HERSHEY CO

Net Sales

Net sales were $2,614.7 million in the second quarter of 2025 compared to $2,074.5 million in the same period of 2024, an increase of $540.2 million, or 26.0%. The net sales increase reflects a volume increase of approximately 21%, related to everyday core U.S. confection, as a result of planned inventory decreases in 2024 within the North America Confectionery and International segments after our ERP system implementation, which was completed in the beginning of the second quarter of 2024. Additionally, the timing of the Easter season in 2025 versus 2024, and higher Halloween seasonal orders in the second quarter of 2025, were favorable volume drivers. The net sales increase was further driven by favorable price realization of approximately 5% primarily related to higher list prices across the North America Confectionery and International segments. The net sales increase was partially offset by foreign currency exchange rates, which resulted in an unfavorable impact of less than 1%.

Key U.S. Marketplace Metrics

For the second quarter of 2025, our total U.S. retail takeaway increased 18.5% in the expanded multi-outlet combined plus convenience store channels (Circana MULO + C-Stores), which includes candy, mint, gum, salty snacks and grocery items. Our U.S. candy, mint and gum (“CMG”) consumer takeaway increased 21.8% and experienced a CMG market share increase of 90 basis points. Our Salty consumer takeaway increased 6.1% in the second quarter of 2025 and experienced a Salty market share increase of 26 basis points.

The CMG consumer takeaway and market share information reflects measured channels of distribution accounting for approximately 90% of our U.S. confectionery retail business. These channels of distribution primarily include food, drug, mass merchandisers, and convenience store channels, plus Wal-Mart Stores, Inc., partial dollar, club and military channels. These metrics are based on measured market scanned purchases as reported by Circana, the Company’s market insights and analytics provider, and provide a means to assess our retail takeaway and market position relative to the overall category.

Cost of Sales and Gross Margin

Cost of sales were $1,818.4 million in the second quarter 2025 compared to $1,240.7 million in the same period of 2024, an increase of $577.7 million, or 46.6%. The increase was driven by $592.0 million of higher costs, primarily due to unfavorable commodity costs from cocoa, as well as higher sales volume. The increase was partially offset by declines of $14.3 million, primarily related to declines in business realignment expenses, $6.8 million of favorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases (See Part I, Item 3 - Quantitative and Qualitative Disclosures About Market Risk included in this Quarterly Report on Form 10-Q for more information), and favorable foreign exchange rates.

Gross margin was 30.5% in the second quarter of 2025 compared to 40.2% in the same period of 2024, a decrease of 970 basis points. The decrease was driven by unfavorable commodity costs and higher supply chain costs, partially offset by higher sales volume, favorable price realization, and favorable activity on our mark-to-market impact from commodity derivative instruments.

SM&A Expenses

SM&A expenses were $603.2 million in the second quarter of 2025 compared to $541.0 million in the same period of 2024, an increase of $62.2 million, or 11.5%. Total advertising and related consumer marketing expenses increased 35.5% driven primarily by an increase in the North America Confectionery segment. SM&A expenses, excluding advertising and related consumer marketing, increased 2.2% in the second quarter of 2025 driven by higher compensation costs, partially offset by $11.1 million of incremental business realignment costs.

Business Realignment Activities

We periodically undertake business realignment activities designed to increase our efficiency and focus our business in support of our key growth strategies. Excluding the portion recorded within Cost of Sales and SM&A expenses (as noted above), we recorded business realignment costs of $0.3 million during the second quarter of 2025 versus $4.9 million in the second quarter of 2024. The costs related to the AAA Initiative, which commenced in 2024, focused on leveraging new technology to improve supply chain and manufacturing-related spend, and optimize selling, general and administrative expenses. Costs associated with business realignment activities are classified in our Consolidated Statements of Income as described in Note 9 to the Unaudited Consolidated Financial Statements.

Operating Profit and Operating Profit Margin

Operating profit was $192.8 million in the second quarter of 2025 compared to $287.9 million in the same period of 2024, a decrease of $95.1 million, or 33.0%. The decrease was primarily due to lower gross profit and higher SM&A expenses, partially offset by lower business realignment expenses, as noted above. Operating profit margin decreased to 7.4% in 2025 from 13.9% in 2024 driven by the same factors noted above that resulted in lower gross margin for the period.

Interest Expense, Net

Net interest expense was $46.0 million in the second quarter of 2025 compared to $41.4 million in the same period of 2024, an increase of $4.6 million, or 11.3%. The increase was primarily due to higher long-term debt balances in 2025, driven by the February 2025 debt issuance, versus 2024.

Other (Income) Expense, Net

Other (income) expense, net was net income of $2.3 million in the second quarter of 2025 versus net expense of $0.6 million in the second quarter of 2024, a net income increase of $2.9 million, or 507.0%. The increase in net income was driven by a gain of $3.6 million on a previously held investment in 2025 versus the second quarter of 2024, partially offset by an increase of $0.7 million of non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans.

Income Taxes and Effective Tax Rate

The effective income tax rate was 57.9% for the second quarter of 2025 compared with 26.4% for the second quarter of 2024. Relative to the 21% statutory rate, the 2025 effective tax rate was primarily impacted by tax reserves, foreign rate differential and state taxes. Relative to the 21% statutory rate, the 2024 effective tax rate was primarily impacted by state taxes, tax reserves and unfavorable foreign rate differential, partially offset by the benefit of employee share-based payments.

