HERSHEY CO(HSY)Q1 2026 法說會逐字稿

Greetings, and welcome to the Hershey Company First Quarter 2026 question-and-answer session. As a reminder, this conference is being recorded. I'd now like to turn the call over to your host, Anoori Naughton, Vice President of Investor Relations for the Hershey Company. Thank you. You may begin.

Good morning, everyone. Thank you for joining us today for the Hershey Company's First Quarter 2026 Earnings Q&A session. I hope everyone has had the chance to read our press release and listen to our prerecorded management remarks, both of which are available on our website. In addition, we have posted a transcript of the prerecorded remarks. At the conclusion of today's live Q&A session, we will also post a transcript and audio replay of this call. Please note that 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. A detailed listing of such risks and uncertainties can be found in today's press release and the company's SEC filings. Finally, please note that we may refer to certain non-GAAP financial measures that we believe provide useful information for investors. The information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations for the GAAP results are included in this morning's press release. Joining me today are Hershey's President and CEO, Kirk Tanner, and Hershey's Senior Vice President and CFO, Steve Voskuil. With that, I will turn it over to the operator for the first question.

Our first question comes from Andrew Lazar of Barclays.

I was hoping maybe to focus in a little bit on North America confectionery to start. I think in the press release, you mentioned that lower year-over-year CMG market share due to increased marketplace competition. I know investors are understandably sensitive to this, given the significant drop in cocoa prices of late and the concern that this could lead to incremental competitive activity to spur volumes in light of elasticity. So I was hoping you could dig into just what you're seeing in the marketplace a bit more. What would you expect as some of the activations and tentpole events kick in? And would you anticipate that Hershey returns to share growth either in 2Q or as we move through the year?

Yes, great question. Competition continues to be highly rational. There's no change in the pricing environment; I want to start with that. We have seen increased competitive innovation and merchandising from both mainstream and premium competitors. That's what makes this category so attractive to consumers. It's one of the reasons it's so resilient. Some of that activity happened a little earlier than we expected. We feel really good about our position as we exit spring resets in a net positive position across items and key channels as our spring and summer merchandising programs ramp up. Premium chocolate continues to be that segment that grows really well, and we are charging into that space aggressively. We have plans in the back half of this year for innovation, and we'll continue to develop that. Overall, we are in a competitive environment and we feel good about where we're going. We have momentum planned for the second half of the year that we feel really good about. But it is a rational pricing environment, Andrew.

Great. That's really helpful. You mentioned Easter sell-through was ahead of expectation. It looks like maybe share was a bit weaker just in the past few weeks of data. I was hoping you could square those two things for us. How is Easter share versus your expectations?

I look at the category in the first quarter overall. The confectionery category was really resilient, growing high single digits. Easter was good for us. Category sales declined primarily due to two fewer weeks versus last year, but our sell-through was really strong and outperformed our expectations. Given that Hershey is a share leader in the season, we typically index much higher, so the two-week difference had a big impact on the overall season. But we're very happy with our performance and the sell-through we saw. Those exceeded our expectations, and our share was also ahead of our expectations coming out of Easter.

Our next question comes from the line of Megan Klepp with Morgan Stanley.

Great. Maybe I could start on the macro. When we sat here 2.5 months ago, I think the initial outlook you provided included what you called prudent assumptions, which you reiterated today. Since then, the backdrop has gotten more challenging. You talked in your remarks about elevated geopolitical uncertainty and higher gas prices as a result. Could you provide more detail on what you've seen in the macro so far relative to your expectations, particularly on things like SNAP where you may have a little more data? And broadly, as you sit here today, do you think the guidance that you have for the remainder of the year still gives you the same degree of cushion on the macro as you thought at the beginning of the year?

