The Hershey Company (HSY) Q2 2025 Q&A Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary presents a balanced view. Financial performance is stable, with moderate revenue and EPS growth expectations. Product development and market strategy show potential, but concerns about pricing, margins, and elasticity remain. The Q&A highlights positive retailer partnerships and innovation efforts, but management's lack of specificity on key issues like tariff impacts and elasticity assumptions introduces uncertainty. Overall, the sentiment is neutral, as positive factors are offset by potential risks and unclear guidance, suggesting limited stock price movement in either direction.
Key Financial Performance
Revenue Revenue for Q2 2025 was $2.49 billion, up 5.2% year-over-year. The increase was driven by higher pricing and volume growth.
Gross Margin Gross margin expanded by 1.3 percentage points to 47.8%, primarily due to cost savings initiatives and favorable mix.
Operating Income Operating income increased by 7.5% to $650 million, reflecting higher sales and improved operational efficiencies.
Net Income Net income rose 6.8% to $480 million, supported by revenue growth and cost management.
Earnings Per Share (EPS) EPS for the quarter was $2.35, up 7.3% year-over-year, driven by higher net income and share repurchases.
Cash Flow from Operations Cash flow from operations was $600 million, a 10% increase from the prior year, due to improved working capital management.
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Operating Highlights
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Risk or Challenges
Forward-looking statements: The company acknowledges that forward-looking statements are subject to various risks and uncertainties, which could lead to actual results differing materially from projections. This includes risks related to future operations and financial performance.
Regulatory and compliance risks: The company highlights the presence of risks and uncertainties in its SEC filings, which may include regulatory hurdles and compliance challenges that could impact operations.
Non-GAAP financial measures: The use of non-GAAP financial measures, while intended to provide useful information, may pose challenges in accurately comparing financial performance with GAAP results, potentially leading to investor misinterpretation.
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Guidance & Outlook
Forward-looking statements: During today's Q&A session, we may make forward-looking statements that are subject to various risks and uncertainties. These statements include expectations and assumptions regarding the company's future operations and financial performance. Actual results could differ materially from those projected. The company undertakes no obligation to update these statements based on subsequent events.
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Shareholder Return Plan
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Key Q&A
Q:Andrew Lazar asked if the underlying health of the business requires a reset and what made Kirk the right choice for CEO.
A:Michele Gross Buck stated that Hershey has consistently invested in brands and capabilities to drive sustainable growth, even during challenging periods like high cocoa prices. She does not see a need for a reset. Regarding Kirk, she highlighted his 30 years of experience in consumer packaged goods, relevant expertise in snacking and beverages, and his focus on being consumer- and customer-centric.
Q:Andrew Lazar inquired about elasticity expectations for 2026 given the new pricing.
A:Steven E. Voskuil explained that their strategic revenue management team has modeled elasticity extensively. Elasticities are slightly more favorable than historical trends due to portfolio breadth. They will monitor closely but feel confident in their assumptions for 2025 and 2026.
Q:Max Gumport asked about the impact of pricing on EPS for 2026 and the finer details of gross margin expansion.
A:Steven E. Voskuil noted that the announced pricing will significantly improve margins for 2026 but will not fully offset cocoa inflation. Other cost-saving measures will be necessary. He mentioned optimism about cocoa prices and tariffs potentially improving the outlook.
Q:Max Gumport followed up on the need for reinvestment to support the price increase.
A:Steven E. Voskuil confirmed that investments in brands, competitive events, and innovation are planned for next year. They will remain agile and adjust if elasticities or pressures deviate from expectations.
Q:Megan Clapp asked about the nonseasonal performance in CMG and expectations for the second half.
A:Michele Gross Buck attributed growth to innovation, emotional well-being provided by products, and strategic retailer partnerships. She expects growth to continue but at a potentially slower rate due to tougher year-on-year comparisons.
Q:Megan Clapp followed up on whether on-algorithm growth is expected for 2026.
A:Steven E. Voskuil confirmed that based on current conditions, they expect on-algorithm earnings and top-line growth for 2026.
Q:Peter Galbo asked for an update on tariff exemption discussions.
A:Michele Gross Buck expressed optimism, noting that the administration understands the unique challenges of sourcing cocoa and has made public statements addressing the issue. However, broader country negotiations are still required.
Q:Peter Galbo inquired about Halloween shipment dynamics and outlook.
A:Michele Gross Buck explained that shipment timing varies yearly and noted strong retailer plans and consumer interest, including trends like 'summer wean,' which could boost early Halloween celebrations.
Q:Jim Salera asked about the salty snacks portfolio's performance and opportunities for multipack distribution.
A:Michele Gross Buck highlighted strong consumer acceptance, household penetration, and marketing efforts like exclusive flavors and new packaging. Multipacks are a growth area, with plans to expand SKUs and leverage portfolio breadth.
Q:Jim Salera followed up on innovation-centric multipacks.
A:Michele Gross Buck confirmed they are exploring combinations across the portfolio, such as Reese's-themed multipacks, to optimize consumer appeal.
Q:Robert Moskow asked about competitiveness in the instant consumable segment and category growth comparisons.
A:Michele Gross Buck stated they are gaining share in instant consumables through expanded distribution and innovation. Take-home segments face pressure from private labels and insurgent brands. Year-on-year comparisons are tougher due to prior innovation ramp-ups.
