HERSHEY CO

The summary that follows provides a discussion of the results of operations of our three segments: North America Confectionery, North America Salty Snacks and International. For segment reporting purposes, we use “segment income” to evaluate segment performance and allocate resources. Segment income excludes unallocated general corporate administrative expenses, unallocated mark-to-market gains and losses on commodity derivatives, business realignment and impairment charges, acquisition-related costs and other unusual gains or losses that are not part of our measurement of segment performance. These items of our operating income are largely managed centrally at the corporate level and are excluded from the measure of segment income reviewed by our Chief Operating Decision Maker, Michele Buck, Chairman of the Board, President, and Chief Executive Officer, and used for resource allocation and internal management reporting and performance evaluation. Segment income and segment income margin, which are presented in the segment discussion that follows, are non-GAAP measures and do not purport to be alternatives to operating income as a measure of operating performance. We believe that these measures are useful to investors and other users of our financial information in evaluating ongoing operating profitability as well as in evaluating operating performance in relation to our competitors, as they exclude the activities that are not directly attributable to our ongoing segment operations. Refer to Note 13 Segment Information in our audited consolidated financial statements for reconciliations of net sales for our reportable segments to consolidated total net sales and of segment operating income to consolidated income before taxes.

Our segment results, including a reconciliation to our consolidated results, were as follows:

(1)Includes centrally-managed (a) corporate functional costs relating to legal, treasury, finance and human resources, (b) expenses associated with the oversight and administration of our global operations, including warehousing, distribution and manufacturing, information systems and global shared services, (c) non-cash stock-based compensation expense, (d) acquisition and integration-related costs and (e) other gains or losses that are not integral to segment performance.

(2)Net losses (gains) on mark-to-market valuation of commodity derivative positions recognized in unallocated derivative losses (gains). See Note 13 to the Unaudited Consolidated Financial Statements.

North America Confectionery

The North America Confectionery segment is responsible for our chocolate and non-chocolate confectionery market position in the United States and Canada. This includes developing and growing our business in chocolate and non-chocolate confectionery, gum and refreshment products, protein bars, spreads, snack bites and mixes, as well as pantry and food service lines. While a less significant component, this segment also includes our retail operations, including Hershey’s Chocolate World stores in Hershey, Pennsylvania; New York, New York; Las Vegas, Nevada; Niagara Falls (Ontario) and Singapore, as well as operations associated with licensing the use of certain trademarks and products to third parties around the world. North America Confectionery results, which accounted for 24.2% and 29.4% of our net sales for the three months ended June 29, 2025 and June 30, 2024, respectively, were as follows:

Net sales of our North America Confectionery segment were $2,085.5 million in the second quarter of 2025 compared to $1,579.8 million in the same period of 2024, an increase of $505.7 million, or 32.0%. The increase was driven by volume increases of approximately 25%, primarily due to the planned inventory decreases in 2024 after our ERP system implementation, which was completed in 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 increase was further driven by a favorable price realization of approximately 6%, primarily due to list price increases on certain products across our portfolio.

Our North America Confectionery segment income was $503.9 million in the second quarter of 2025 compared to $464.5 million in the same period of 2024, an increase of $39.4 million, or 8.5%. The increase was predominantly due to volume increases and favorable price realization, as noted above, and net savings from the execution of our AAA Initiative, partially offset by higher advertising and related consumer marketing costs.

Net sales of our North America Confectionery segment were $4,385.6 million in the first six months of 2025 compared to $4,287.1 million in the same period of 2024, an increase of $98.5 million, or 2.3%. The increase was driven by favorable price realization of approximately 4%, primarily driven by list price increases on certain products across our portfolio. The increase was partially offset by volume declines of approximately 2%, primarily driven by a decrease in everyday core U.S. confection.

Our North America Confectionery segment income was $1,200.3 million in the first six months of 2025 compared to $1,412.7 million the same period of 2024, a decrease of $212.4 million or 15.0%. The decrease was primarily due to higher commodity costs, higher supply chain costs, volume declines and higher advertising and related consumer marketing costs. The decrease was partially offset by favorable price realization and net savings from the execution of our AAA Initiative.

North America Salty Snacks

The North America Salty Snacks segment is responsible for our grocery and snacks market positions, including our salty snacking products. North America Salty Snacks results, which accounted for 21.1% and 18.0% of our net sales for the three months ended June 29, 2025 and June 30, 2024, respectively, were as follows:

Net sales of our North America Salty Snacks segment were $315.5 million in the second quarter of 2025 compared to $289.9 million in the same period of 2024, an increase of $25.6 million, or 8.8%. The increase was predominantly due to favorable price realization of approximately 5%, primarily driven by promotion rates, as well as volume increases of approximately 4%, primarily driven by Dot’s Homestyle Pretzels.

