The Hershey Company (HSY) Q3 2026 earnings review
Hershey doubles its profit on higher prices, but volumes drop
The Hershey Company, the maker of Reese's and SkinnyPop, doubled its third-quarter profit through steep price increases while its sales volumes fell. Profit per share excluding one-offs reached $2.64, above what the company's own plan pointed to and helped by tariff refunds. Chief executive Kirk Tanner said marketing programmes are gaining momentum, but underlying sales rose less than 1% as a 10% volume drop offset an 11% price hike.
| Sales from businesses owned a year ago | +0.8% price +11%, volume -10% |
|---|---|
| Profit per share, excluding one-offs | $2.64 +103% from a year ago (includes $0.22 tariff refund) |
| Gross margin, excluding one-offs | 42.7% +10.9 percentage points from a year ago |
| Full-year underlying sales outlook | Trimmed to ~3% prior: 3% to 3.5% |
⚖️ Verdict: 🔴 Bearish
The story got worse because customer pushback against higher prices deepened across the business. Core candy volume fell 11% with another market-share loss, Salty Snacks profit dropped 18% on freight and factory costs, and Hershey trimmed its full-year underlying sales outlook to about 3%, which by our math leaves almost zero growth for the fourth quarter. The good news: lower cocoa costs and high prices lifted gross margin excluding one-offs by 11 percentage points, and management raised full-year profit plans by the exact amount of the third-quarter tariff refund.
The question now is whether candy volumes will recover once last year's big price increases pass their one-year mark, or whether shoppers have permanently cut back. One view is that contracted cocoa cost relief will carry 2027 profit as volumes settle; the other is that three years of market-share losses and rising freight costs in snacks will eat into those gains. Fourth-quarter candy volume and management's 2027 outlook on the next call will settle it.
🐂 Bull Case
Higher Prices and Lower Cocoa Costs Lifted Margins
The Hershey Company, the maker of Reese's and KitKat in the US, spent the past year raising prices to cover high cocoa costs. Chief executive Kirk Tanner said the company remains on track for a "meaningful recovery in margin and earnings" this year.
That recovery arrived in the third quarter. Gross margin excluding one-offs rose 10.9 percentage points from a year ago to 42.7%, because cost of sales fell by 13.5 percentage points of revenue. Hershey kept 11% higher prices while net commodity costs fell, and it collected tariff refunds and supply-chain savings.
- North America Confectionery segment margin: 35.8%, up 14.0 percentage points from a year ago
- Operating margin excluding one-offs: 23.0%, up 9.7 percentage points
- Selling, marketing and administrative costs: 21.2% of revenue, up 2.3 percentage points on "higher capability and technology investments" and a 17.1% rise in advertising
What to watch: the quarterly filing's note on commodity derivative gains scheduled to flow into segment profit over the next 12 months. A large remaining pool would show how much cost relief is locked in for 2027 regardless of cocoa market prices.
Tariff Refunds Carried the Full-Year Profit Raise
Profit per share excluding one-offs more than doubled from last year's low point, rising 103.1% to $2.64. That beat the roughly $2.06 to $2.14 per share that the prior full-year outlook implied for an average second-half quarter by our math.
Hershey received $0.22 per share in tariff refunds during the quarter, following $0.03 in the second quarter. Even without the $0.22 refund, profit per share was $2.42 by our math, up 86.2% from a year ago and still well ahead of the implied pace.
Management raised the full-year profit outlook by $0.22 at the middle of the range, to $8.58–$8.74 per share. Because the raise matches the tariff refund to the cent, the chocolate maker kept its operational beat in reserve for the fourth quarter.
What to watch: fourth-quarter profit per share against the $1.77 implied by the middle of the new full-year outlook. Beating that figure without new tariff refunds would show that underlying earnings power is running ahead of the plan.
🐻 Bear Case
Candy Volume Drop Steepened and Market Share Fell
"Our second-half demand creation initiatives are gaining momentum, even as consumers grow more cautious," chief executive Kirk Tanner said. Management has argued for four quarters that customer pushback against higher prices is tracking within its plan.
