Hershey Q3 earnings report summary
- Hershey posted Q3 net sales of $3.1bn, up 6.5 percent
- Net income dropped 38.2 percent to $276.3m or $1.36 per share
- Rising commodity and production costs squeezed company profit margins
- Hershey expects Q4 costs including $170m in tariff expenses
- $150m in savings projected from agility and automation initiative
The Hershey Company announced strong Q3 sales on Thursday morning, beating analyst expectations, but the picture for the confectionery giant is far from rosy.
The American multinational posted consolidated net sales of $3.1bn (€2.6bn), an increase of 6.5%. Meanwhile organic, constant currency net sales increased by 6.2%.
However, reported net income fell a massive 38.2%, taking it to $276.3m or $1.36 per share-diluted.
The company’s struggles have been blamed on rising commodity and production costs, squeezing already-tight margins.
Despite this Hershey’s president and CEO, Kirk Tanner, attempted to put a positive spin on things.
“Third quarter results surpassed expectations, as strong innovation, strategic brand investments, and market leading execution drove momentum across business segments,” he said during the earnings announcement. “Based on our results year-to-date, we are raising our full year outlook for net sales and earnings per share.”
But Hershey isn’t the only one struggling.
Industry in trouble
On Tuesday, Mondelēz International hinted at plans to slash its prices, following poor sales performance. The company has made no secret of the fact it intended to pass rising costs onto consumers - it’s clear that strategy failed.
Similarly, industry leader Nestlé has suffered declining sales, but is attempting to turn things around by streamlining operations - a strategy that’s led to the layoff of 16,000 employees worldwide. We don’t yet know if lowering prices is also on the cards for the Swiss multinational.
Challenging times ahead
Adding to the candymaker’s concerns, Hershey anticipates some sizeable costs in the fourth quarter of the year. Tariff expenses are projected to reach up to $170m, the reported effective tax rate will be around 30%, and adjusted effective tax rate will be around 26%, reflecting shifts in the global business and tax environment.
Other expenses are expected to total up to $35m, primarily due to the write-down of equity investments that qualify for tax credits.
Interest expenses are projected at approximately $195m, while capital expenditures are estimated to reach $425m.
However, these costs will, in part, be offset by the $150m savings made through the Hershey’s Advancing Agility & Automation Initiative.
Hershey’s future
While Hershey’s top-line growth offers a glimmer of optimism, the company faces mounting pressures that could weigh heavily on its bottom line in the months to come.
With commodity inflation, rising interest rates, and global tax shifts all in play, the confectionery giant must rely on strategic cost-saving measures, like its Advancing Agility & Automation Initiative, to maintain profitability.
And as competitors like Mondelēz and Nestlé recalibrate their approaches, Hershey’s ability to adapt swiftly and innovate meaningfully will be critical in navigating an increasingly volatile market. Whether these efforts will be enough to sweeten investor sentiment remains to be seen.
Nevertheless, CEO Tanner remains positive.
“I am excited to steer the next generation of growth at the Company,” he says.