8-K: Hershey Reports Disappointing First-Quarter 2025 Results Amidst Cost Pressures

Hershey's first-quarter 2025 results reveal a significant drop in net sales and earnings, driven by volume declines and heightened costs, despite strong consumption in key segments.

Summary

• The Hershey Company announced its first-quarter 2025 financial results, showing a decrease in both net sales and earnings.
• Consolidated net sales decreased by 13.8% to $2,805.4 million.
• Organic, constant currency net sales decreased by 13.2%.
• Reported net income decreased by 71.7% to $224.2 million, or $1.10 per share-diluted.
• Adjusted earnings per share-diluted decreased by 31.9% to $2.09.
• The company is reiterating its full-year outlook, expecting net sales growth of at least 2% and adjusted earnings per share growth down in the mid-30% range.
• Tariff expenses are expected to be $15 million to $20 million in the second quarter.
• Capital expenditures are projected to be between $425 million and $450 million.
• The company anticipates savings of approximately $125 million from its Advancing Agility & Automation Initiative.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to significant declines in sales and earnings, although the company is reiterating its full-year outlook and highlighting positive performance in certain segments.

Positives

• Hershey's U.S. salty snack retail takeaway increased 9.6%.
• SkinnyPop ready-to-eat popcorn takeaway increased 6.4%, with a 190 basis point share increase.
• Dots Homestyle Pretzels retail sales increased 20.7%, resulting in a 337-basis point pretzel category share gain.
• The company expects savings of approximately $125 million from its Advancing Agility & Automation Initiative.

Negatives

• Consolidated net sales decreased 13.8% to $2,805.4 million.
• Organic, constant currency net sales decreased 13.2%.
• Reported net income decreased 71.7% to $224.2 million, or $1.10 per share-diluted.
• Adjusted earnings per share-diluted decreased 31.9% to $2.09.
• North America Confectionery net sales decreased 15.0%.

Risks

• The company faces heightened cost pressures, including higher commodity and manufacturing costs.
• Uncertainty regarding the duration, scale, and scope of U.S. import and retaliatory tariffs poses a risk to financial outlook.
• The company's guidance does not include assumptions about the ultimate impact of new tariff actions or the effects of the proposed acquisition of LesserEvil.
• Volume declines in North America Confectionery due to the lap of planned inventory increases and the timing of the Easter season.

Future Outlook

The company is reiterating its net sales growth, reported earnings per share and adjusted earnings per share outlook for the year. Net sales growth is expected to be at least 2%, while adjusted earnings per share growth is expected to be down in the mid-30% range. This guidance includes tariff expenses understood for the second quarter but does not account for new tariff actions or the LesserEvil acquisition.

Management Comments

• 'I am pleased with the progress we are making on our key strategic initiatives for the year,' said Michele Buck, The Hershey Company President and Chief Executive Officer.
• Consumption in the quarter exceeded our expectations in both U.S. Candy, Mint, and Gum and Salty Snacks, driven by the strength of seasons, sweets, Dots and SkinnyPop.
• Despite heightened cost pressure, our strong balance sheet gives us flexibility to invest in the business and participate in recent strategic acquisitions that further expand our better-for-you portfolio and drive long-term value creation.

Industry Context

Hershey's results reflect broader industry challenges related to cost inflation, supply chain disruptions, and changing consumer preferences. The company's focus on strategic acquisitions and portfolio expansion aligns with industry trends towards diversification and catering to health-conscious consumers.

Comparison to Industry Standards

• Hershey's Q1 2025 performance lags behind competitors such as Nestle and Mondelez, which have demonstrated more resilience in maintaining sales and profitability amidst similar market conditions.
• While Hershey's salty snack segment showed growth, it is still smaller compared to the confectionery segment, unlike peers like PepsiCo with a more balanced portfolio.
• The decline in Hershey's gross margin is more pronounced than some competitors, indicating potential challenges in managing costs and pricing strategies effectively.

Stakeholder Impact

• Shareholders will be concerned about the decline in earnings and the impact on stock value.
• Employees may face uncertainty due to cost-cutting measures and restructuring activities.
• Customers may experience price increases or changes in product offerings.
• Suppliers may be affected by changes in procurement strategies and supply chain optimization.

Next Steps

• The company will continue to execute its strategic initiatives for the year.
• Hershey will focus on managing costs and mitigating the impact of tariffs.
• The company will monitor the integration of recent acquisitions and their contribution to net sales growth.
• Hershey will host a live question and answer session with investors and financial analysts.

Key Dates

Keywords

Hershey, Financial Results, Net Sales, Earnings, Salty Snacks, Confectionery, Tariffs, Acquisition, SkinnyPop, Dots Pretzels