The third-quarter numbers cut against that claim. In North America Confectionery, Hershey's core US and Canadian candy business, underlying sales rose 1.6% only because prices were up 13%. Shipment volume fell 11%, worse than the 10% drop in the second quarter and the 4% drop in the first.
Retail checkout sales of Hershey's US candy, mint and gum rose just 0.8% over the 12 weeks ended September 27, and the company lost market share again. Hershey also trimmed its full-year underlying sales outlook from 3%–3.5% to about 3%, which by our math leaves almost no underlying growth (0.2%) for the fourth quarter.
What to watch: North America Confectionery volume in the fourth quarter as last year's price increases pass their one-year mark. If volume keeps falling near 10% while price gains fade, the company's 2% to 4% long-term growth target for 2027 is at risk.
Salty Snacks Sold More But Earned Less
North America Salty Snacks — which makes SkinnyPop popcorn, Dot's pretzels and the acquired LesserEvil brand — is Hershey's main engine for volume growth. Sales in the division jumped 22.3% to $392.7 million, with LesserEvil adding 20 percentage points and sales from businesses owned a year ago up 2.3%.
Shoppers kept buying: US retail checkout sales excluding LesserEvil rose 4.0% and gained market share, while a "planned reduction of sales to private label customers" held back shipment volume to 1% growth. Yet segment profit fell 17.9% from a year ago to $47.4 million, and the division's margin shrank by 5.9 percentage points to 12.1%.
Hershey blamed "higher freight, logistics, and manufacturing costs", higher ingredient costs and heavier marketing spend. Across the first nine months of 2026, Salty Snacks profit is down 13.1%, making management's earlier goal of double-digit full-year profit growth for the division nearly impossible.
What to watch: Salty Snacks segment margin in the fourth quarter. A reading still stuck near 12% would confirm that supply-chain and freight costs will weigh on profit until new pretzel factory capacity opens in 2027.
International Losses More Than Doubled as Volumes Dropped
Hershey's International division has lost money in four of the last five quarters, and the third quarter was the worst of the stretch. Sales fell 7.5% to $226.4 million, and sales from businesses owned a year ago in constant currency dropped 9.7%.
A 4% price increase triggered a 14% drop in volume, which the company attributed to buyer pushback against higher prices, quarterly shipment timing and "planned portfolio rationalization in select markets". Higher ingredient and factory costs pushed the division's operating loss to $30.0 million, more than double last year's $13.6 million loss, for a margin of minus 13.3%.
What to watch: management's promised year-end update on its International restructuring plan on the fourth-quarter call. Investors need a specific cost-savings target and a timeline for getting the division back to break-even.
Risks this quarter didn't answer
Three standing risks from prior quarters cannot be checked from the third-quarter earnings release alone.
- 2027 cocoa hedge coverage: the release does not state what share of 2027 cocoa needs is locked in or at what price; any comment on the conference call will shape 2027 margin expectations.
- Government food-stamp rules and weight-loss drugs: Tanner noted that consumers are growing more cautious, but the release gives no data on state SNAP restrictions or GLP-1 weight-loss drug impact; call commentary will show if management is seeing actual demand loss.
- Full-quarter scanner share vs 12-week window: the release reports a 0.8% US candy retail sales rise for the 12 weeks ended September 27; the quarterly filing will show whether the full fiscal-quarter figure was weaker.
👓 Other Themes
Commodity Derivative Gains Pushed Reported Profit Above Underlying
Hershey uses commodity futures contracts to lock in ingredient costs for future years, and it records the paper gains or losses on those contracts in its reported results right away while holding them out of results excluding one-offs until the physical inventory is sold. In the third quarter, $113.4 million ($0.56 per share) of paper derivative gains lifted reported profit per share to $2.88, above the $2.64 figure excluding one-offs.