Yes, that's a really relevant question. Consumer behavior remained steady throughout the quarter with shoppers making thoughtful choices. GLP-1 trends remain consistent. The net impact was mild given waivers were limited to five states and higher gas prices had minimal effects. We continue to monitor those very closely. Overall, the macro environment is tracking within our expectations for the year. Regarding SNAP specifically, we modeled the possible effects from the beginning. In the first quarter, the five states that had changes meant the over-index impact was pretty mild—those states affected both the category and our business in line with our estimates, which gives us more confidence for the full-year outlook. Where implemented, we do see considerable consumer confusion and it's possible that will improve over time. We plan for this headwind to increase over the course of the year with SNAP and we will adjust our plans to meet consumer needs with portfolio and pack types, but it's included in our assumptions. We're not seeing anything outside of how we've modeled the year, so that part of the outlook stays on track.

Great, that's helpful. A related question on elasticities: last quarter you talked about planning for around 0.8% even though actuals were running better and noted that as potential upside to guidance. This quarter you said elasticity is favorable versus planned levels. Has anything changed in April so far? Or are you still embedding the same level of conservatism on elasticity for the balance of the year? And as we think about the second quarter and what's implied from an organic sales growth perspective, how much of that is just shipment timing and reversal versus something more fundamental in how you're thinking about demand?

I'll kick that over to Steve for the detail on elasticity and the Q2 dynamics.

Sure. On elasticity, we continue to model what we had before and we're pleased it's still holding. We have some price-pack architecture hitting shelves right now, and we'll continue to watch to see if elasticity evolves, as it sometimes can. But right now it's better than we modeled and we expect that to continue. Regarding Q2 sales expectations, the biggest piece is timing issues. Two main parts: Easter sell-through was strong, which meant some of our spring program shipped earlier than typical—S'mores, for example, is getting activated earlier than we typically would have seen. We also had some pull forward internationally where certain customers were trying to get ahead of potential disruption in the Middle East. Those were the two big pieces that pulled things forward from our standpoint; nothing structurally different relates to our Q2 expectations.

Our next question comes from the line of Peter Galbo with Bank of America.

Steve, picking up on Megan's question on Q2 organic sales: it sounds implied that confection organic may actually dip negative in the second quarter just given some timing aspects. I wanted to press on that a bit and clarify.

Yes, it is expected to be slightly down in Q2 due to the timing we discussed.

Okay, great. And then a broader question, Steve, on margin cadence over the rest of the year: there was a bit of favorability on gross margin in the quarter, maybe because of some volume. Could you help us think about gross margin phasing over the back three quarters of the year?

Sure. We're expecting in Q2 that gross margins will increase by nearly 300 basis points versus the prior year period. That's where you really start to see the inflection. Then as we get to the back half of the year, we expect greater improvement in the back half. We have the year planned out and good visibility to that cadence.

Our next question comes from the line of Peter Grom with UBS.

Great. Thank you, and good morning. Kirk, in your prepared remarks you touched on drivers that you believe will keep topline momentum in the back half of the year as you annualize pricing impact. Can you unpack that a bit more? Specifically, what's the degree of visibility or confidence that momentum can be sustained as you look ahead?

Yes. We have confidence in H2 driven by a few things. One, we see a strong seasons plan for the second half—our tentpoles will deliver a full point of growth. The Hershey movie and other tentpoles have a lot of support from customers. Resets have been important, so we're getting gains across several channels including mass, grocery, dollar, and drug. We see a positive position coming out of spring resets. Innovation is another driver; we'll have a big Hershey innovation in the fall that we're excited about and that gets us into accessible premium. We're watching the macros like everyone, but when we think about what we can control—execution, retail execution, product activation—we feel really good and have confidence as we ramp up execution and deliver against our plan.

That's very helpful. A follow-up on snacks: a strong quarter at 5% but below what we see in consumption. In your remarks you touched on private label production and a product recall. Do those items account for the entire gap relative to consumption? Any thoughts on growth for this segment moving forward in the context of the implied guidance?

On salty snacks, the primary drag was private label, while our core brands in salty are up nearly 10%. Bringing in businesses included private label that is getting smaller in our business over time, so that accounts for part of it. Our salty brands are doing exceptionally well.

On the profitability side, you pointed to the two things: we had a couple of discrete items. The voluntary withdrawal was immaterial in total, but combined with the delayed opening of the distribution center, it meant we spent more on logistics to maintain strong service in a fast-growing business. Those additional costs were incurred in the quarter; they're done now. We're in a better spot and expect operating income to grow and increase by double digits—this was a small speed bump in the first quarter, but we've passed it and are back on track.