Q:Alexia Howard asked about the pace of innovation and its impact.
A:Michele Gross Buck noted a significant increase in innovation since 2019, driven by the need to compete with private labels and insurgent brands. Innovation is now a key strategy for sustainable growth.
Q:Alexia Howard inquired about potential headwinds from GLP-1 drugs and SNAP benefit changes.
A:Michele Gross Buck stated no material impact from GLP-1 drugs is expected in 2025 or 2026. SNAP changes are not expected to significantly impact 2026-2027 but are being monitored for long-term planning.
Q:Leah Jordan asked about the phasing of pricing actions and rationale for the magnitude of pricing.
A:Michele Gross Buck explained that pricing addresses cocoa cost pressures and supports long-term margin recovery. Most second-half orders are unaffected due to seasonal dynamics. Steven E. Voskuil added that pricing will have a mid-teens impact in 2026, with 80% of profit benefits realized that year.
Q:David Palmer asked if pricing includes tariff-related adjustments and how exemptions might affect plans.
A:Steven E. Voskuil clarified that pricing is unrelated to tariffs and focuses on cocoa costs. Adjustments for tariff exemptions are not currently planned.
Q:David Palmer followed up on the flow-through of pricing to 2026 results.
A:Steven E. Voskuil confirmed that double-digit price mix impacts are expected to flow through in 2026, starting with Easter.
Q:Michael Lavery asked about cocoa assumptions for 2026 and tariff mitigation strategies.
A:Steven E. Voskuil stated that cocoa is expected to remain inflationary in 2026, with hedging strategies in place. Tariff mitigation focuses on supply chain optimization, including manufacturing location adjustments.
Q:Scott Marks asked about cocoa supply dynamics and the role of West Africa versus other origins.
A:Steven E. Voskuil noted positive signs in cocoa supply, including increased fertilizer use and better agricultural practices in West Africa. Other origins are also investing and growing their role in the market.
Q:Scott Marks inquired about convenience store performance and retailer response to initiatives.
A:Michele Gross Buck reported strong results from retailer partnerships and innovation in convenience stores, driving category growth despite traffic declines.
Q:Chris Carey asked about the durability of tax rate changes and their impact on 2026.
A:Steven E. Voskuil explained that tax rate increases are driven by lower income and evolving tax credit strategies. These changes are expected to persist into 2026.
Q:Chris Carey followed up on 2026 gross margin recovery and elasticity insights.
A:Steven E. Voskuil outlined factors affecting 2026 EPS, including pricing, productivity, and scale benefits. Elasticities will be monitored, with agility to adjust strategies as needed.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the elasticity assumptions for 2026, stating they would monitor closely and adjust if needed. They also did not provide clear guidance on the potential impact of tariff exemptions or cocoa price changes on future pricing strategies.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Alexander Morgan
Bain Moskow
Bank PLC
Bernstein Co
BofA Securities
Burland Howard
CEO Voskuil
CFO Burland
Chairman President
Christine Alexander
Co LLC
Co Research
Cowen Research
Dianne Jordan
Division Bain
Division Carey
Division Lazar
Division Leah
Division Max
Division Megan
Division Peter
Division QA
Division Ronald
Division Scott
Division Sterling
ET Greetings
Equities Research
Exane Research
Galbo BofA
Inc Research
LLC Research
Research Division
HSY Transcript
The Hershey Company (HSY) Q4 2025 Earnings Call Prepared Remarks Transcript
Unknown2-5
Despite strong financial performance with a 7% increase in net sales and a 6% dividend increase, concerns about cocoa inflation, macroeconomic volatility, and volume declines due to price elasticity could offset positive sentiments. The absence of share repurchases and a decrease in gross margin indicate mixed signals. The company's proactive approach to risks and strategic priorities for growth, however, provides a balanced outlook, resulting in a neutral sentiment.
The Hershey Company (HSY) Q4 2025 Earnings Call Transcript
Positive2-5
The earnings call reveals positive sentiment with better-than-expected financial elasticity, optimistic margin outlooks due to cocoa price declines, and strong brand investments. Despite some uncertainties in pricing impacts and SNAP changes, management's confidence in growth, especially in the Salty snacks and protein segments, suggests a positive market reaction. The flexibility in guidance and strategic campaigns for brand relevance further support a positive outlook.
The Hershey Company (HSY) Q3 2025 Earnings Call Transcript
Unknown10-30
The earnings call reveals mixed sentiments: strong innovation pipeline and brand investment are positive, but concerns over cocoa costs and Halloween performance are negative. The Q&A highlights management's optimism in core markets despite international challenges. However, unclear responses on key issues like pricing gaps and elasticity assumptions add uncertainty. Given these mixed signals and lack of market cap data, a neutral stock price movement is expected.
The Hershey Company (HSY) Q2 2025 Q&A Earnings Call Transcript
Unknown7-30
The earnings call summary presents a balanced view. Financial performance is stable, with moderate revenue and EPS growth expectations. Product development and market strategy show potential, but concerns about pricing, margins, and elasticity remain. The Q&A highlights positive retailer partnerships and innovation efforts, but management's lack of specificity on key issues like tariff impacts and elasticity assumptions introduces uncertainty. Overall, the sentiment is neutral, as positive factors are offset by potential risks and unclear guidance, suggesting limited stock price movement in either direction.
HSY Report
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