HERSHEY CO

Net Sales

Net sales were $3,181.4 million in the third quarter of 2025 compared to $2,987.5 million in the same period of 2024, an increase of $193.9 million, or 6.5%. The net sales increase reflects a favorable price realization of approximately 6% primarily related to pricing actions within the North America Confectionery and International segments. Volume was slightly positive, driven by strong results in North America Salty Snacks and the timing of shipments in the International segment, partially offset by price elasticity impacts within the North America Confectionery segment. Additionally, the 2024 acquisition of Sour Strips contributed a minimal benefit and there was no impact from foreign currency exchange rates.

Key U.S. Marketplace Metrics

The U.S. candy, mint and gum (“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.

For the third quarter of 2025, our total U.S. retail takeaway increased 6.3% 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 CMG consumer takeaway increased 5.4%, despite a CMG market share decrease of 4 basis points. Our Salty consumer takeaway increased 14.2% in the third quarter of 2025 and experienced a Salty market share increase of 48 basis points.

Cost of Sales and Gross Margin

Cost of sales were $2,144.1 million in the third quarter 2025 compared to $1,754.8 million in the same period of 2024, an increase of $389.3 million, or 22.2%. The increase was driven by higher costs, primarily due to unfavorable commodity costs from cocoa and tariffs. Mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases contributed a minimal impact (See Part I, Item 3 - Quantitative and Qualitative Disclosures About Market Risk included in this Quarterly Report on Form 10-Q for more information).

Gross margin was 32.6% in the third quarter of 2025 compared to 41.3% in the same period of 2024, a decrease of 870 basis points. The decrease was driven by unfavorable commodity and tariff costs and unfavorable mix, partially offset by net price realization, supply chain productivity andnet savings related to our AAA Initiative.

SM&A Expenses

SM&A expenses were $600.5 million in the third quarter of 2025 compared to $591.9 million in the same period of 2024, an increase of $8.6 million, or 1.5%. Total advertising and related consumer marketing expenses decreased 5.0%, driven primarily by efficiencies in the North America Confectionery segment. SM&A expenses, excluding advertising and related consumer marketing, increased 5.0% in the third quarter of 2025, driven by higher compensation and consulting costs, partially offset by net savings related to our AAA Initiative.

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 $2.2 million during the third quarter of 2025 versus $27.6 million in the third 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 $434.6 million in the third quarter of 2025 compared to $613.2 million in the same period of 2024, a decrease of $178.6 million, or 29.1%. 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 13.7% in 2025 from 20.5% 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 $51.5 million in the third quarter of 2025 compared to $44.3 million in the same period of 2024, an increase of $7.2 million, or 16.2%. 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 $11.2 million in the third quarter of 2025 versus $50.1 million in the third quarter of 2024, a net decrease of $38.9 million, or 77.6%. The decrease in net expense was predominantly driven by no write-downs on equity investments qualifying for tax credits in the third quarter of 2025 versus $49.6 million of write-downs on equity investments qualifying for tax credits in the third quarter of 2024, partially offset by an increase of $11.3 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 25.7% for the third quarter of 2025 compared with 14.0% for the third quarter of 2024. Relative to the 21% statutory rate, the 2025 effective tax rate was primarily impacted by state taxes and tax reserves, partially offset by foreign rate differential. Relative to the 21% statutory rate, the 2024 effective tax rate was primarily impacted by investment tax credits, partially offset by state taxes.

Net Income and Earnings Per Share-diluted

Net income was $276.3 million in the third quarter of 2025 compared to $446.3 million in the same period of 2024, a decrease of $170.0 million, or 38.1%. EPS-diluted was $1.36 in the third quarter of 2025 compared to $2.20 in the third quarter of 2024, a decrease of $0.84, or 38.2%. 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 expenses.

Net Sales

Net sales were $8,601.6 million in the first nine months of 2025 compared to $8,314.7 million during the same period of 2024, an increase of $286.9 million, or 3.4%. The net sales increase was driven by favorable price realization of approximately 4% across our reportable segments. The net sales increase was partially offset by a volume decrease of approximately 1%, primarily driven by price elasticity impacts within the North America Confectionery segment, partially offset by strong results in North America Salty Snacks. Additionally, the 2024 acquisition of Sour Strips contributed a minimal benefit and there was an unfavorable foreign currency exchange impact of less than 1%.

Key U.S. Marketplace Metrics

For the first nine months of 2025, our total U.S. retail takeaway increased 4.9% 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 4.4% and experienced a CMG market share decrease of 7 basis points. Our Salty consumer takeaway increased 10.1% and experienced a Salty market share increase of 36 basis points.

Cost of Sales and Gross Margin

Cost of sales were $5,823.7 million in the first nine months of 2025 compared to $4,572.2 million in the same period of 2024, an increase of $1,251.5 million, or 27.4%. The increase was driven by $1,309.7 million of higher costs, primarily related to $244.4 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 and tariffs. The increase was partially offset by $58.2 million, primarily related to lower sales volume and lower business realignment costs.

Gross margin was 32.3% in the first nine months of 2025 compared to 45.0% in the same period of 2024, a decrease of 1,270 basis points. The decrease was driven by higher commodity and tariff costs, unfavorable year-over-year mark-to-market impact from commodity derivative instruments, unfavorable product mix, and volume declines, partially offset by net price realization, supply chain productivity and net savings related to our AAA Initiative.

SM&A Expenses

SM&A expenses were $1,762.4 million in the first nine months of 2025 compared to $1,750.9 million in the same period of 2024, an increase of $11.5 million, or 0.7%. Total advertising and related consumer marketing expenses increased 2.1%, driven by increased spending in the North America Confectionery and North America Salty Snacks segments. SM&A expenses, excluding advertising and related consumer marketing, remained flat in the first nine months of 2025 as compared to the first nine months of 2024.

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 $18.8 million during the first nine months of 2025 versus $32.6 million in the first nine 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 $996.6 million in the first nine months of 2025 compared to $1,959.0 million in the same period of 2024, a decrease of $962.4 million, or 49.1%. The decrease was driven by lower gross profit and higher SM&A expenses, partially offset by lower business realignment activities as noted above. Operating profit margin decreased to 11.6% in the first nine months of 2025 from 23.6% 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 $142.1 million in the first nine months of 2025 compared to $125.5 million in the same period of 2024, an increase of $16.6 million, or 13.2%. 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 $9.8 million in the first nine months of 2025 versus $82.7 million in the first nine months of 2024, a net income decrease of $72.9 million, or 88.1%. The change was predominantly driven by no write-downs on equity investments qualifying for tax credits in the first nine months of 2025 versus $81.0 million of write-downs on equity investments qualifying for tax credits in the first nine months of 2024. This was partially offset by an increase of $12.7 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 33.3% for the first nine months of 2025 compared with 18.6% for the first nine 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 $563.2 million in the first nine months of 2025 compared to $1,424.6 million in the same period of 2024, a decrease of $861.4 million, or 60.5%. EPS-diluted was $2.77 in the first nine months of 2025 compared to $7.00 in the same period of 2024, a decrease of $4.23, or 60.4%. The decrease in both net income and EPS-diluted was driven by lower gross profit, higher interest expense, and higher taxes, partially offset by lower other expenses.