Our North America Salty Snacks segment income was $66.5 million in the second quarter of 2025 compared to $52.2 million in the same period of 2024, an increase of $14.3 million, or 27.4%. The increase was primarily due to volume increases and favorable price realization and net savings from the execution of our AAA Initiative.

Net sales of our North America Salty Snacks segment were $593.3 million in the first six months of 2025 compared to $565.0 million the same period of 2024, an increase of $28.3 million, or 5.0%. The increase reflects a favorable price realization of approximately 5% primarily driven by promotion rates. The increase was further driven by volume growth of approximately 4%, primarily related to Dot’s Homestyle Pretzels and SkinnyPop.

Our North America Salty Snacks segment income was $108.3 million in the first six months of 2025 compared to $90.9 million the same period of 2024, an increase of $17.4 million, or 19.2%. The increase was primarily due to volume increases and favorable price realization, as noted above, and lower supply chain costs. The increase was partially offset by higher advertising and related consumer marketing costs.

International

The International segment includes all other countries where we currently manufacture, import, market, sell or distribute chocolate and non-chocolate confectionery and other products. We currently have operations and manufacture product in Mexico, Brazil, India and Malaysia, primarily for consumers in these regions, and also distribute and sell confectionery products in export markets of Latin America, as well as Europe, Asia-Pacific (“APAC”), the Middle East and Africa (“MEA”) and other regions. International results, which accounted for 9.3% and 12.2% of our net sales for the three months ended June 29, 2025 and June 30, 2024, respectively, were as follows:

Net sales of our International segment were $213.7 million in the second quarter of 2025 compared to $204.8 million in the same period of 2024, an increase of $8.9 million, or 4.4%. The increase was due to volume increases of approximately 9%, primarily attributable to MEA, and World Travel Retail, as well as favorable price realization of approximately 1%, driven by Mexico, Brazil and Latin America. The increase was partially offset by unfavorable impact from foreign currency exchange rates of approximately 6%, driven by Mexico, Brazil and Latin America.

Our International segment generated income of $19.8 million in the second quarter of 2025 compared to $25.0 million in the second quarter of 2024, a decrease of $5.2 million, or 20.8%, driven primarily by unfavorable foreign currency exchange rates, as well as increased commodity and supply chain costs, partially offset by volume increases, favorable price realization, and net savings from the execution of our AAA Initiative.

Net sales of our International segment were $441.2 million in the first six months of 2025 compared to $475.1 million the same period of 2024, a decrease of $33.9 million, or 7.1%. The decrease was due to an unfavorable impact from foreign currency exchange rates of approximately 7%, driven by Mexico, Brazil and Latin America, and volume declines of approximately 1%, primarily attributable to APAC and India and Mexico, Brazil and Latin America. The decrease was partially offset by a favorable price realization of approximately 1%, driven by Mexico, Brazil and Latin America.

Our International segment generated income of $48.5 million in the first six months of 2025 compared to $67.8 million in the first six months of 2024, a decrease of $19.3 million, or 28.4%, driven primarily by an unfavorable impact from foreign currency exchange rates, volume declines, higher supply chain costs, and increased commodity costs, partially offset by favorable price realization.

Unallocated Corporate Expense

Unallocated corporate expense includes centrally-managed (a) corporate functional costs relating to legal, treasury, finance and human resources, (b) expenses associated with the oversight and administration of our global operations, including warehousing, distribution and manufacturing, information systems and global shared services, (c) non-cash stock-based compensation expense, (d) acquisition and integration-related costs and (e) other gains or losses that are not integral to segment performance.

In the second quarter of 2025, unallocated corporate expense totaled $181.5 million, as compared to $161.5 million in the second quarter of 2024, an increase of $20.0 million, or 12.4%. The increase was primarily driven by higher compensation and benefits costs, partially offset by decreased investments in capabilities and technology, as a result of the completion of the upgrade of the Company’s ERP system across the enterprise in 2024, and lower acquisition and integration costs.

In the first six months of 2025, unallocated corporate expense totaled $342.0 million, as compared to $334.4 million in the first six months of 2024, an increase of $7.6 million, or 2.3%. The increase was primarily driven by higher compensation and benefits costs, partially offset by lower investments in capabilities and technology, as a result of the completion of the upgrade of the Company’s ERP system across the enterprise in 2024, as well as lower acquisition and integration costs.