency and productivity programs.”[1]
Supply chain productivity and transformation savings partially offset pressures. President and CEO Kirk Tanner added, “Our procurement team did a remarkable job navigating volatile cocoa markets in 2025.” The company also ramped up focus on functional snacking, positioning brands in permissible and portion-controlled categories.[1]
2026 Guidance Signals Margin Recovery
Hershey forecasts 4% to 5% net sales growth next year, with adjusted earnings per share of $8.20 to $8.52, a 30% to 35% increase from 2025.[2] Reported EPS is projected at $7.77 to $8.19. First-quarter adjusted gross margins face ongoing commodity and tariff strain, but recovery starts in the second quarter.
Innovation drives optimism, including expanded Reese’s/Oreo production, new Shaq-a-Licious Slams gummies, Jolly Rancher Heat Wave gummies, and reformulated SkinnyPop flavors. Investments target protein offerings like ONE and Fulfil bars. Management anticipates headwinds from SNAP waivers in 18 states, GLP-1 medications, and consumer pressures but has incorporated them into plans.[1]
Key Takeaways
- Sales grew despite volume softness from pricing.
- Cocoa and tariffs drove 2025 margin compression.
- 2026 outlook promises earnings acceleration via cost relief and innovation.
Hershey’s diversified portfolio and proactive cost management offer resilience as commodity pressures ease, paving the way for sustained growth. What do you think of Hershey’s recovery strategy? Tell us in the comments.