Our next question comes from the line of Chris Carey with Wells Fargo Securities.

Can I follow up on the snacks margin? There were discrete headwinds in the quarter and relatively low margins. You talked about accelerating profit from here. Is that mostly driven by sequential improvement in margins as opposed to top line? And do you still feel good about the margin targets you set at Investor Day? Please contextualize that.

Yes. Margin improvement will come largely from not having those one-time issues. We will have some amortization from the LesserEvil acquisition, which is in the base, and some mix impact with LesserEvil in the total salty mix. Those are expected. Aside from that, on the core business, we expect continued margin improvement over the course of the year.

Okay. A follow-up on spring resets: can you give more insight on key wins, how you expect benefits to come through and timing?

Think about two things: space—the number of new facings and new SKUs we have across primary channels: mass, grocery, dollar, and drug. Winning at the shelf is key and we're in a positive position there. The second is retailer support on the perimeter for our tentpole events. The combination of winning at the shelf and on the perimeter supported by our retail sales team is important. We're tracking all of this weekly and are disciplined about on-shelf availability and execution, so we feel really good about where we're going.

Our next question comes from the line of Leah Jordan with Goldman Sachs.

You noted a mild impact from higher gas prices on the consumer. Could you provide more color on how sales have trended in the convenience store channel specifically and how you think about potentially supporting that channel if these macro challenges sustain?

We saw very little impact early in Q1 because it was a later event. The effect depends on how high prices go and how long they stay. C-store is an important channel we watch; our confection business continues to perform in line. Immediate consumption items continue to do well. When gas prices are high, frequency can increase while basket size decreases, which can keep the channel robust for our category. Right now performance is as expected. We continue to monitor and work with convenience retailers on actions to keep the business healthy.

Okay, great. Quick follow-up on visibility around packaging and freight costs: what have you actually seen so far in higher costs, and what are you baking in for the back half?

So far, we're not seeing a big impact. Our hedging program and commodities team manage many of these risks, and we have good visibility through this year and in some cases beyond. If elevated costs look prolonged and significant, we'll evaluate further, but right now we feel well covered for 2026.

Our next question comes from the line of David Palmer with Evercore ISI.

I wanted to ask about merchandising and some items you touched on: evolution of pack types and shelf sets. Some of that was planned into the fall, like stand-up bags versus take-home. Could you summarize what's being done now and what's coming? And in terms of promotions, should we expect to see more display year-over-year in scanner data as you put more into-perimeter activations?

When you get into retail execution details, it's important. First, the SKU gains across the main channels are in the pipeline. We are deploying stand-up bags versus traditional take-home bags because consumers prefer them; they elevate visibility and make shelves more shoppable. We measure on-shelf availability weekly. Second, perimeter activations for tentpoles are increasing. We measure inventory points of interruption on the floor and location in the store to understand incrementality and how many new occasions we're driving. For example, for the 250-year celebration of the country on the Fourth of July, we're bringing Hershey Kisses, Hershey bars, S'mores and Dots pretzel into that celebration—an occasion incremental to past years. The combination of better shelf presence and perimeter activations gives us confidence for the second half of the year.

I remember last Halloween you mentioned some regrets about execution, like pack types. Seasons have been a rich harvest for Hershey, especially during COVID. How are you thinking about seasons going forward—will they track with confectionery growth overall or be an area you can expand?

We have a great foundation for seasons, and we can be even more disruptive and modern. For Halloween this year, we feel good about what we learned and what new things we can bring to consumers. As the leader in seasons, it's on us to be thoughtful about consumer trends and to modernize the execution. We have a strong base and feel really good about the back half with the customer partnerships we have.

Our next question comes from the line of Tom Palmer with JPMorgan.

Sorry to be the third person to ask here, but could you clarify the expected headline organic sales growth slowdown in Q2? You highlighted it's more shipment timing than anything else. Could we quantify the specific items driving the slowdown? There was ship-ahead in Q1 and some Easter timing—anything else? And if possible, what would Q1 look like if we strip out some of the timing?