💲 Other KPIs
Total debt — short-term debt, current portion of long-term debt, and long-term debt — fell 8.6% from the second quarter's $5,610.7 million and is down from $5,403.1 million at year-end 2025. The current portion of long-term debt dropped from $504.2 million to $197.8 million as Hershey paid off notes that matured in August 2026.
Accounts receivable — money owed by retail customers — rose 15.2% from a year ago, outpacing the 3.0% rise in net sales due to seasonal holiday shipments. Inventories fell 5.8% from a year ago and dropped from $1,743.3 million in the second quarter as the chocolate maker shipped autumn and Halloween stock.
Diluted shares fell 0.9% from 203.5 million a year ago and edged down from 202.7 million in the second quarter. The lower share count reflects the $439.4 million of stock buybacks the confectioner completed in the first half of 2026.
🔮 Guidance
Raised. The company moved its full-year reported sales plan to the top of the prior range, helped by about 2 percentage points from the LesserEvil acquisition (up from 1.5 points previously) and a slight currency benefit. By our math, that leaves about 0.6% reported sales growth for the fourth quarter, down from 3.0% in the third quarter.
Cut. Hershey trimmed its full-year underlying sales plan to the bottom of the prior range after third-quarter volumes dropped 10%. By our math, 4.0% growth across the first nine months and a ~3% full-year target leave just 0.2% underlying growth for the fourth quarter.
Raised. The middle of the range moved up $0.22 to $8.66, which equals the $0.22 per share tariff refund received in the third quarter. It is the second raise this year (+$0.08 in Q2, +$0.22 in Q3). By our math, the middle of the range leaves $1.77 for the fourth quarter, up 3.5% from a year ago.
Raised. The middle of the range rose $0.10 to $8.13, or 87.3% growth from 2025's $4.34. Reported profit per share in 2026 includes $0.30 to $0.35 of restructuring charges and $0.35 to $0.40 of acquisition integration costs, and excludes future paper gains or losses on commodity derivatives.
Raised (rate lowered). The confectioner moved its expected tax rate to the favourable bottom end of the prior 25% to 27% band. Both the reported and underlying tax rates stood at 24.4% in the third quarter and 24.4%–24.5% across the first nine months, helped by higher pre-tax profit.
Raised (cost lowered). Full-year net interest expense now sits at the favourable bottom of the prior $200 million to $210 million range. Net interest cost was $48.7 million in the third quarter and $148.5 million across the first nine months, leaving about $51.5 million for the fourth quarter.
Raised (cost lowered). Expected pension and post-retirement benefit costs dropped from roughly $10 million to a range of $5 million to $10 million (down from ~$15 million at the start of the year). Other expense was $1.0 million in the third quarter and $3.6 million year to date.
Unchanged at the middle of the range. Management narrowed its capital spending plan to $450 million, matching the middle of the prior band as major factory and computer-system projects wind down.
Unchanged. The US company still expects $100 million in cost savings this year from its supply-chain and overhead restructuring programme, which is in its final year.
❓ Key Questions
How much of 2027 cocoa is hedged and at what price?
Gross margin excluding one-offs recovered to 42.7% on high prices and lower net commodity costs. Investors cannot model 2027 profit without knowing what share of next year's cocoa is locked in and how those contract prices compare with current market levels.
When will Salty Snacks profit stop falling?
North America Salty Snacks sales rose 22.3%, but segment profit dropped 17.9% on freight and factory costs and is down 13.1% year to date. Management previously promised double-digit full-year profit growth for the division and has not given a new target.
What is the cost and timeline of the International fix?
International lost $30.0 million in the third quarter, more than double a year ago, as volumes fell 14%. Management has mentioned "planned portfolio rationalization in select markets" without stating what the restructuring will cost or when losses will end.
What volume recovery does Hershey expect as price hikes lap?
North America Confectionery volume fell 11% against a 13% price increase, and US retail market share declined again. As last year's price hikes pass their one-year mark in the fourth quarter, how quickly must volume recover to hit the 2% starting target for 2027?