HERSHEY CO

Net Sales

Net sales were $3,104.2 million in the first quarter of 2026 compared to $2,805.4 million in the same period of 2025, an increase of $298.8 million, or 10.6%. The net sales increase reflects a favorable price realization of approximately 10% primarily related to pricing actions within the North America Confectionery and International segments. Additionally, the 2025 acquisition of LesserEvil contributed a 2% benefit, with an additional 1% benefit being provided by foreign currency exchange rates. The increase was partially offset by a volume decrease of approximately 2%, primarily driven by declines in North America Confectionery and International segments, which more than offset the volume growth in the North America Salty Snacks segment.

Key U.S. Marketplace Metrics

For the first quarter of 2026, our total U.S. retail takeaway increased 9.3% in the expanded multi-outlet combined plus convenience store channels (MULO+ w/ Convenience), which includes candy, mint, gum, salty snacks and grocery items. Our U.S. candy, mint and gum (“CMG”) consumer takeaway increased 8.1%, despite a CMG market share decline. Our Salty consumer takeaway, excluding LesserEvil, increased 9.8% in the first quarter of 2026 and experienced a Salty, excluding LesserEvil, market share increase.

The consumer takeaway and market share information reflect measured channels of distribution accounting for approximately 90% of our U.S. confectionery and salty snack retail businesses. These channels of distribution primarily include food, drug, mass merchandisers and convenience store channels, 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 $1,881.4 million in the first quarter 2026 compared to $1,861.1 million in the same period of 2025, an increase of $20.3 million, or 1.1%. The increase was driven by $269.9 million of higher costs, predominantly due to unfavorable commodity and tariff costs. The increase was partially offset by declines of $249.6 million, primarily due to supply chain productivity and transformation program net savings and $24.9 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).

Gross margin was 39.4% in the first quarter of 2026 compared to 33.7% in the same period of 2025, an increase of 570 basis points. The increase was driven by favorable net price realization partially offset byunfavorable supply chain and tariff costs and volume declines.

SM&A Expenses

SM&A expenses were $576.0 million in the first quarter of 2026 compared to $558.7 million in the same period of 2025, an increase of $17.3 million, or 3.1%. Total advertising and related consumer marketing expenses increased 5.8%, driven by investments in advertising and related consumer marketing expenses in the North America Salty Snacks and International segments. SM&A expenses, excluding advertising and related consumer marketing, increased 1.8% in the first quarter of 2026, driven by higher capability and technology investments, partially offset by lower compensation and benefit costs and lower consulting fees, as well as net savings related to to our AAA Initiative versus the prior year.

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 $6.0 million during the first quarter of 2026 versus $16.4 million in the first quarter of 2025. 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 $640.7 million in the first quarter of 2026 compared to $369.2 million in the same period of 2025, an increase of $271.5 million, or 73.5%. The increase wasprimarily due to higher gross profit as well as lower business realignment expenses, partially offset by increased SM&A expenses, as noted above. Operating profit margin increased to 20.6% in 2026 from 13.2% in 2025, driven bythe same factors noted above that resulted in higher gross margin for the period.

Interest Expense, Net

Net interest expense was $49.8 million in the first quarter of 2026 compared to $44.6 million in the same period of 2025, an increase of $5.2 million, or 11.6%. The increase was primarily due to the timing of the February 2025 debt issuance.

Other (Income) Expense, Net

Other (income) expense, net was income of $1.8 million in the first quarter of 2026 versus expense of $0.9 million in the first quarter of 2025, a change of $2.7 million. The decrease in net expense was predominantly driven by a decrease of $2.4 million of non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans in the first quarter of 2026 versus the same period of 2025.

Income Taxes and Effective Tax Rate

The effective income tax rate was 26.6% for the first quarter of 2026 compared with 30.7% for the first quarter of 2025. Relative to the 21% statutory rate, the 2026 and 2025 effective tax rates were primarily impacted by state taxes and foreign tax differential.

Net Income and Earnings Per Share-diluted

Net income was $435.1 million in the first quarter of 2026 compared to $224.2 million in the same period of 2025, an increase of $210.9 million, or 94.1%. EPS-diluted was $2.13 in the first quarter of 2026 compared to $1.10 in the first quarter of 2025, an increase of $1.03, or 93.6%. The increase in both net income and EPS-diluted was driven by higher gross profit, lower business realignment costs and lower other (income) expense, partially offset by higher SM&A expenses, higher interest expense, and higher income taxes. Higher income taxes were driven by higher income before income taxes, partially offset by a lower effective tax rate.