HERSHEY CO

Net Sales

Net sales were $3,275.5 million in the third quarter of 2026 compared to $3,181.4 million in the same period of 2025, an increase of $94.1 million, or 3.0%. The net sales increase reflects a favorable price realization of approximately 11%, primarily related to pricing actions across all segments. Additionally, the 2025 acquisition of LesserEvil contributed approximately a 2% benefit. There was minimal impact from foreign currency exchange rates. The increase was partially offset by a volume decrease of approximately 10%, primarily driven by volume declines in the 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 third quarter of 2026, our total U.S. retail takeaway increased 2.2% 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 0.8% and experienced a CMG market share decline. Our Salty consumer takeaway, excluding LesserEvil, increased 4.0% in the third 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 $1,764.5 million in the third quarter 2026 compared to $2,144.1 million in the same period of 2025, a decrease of $379.6 million, or 17.7%. The decrease was driven by $367.0 million primarily related to lower commodity costs, net savings related to our AAA Initiative, tariff refunds and $49.1 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). The decrease was partially offset by $36.2 million related to higher freight and logistics expenses.

Gross margin was 46.1% in the third quarter of 2026 compared to 32.6% in the same period of 2025, an increase of 1,350 basis points. The increase was driven by favorable net price realization, favorable derivative mark-to-market activity, tariff refunds, and net savings related to our AAA Initiative, partially offset by volume declines and higher freight and logistics expenses.

SM&A Expenses

SM&A expenses were $692.8 million in the third quarter of 2026 compared to $600.5 million in the same period of 2025, an increase of $92.3 million, or 15.4%. SM&A expenses, excluding advertising and related consumer marketing, increased 14.5% in the third quarter of 2026, driven by higher capability and technology investments, partially offset by lower compensation and benefit costs, as well as net savings related to our AAA Initiative versus the prior year. Advertising and related consumer marketing expenses increased 17.1%, driven by the expansion of national brand campaigns in the North America Confectionery and North America Salty Snacks segments.

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 $0.5 million during the third quarter of 2026 versus $2.2 million in the third 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 $817.7 million in the third quarter of 2026 compared to $434.6 million in the same period of 2025, an increase of $383.1 million, or 88.1%. The increase was primarily 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 25.0% in 2026 from 13.7% in 2025, driven by the same factors noted above that resulted in higher gross margin for the period.

Interest Expense, Net

Net interest expense was $48.7 million in the third quarter of 2026 compared to $51.5 million in the same period of 2025, a decrease of $2.8 million, or 5.4%. The decrease was primarily due to lower long-term debt balances, partially offset by lower interest income.

Other (Income) Expense, Net

Other (income) expense, net was expense of $1.0 million in the third quarter of 2026 versus expense of $11.2 million in the third quarter of 2025, a change of $10.2 million. The decrease in net expense was predominantly driven by a decrease of $10.6 million in non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans in the third quarter of 2026 versus the same period of 2025.

Income Taxes and Effective Tax Rate

The effective income tax rate was 24.4% for the third quarter of 2026 compared with 25.7% for the third quarter of 2025. The 2026 effective tax rate was lower due to the impact of tax reserves and foreign rate differentials related to mark-to-market activity. Relative to the 21% statutory rate, the 2026 effective tax rate was primarily impacted by state taxes and foreign rate differential. Relative to the 21% statutory rate, the 2025 effective tax rate was primarily impacted by state taxes, foreign rate differentials and tax reserves.

Net Income and Earnings Per Share-diluted

Net income was $580.8 million in the third quarter of 2026 compared to $276.3 million in the same period of 2025, an increase of $304.5 million, or 110.2%. EPS-diluted was $2.88 in the third quarter of 2026 compared to $1.36 in the third quarter of 2025, an increase of $1.52, or 111.8%. The increase in both net income and EPS-diluted was driven by higher gross profit, lower other (income) expense, lower business realignment costs, and lower interest expense, partially offset by higher SM&A expenses and higher income taxes. Higher income taxes were driven by higher income before income taxes, partially offset by a lower effective tax rate.