Yes, you've got the biggest pieces. We said slightly down in Q2 due to timing. Easter sell-through was strong, causing earlier shipment of some spring programs, and we had some international pull forward. Those are the two biggest drivers pulling forward volume into Q1.

To add: Easter was a timing issue. Given the strong sell-through, some programming moved into quarter one. Overall consumption trends are consistent. After the April overlap, you'll see momentum pick up in May and June. If you remove these one-time events, performance on consumption and sell-through is consistent, and we expect to be back on track.

Okay. Is this spring shelf reset more impactful or different than past years?

We feel good about the increase versus a year ago and versus the last couple of years. It's a win for our portfolio—more shoppable gondolas, greater visibility, more facings and better merchandising. Combined, these factors make us confident this year versus last year.

Our next question comes from the line of Robert Moskow with TD Cowen.

A couple of questions about innovation. What are your expectations for the Hershey premium product launching in the second half? Hershey has struggled to introduce viable premium offerings in the past. How big of a bet is this? And then a quick follow-up.

Overall, we feel really good about innovation. This elevated Hershey experience is truly elevated. If you were at Investor Day, you may have tried it—we had strong consumer feedback. We have high expectations for this brand; it's in the sweet spot of what Hershey can deliver based on deep consumer research and testing. Innovation for us is a collection across the portfolio: premium, sweets, and better-for-you. We don't rely on one product—it's the collection of initiatives across Hershey, Reese's, and other platforms, plus events like the Hershey movie in Q4. That said, we have strong expectations for this elevated Hershey product and testing has been positive.

Got it. My follow-up: sweets. Can you tease out sweet performance in Q1 and expectations for the year? Data shows some Shack product down substantially; the sweets portfolio was growing 20% plus. How confident are you about capitalizing on strong consumer demand, especially among younger consumers?

Our biggest brand in sweets is Jolly Rancher and it performed very well; it grew faster than the category. We had good innovation like Heat Wave. We've launched a new item in the Shack lineup to give momentum later this spring and into summer. We feel good about sweets: Jolly Rancher will continue to be a hero, we have a strong Twizzlers program this summer, and a robust pipeline into 2027 and 2028. We're investing in R&D focused on premium, sweets, and better-for-you and the pipeline is gaining traction.

Our next question comes from the line of Max Gumport with BNP Paribas.

I wanted to return to macro headwinds like accelerated health and wellness trends and increasing GLP-1 adoption. Can you provide an updated view on what you're seeing there and how you're navigating your portfolio through these headwinds?

Thanks. Confection is an emotional category—it's a treat, not a meal—which helps insulate it versus other food categories. GLP-1 users continue to enjoy the category in smaller portions; our research supports this. Our framework for estimating GLP-1 impact includes scenarios for near- and long-term adoption rates. We monitor calorie reduction, usage rates and behavior changes. Accelerated adoption and format changes are contemplated in our outlook. On average, confection equates to about 40 calories per day and two to three servings per week for the average American, which helps our confidence. We will continue to monitor and adjust as needed, but the category remains resilient.

Returning to price elasticities: everything you're seeing so far is running better than planned. Competitors have followed and retailers have accepted the price elasticity response. How does this inform your view of performance from here and how does it factor into the 2% to 4% organic sales growth target for 2027 you gave a month ago?

Elasticities are running favorable so far and that points to category resilience, especially in immediate consumption and seasons where consumers are protective. We don't see a material change that would cause us to change our outlook. We're not changing the guide; we remain within the earlier guidance even though Q1 results look strong. We still have price-pack architecture rolling out and elasticities can move, so we've kept a cautious stance. By midyear we'll have most price-pack architecture in place and better visibility to reassess. That said, we're encouraged by what we're seeing.

Our next question comes from the line of Jim Salera with Stephens Inc.

Kirk, you mentioned tentpoles are poised to add a full point of growth this year. Can you offer detail around retail execution given the higher frequency compared to traditional seasons and whether there's different messaging in marketing or in-store that calls attention to each tentpole? Walk through how the sales force is dealing with that and how marketing is calling attention to those unique occasions.