Net Income and Earnings Per Share-diluted

Net income was $62.7 million in the second quarter of 2025 compared to $180.9 million in the same period of 2024, a decrease of $118.2 million, or 65.3%. EPS-diluted was $0.31 in the second quarter of 2025 compared to $0.89 in the second quarter of 2024, a decrease of $0.58, or 65.2%. The decrease in both net income and EPS-diluted was driven by lower gross profit, higher SM&A expenses, higher interest expense, and higher income taxes, partially offset by lower business realignment costs and lower other income and expenses.

Net Sales

Net sales were $5,420.1 million in the first six months of 2025 compared to $5,327.2 million during the same period of 2024, an increase of $92.9 million, or 1.7%. The net sales increase was driven by favorable price realization of approximately 3% across our reportable segments. The net sales increase was partially offset by a volume decrease of approximately 1%, primarily driven by the North America Confectionery segment, as well as unfavorable foreign currency exchange impact of approximately 1%.

Key U.S. Marketplace Metrics

For the first six months of 2025, our total U.S. retail takeaway increased 4.4% in the expanded multi-outlet combined plus convenience store channels (IRI MULO + C-Stores), which includes candy, mint, gum, salty snacks and grocery items. Our U.S. CMG consumer takeaway increased 4.0% and experienced a CMG market share increase of 7 basis points. Our Salty consumer takeaway increased 8.0% and experienced a Salty market share increase of 31 basis points.

Cost of Sales and Gross Margin

Cost of sales were $3,679.6 million in the first six months of 2025 compared to $2,817.4 million in the same period of 2024, an increase of $862.2 million, or 30.6%. The increase was driven by $980.1 million of higher costs, primarily related to $244.9 million of unfavorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases (See Part I, Item 3 - Quantitative and Qualitative Disclosures About Market Risk included in this Quarterly Report on Form 10-Q for more information) and unfavorable commodity costs from cocoa. The increase was partially offset by $118.6 million of lower costs, primarily driven by lower supply chain costs and lower business realignment costs.

Gross margin was 32.1% in the first six months of 2025 compared to 47.1% in the same period of 2024, a decrease of 1,500 basis points. The decrease was driven by higher commodity costs, unfavorable year-over-year mark-to-market impact from commodity derivative instruments, unfavorable product mix, and volume declines. The decrease was partially offset by lower supply chain costs and decreased business realignment costs.

SM&A Expenses

SM&A expenses were $1,161.9 million in the first six months of 2025 compared to $1,159.0 million in the same period of 2024, an increase of $2.9 million, or 0.3%. Total advertising and related consumer marketing expenses increased 6.0%, driven by increases in the North America Confectionery and North America Salty Snacks segments. SM&A expenses, excluding advertising and related consumer marketing, decreased approximately 2.5% in the first six months of 2025 driven primarily by a decrease of $15.7 million of incremental business realignment costs, partially offset by higher compensation costs.

Business Realignment Activities

We periodically undertake business realignment activities designed to increase our efficiency and focus our business in support of our key growth strategies. Excluding the portion recorded within Cost of Sales and SM&A expenses (as noted above), we recorded business realignment costs of $16.6 million during the first six months of 2025 versus $4.9 million in the first six months of 2024. The costs related to the AAA Initiative, which commenced in 2024, focused on leveraging new technology to improve supply chain and manufacturing-related spend, and optimize selling, general and administrative expenses. Costs associated with business realignment activities are classified in our Consolidated Statements of Income as described in Note 9 to the Unaudited Consolidated Financial Statements.

Operating Profit and Operating Profit Margin

Operating profit was $562.0 million in the first six months of 2025 compared to $1,345.9 million in the same period of 2024, a decrease of $783.9 million, or 58.2%. The decrease was predominantly due to lower gross profit, higher business realignment costs and higher SM&A expenses, as noted above. Operating profit margin decreased to 10.4% in the first six months of 2025 from 25.3% in the same period in 2024 driven by the same factors that resulted in lower gross margin for the period.

Interest Expense, Net

Net interest expense was $90.7 million in the first six months of 2025 compared to $81.2 million in the same period of 2024, an increase of $9.5 million, or 11.7%. The increase was primarily due to higher long-term debt balances in 2025 versus 2024, driven by the February 2025 debt issuance, partially offset by lower short-term debt balances in 2025 versus 2024.

Other (Income) Expense, Net

Other (income) expense, net was a net income of $1.4 million in the firstsix months of 2025 versus a net expense of $32.6 million in the firstsix months of 2024, a net income increase of $34.0 million, or 104.3%. The change was predominantly driven by no write-downs on equity investments qualifying for tax credits in the first six months of 2025 versus $31.4 million of write-downs on equity investments qualifying for tax credits in the first six months of 2024. This was partially offset by an increase of $1.4 million of non-service cost components of net periodic benefit costs relating to pension and other post-retirement benefit plans.

Income Taxes and Effective Tax Rate

Our effective income tax rate was 39.3% for the first six months of 2025 compared with 20.6% for the first six months of 2024. Relative to the 21% statutory rate, the 2025 effective tax rate was primarily impacted by tax reserves, foreign rate differential and state taxes. Relative to the 21% statutory rate, the 2024 effective tax rate was impacted by investment tax credits partially offset by state taxes.

Net Income and Earnings Per Share-diluted

Net income was $286.9 million in the first six months of 2025 compared to $978.3 million in the same period of 2024, a decrease of $691.4 million, or 70.7%. EPS-diluted was $1.41 in the first six months of 2025 compared to $4.80 in the same period of 2024, a decrease of $3.39, or 70.6%. The decrease in both net income and EPS-diluted was driven by lower gross profit, higher business realignment costs, and higher interest expense, partially offset by higher other income and lower income taxes.