Net Sales

Net sales were $9,167.0 million in the first nine months of 2026 compared to $8,601.6 million during the same period of 2025, an increase of $565.4 million, or 6.6%. The net sales increase was driven by favorable price realization of approximately 11% within our North America Confectionery and International segments. Additionally, the 2025 acquisition of LesserEvil contributed approximately a 2% benefit. Further, there was minimal impact from foreign currency exchange rates. The net sales increase was partially offset by a volume decrease of approximately 7%, driven by volume declines in the 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 nine months of 2026, our total U.S. retail takeaway increased 3.8% 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. CMG consumer takeaway increased 2.2%, despite a CMG market share decline. Our Salty consumer takeaway, excluding LesserEvil, increased 6.7% and experienced a Salty, excluding LesserEvil, market share increase.

Cost of Sales and Gross Margin

Cost of sales were $5,170.0 million in the first nine months of 2026 compared to $5,823.7 million in the same period of 2025, a decrease of $653.7 million, or 11.2%. The decrease was driven by $1,039.5 million primarily related to lower commodity costs, net savings related to our AAA Initiative, tariff refunds and $191.5 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). The decrease was partially offset by $385.8 million, primarily related to increased supply chain costs and unfavorable mix.

Gross margin was 43.6% in the first nine months of 2026 compared to 32.3% in the same period of 2025, an increase of 1,130 basis points. The increase was driven by favorable net price realization, net savings related to our AAA Initiative and tariff refunds, partially offset by unfavorable supply chain costs and volume declines.

SM&A Expenses

SM&A expenses were $1,889.4 million in the first nine months of 2026 compared to $1,762.4 million in the same period of 2025, an increase of $127.0 million, or 7.2%. SM&A expenses, excluding advertising and related consumer marketing, increased 7.6% in the first nine months of 2026 as compared to the first nine months of 2025, driven by higher capability and technology investments. Advertising and related consumer marketing expenses increased 6.4%, driven by increased spending across all segments.

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 $6.6 million during the first nine months of 2026 versus $18.8 million in the first nine months 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 $2,101.0 million in the first nine months of 2026 compared to $996.6 million in the same period of 2025, an increase of $1,104.4 million, or 110.8%. The increase was driven by higher gross profit and lower business realignment activities, partially offset by higher SM&A expense, as noted above. Operating profit margin increased to 22.9% in the first nine months of 2026 from 11.6% in the same period in 2025, driven by the same factors that resulted in higher gross margin for the period.

Interest Expense, Net

Net interest expense was $148.5 million in the first nine months of 2026 compared to $142.1 million in the same period of 2025, an increase of $6.4 million, or 4.5%. The increase was primarily due to lower interest income, partially offset by lower long-term debt balances.

Other (Income) Expense, Net

Other (income) expense, net was expense of $3.6 million in the first nine months of 2026 versus expense of $9.8 million in the first nine months of 2025, a change of $6.2 million. The decrease in net expense was predominantly driven by a decrease of $9.5 million in non-service cost components of net periodic benefit cost relating to pension and other post-retirement benefit plans, partially offset by lower other corporate income of $3.3 million.

Income Taxes and Effective Tax Rate

Our effective income tax rate was 24.4% for the first nine months of 2026 compared with 33.3% for the first nine months of 2025. The 2026 effective tax rate was lower due to the impact of tax reserves and foreign rate differentials related to mark-to-market activity. Relative to the 21% statutory rate, the 2026 effective tax rate was primarily impacted by state taxes and foreign rate differential. Relative to the 21% statutory rate, the 2025 effective tax rate was primarily impacted by state taxes, foreign rate differentials and tax reserves.

Net Income and Earnings Per Share-diluted

Net income was $1,473.6 million in the first nine months of 2026 compared to $563.2 million in the same period of 2025, an increase of $910.4 million, or 161.6%. EPS-diluted was $7.27 in the first nine months of 2026 compared to $2.77 in the same period of 2025, an increase of $4.50, or 162.5%. 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 income taxes, and higher interest expense. Higher income taxes were driven by higher income before income taxes, partially offset by a lower effective tax rate.