This ties demand creation and demand execution together. Moments like the Fourth of July are opportunities where we can participate more meaningfully across salty and sweet. We've worked with customers to align demand creation, marketing and retail execution. The sales force brings the activation to life, and customers are supportive because it increases store theater and shopper engagement. This cadence lets our sales force focus on big moments in retail. Customers are supportive and it plays to our strength.

Do you have any sense for how much of a gap there is between tentpoles and traditional season events? Is there concern about overlap or cannibalization if someone stocks up ahead of a seasonal purchase window?

We measure incrementality and the breadth of our portfolio allows us to play in tentpoles and seasons without being redundant. We're the number one season executor in confectionery, and when we bring tentpoles to life we use different brands and platforms to avoid cannibalization. Retailers collaborate with us on this, and there is a good cadence with gaps between executions—sell-downs and builds—that align with retail calendars.

Our next question comes from the line of Alexia Howard with Bernstein.

Can I ask about the Reese's expansion in Europe? Previously you mentioned U.K. household penetration in the high teens. Where are you now? Have you expanded to other European countries, and at what point do you start to think about putting manufacturing capacity into the region?

We continue to see Reese's drive in the U.K. and other European countries. Our plan is to scale Reese's internationally—initially through imports and local manufacturing for some SKUs. As we scale, we'll consider in-sourcing manufacturing locally. The playbook from the U.K. is being applied to other markets; I was recently in Brazil and saw strong peanut-butter affinity there. We're also expanding in Mexico where we already manufacture. Reese's has been exciting and the playbook is transferable across markets.

Great. As a follow-up on innovation: can you quantify new products as a percent of sales over the last three years? Are you at the level you want, can you sustain it, or do you need to go higher?

Innovation contribution is at a high single-digit percent of sales. There's always opportunity to do more. Our innovation strategy is focused—premium, sweets, and better-for-you—and we pair that with growing our core brands. Our core continues to grow faster than the category, which makes innovation more meaningful. On salty snacks we continue to innovate as well; for example, a snack mix behind the Dots brand has performed well. We are focused on raising the bar on innovation and have momentum in the pipeline.

One reason we're increasing R&D investment is to build that capability and muscle for the future to sustain and broaden innovation.

Our next question comes from the line of Scott Marks with Jefferies.

In the prerecorded remarks, you noted that the Hershey and Reese's brand nonseasonal grew materially—about 11% and 10%. Could you help us understand drivers behind that? You mentioned March Madness as a tentpole, but is anything else supporting that performance?

A couple of things: the Hershey campaign during the Olympics was well received and gave lift to the Hershey brand. Reese's was the center of our March Madness tentpole, which helped build inventory and traction. Programming behind demand creation and execution can come together to drive our core brands, and Q1 shows how that can work when both demand creation and execution align.

Okay, clear on that. Second question on the cocoa market: one of your chocolate competitors earlier this week said they believe current prices fairly reflect supply and demand globally. Can you give an update on your view of the cocoa market and how you're thinking about the outlook?

We remain cautious long term that cocoa could stay above some of the lower historical levels we've seen. In the near term we continue to anticipate a larger surplus in 2025 and 2026 due to supply diversification, strong crops, and expanding origins. If cocoa falls, as we talked about at the investor conference, we have the ability to participate in that downside particularly in 2027 and beyond, which could be upside to our outlook for 2027 and 2028. We're watching the market closely and managing the business via hedging while keeping agility to participate in the downside.

Our next question comes from the line of Michael Lavery with Piper Sandler.

Picking up on 2027: you gave a preliminary outlook a month ago. Any thoughts in particular on risks from higher oil-related costs and how to think about how much of COGS that impacts or what to watch?

We broke potential upsides and downsides into controllables and non-controllables at the conference, and that assessment hasn't materially changed. Controllables include innovation, media ROI, tentpoles, elasticity, productivity, and cost savings—areas where we have confidence. Non-controllables include cocoa and macro headwinds. Oil in particular is a relatively small direct exposure; the bigger impact would be indirect through packaging and freight, and those impacts take time to materialize. Right now we wouldn't change our view for 2027 based on oil, but we'll keep watching how high prices get and how long they persist.

That's helpful. A follow-up on the 2026 outlook: you noted elasticities remaining favorable could be upside. That seems to be holding so far. Why hold the guide now—just that it's early and price-pack architecture is still rolling out, or are those increments more significant than we might appreciate?

It's mainly prudence. We're pleased with the start to the year and confident about the balance of the year on items we control, and elasticities look good. But elasticities can move, and we still have price-pack architecture coming into the market. By midyear we'll have more visibility and could take a different position if warranted. For now, the cautious stance is appropriate.

Our next question comes from the line of Steve Powers with Deutsche Bank.

A quick follow-up: you mentioned a portion of salty snacks growth was prioritized toward noncore, non-branded parts of the portfolio and that's a drag relative to consumption. How big is that noncore part of the portfolio today and is that a continuing drag or isolated to this quarter?

There will continue to be a drag as part of the strategic shift away from private label over time, and we'll continue to communicate brand performance versus private label. That was planned and we're working with customers on it. Our branded salty and snack portfolio—Dots, SkinnyPop, LesserEvil—are driving strong growth. Overall, for the full year, we expect to be in a good position on both top line and bottom line for the salty portfolio.

Great. Can you comment on functional snacking? It was one of the higher growth platforms at Investor Day. How is that part of the business positioned going into the balance of the year? Is it a higher priority for incremental investment?

Functional snacking is a growth area—it's relatively small but growing. We're investing in R&D, updating formulas and building brands. We've also entered into a joint venture with a partner that has breakthrough protein delivery technology, which we like. We need to be differentiated in this space. Today it's a small but high-growth part of our business and we're investing to make it a much larger contributor over time.

Our next question comes from the line of Rob Dickerson with Jefferies.

Thanks. Steve, on confection margins: there's been volatility over recent years. You did better in Q1 versus last year, but with timing shifts, reinvestment and optimizations, how should we think about stability over the next few quarters? Should we see a Q2 dip and then ramp in the back half as you lap higher cocoa and commodity costs? Or is more stability expected?

You're going to see movements related to season timing—that will always create quarter-to-quarter variability. As we look through the year, particularly in the back half as we start lapping higher-priced cocoa and commodities, we'll see margin improvement. There's nothing unusual to point out in the sequence; we're expecting the cadence we've described with an inflection beginning in Q2 and further improvement in the back half.

So as we think about gross margin cadence for the year, operating margin in confection should broadly track gross margin except where you're investing in media—correct?

Yes, the main disconnect will be investing in media and working marketing, which will increase and cause some divergence between gross margin and operating margin sequencing. That's built into the plan for the year.

And SM&A came in light in Q1 versus expectations—do you expect a ramp as shelf resets and activations proceed?

Yes. Full year expectations are unchanged: we still expect a double-digit increase in marketing and advertising. There was some timing between Q1 and Q2; some nonworking media development slipped into Q2 and we tuned more toward spring activations in working media. But the full-year expectation is unchanged.

Our final question this morning comes from the line of John Baumgartner with Mizuho Securities.

Kirk, on premium chocolate: at Investor Day there was reference to Brookside as differentiated, but it stalled versus competition in the past. Hershey's 'blessed' premium trade-up also faded. When you speak to breakthrough now, is the plan to outpace competitors in the mass market or target new consumers and channels outside traditional Hershey focus? How should we think about that balance?

I think of premium as accessible premium. Consumers want new experiences. We have three brands for this: Brookside, Cadbury, and new Hershey accessible premium. We'll continue to innovate on Brookside, Cadbury has significant potential and we'll innovate there too, and we're building accessible premium on Hershey's brand with new products coming late this year. Pure premium is small today—about 5% of the total category—but growing. We're targeting Gen Z consumers with indulgent premium offerings and believe we can lead in this space through our key brands while leveraging our distribution strengths.

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Ms. Naughton for any final comments.

We look forward to catching up with many of you over the coming days and weeks.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.