HSY Q2 Deep Dive: Volume Recovery and Pricing Actions Shape Outlook Amid Cocoa and Tariff Risks

Chocolate company Hershey (NYSE:HSY) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 26% year on year to $2.61 billion. Its non-GAAP profit of $1.21 per share was 20.4% above analysts’ consensus estimates.

Is now the time to buy HSY? Find out in our full research report (it’s free).

StockStory’s Take

Hershey’s second quarter performance surpassed Wall Street’s expectations, reflecting a meaningful rebound in sales volumes and continued brand investment. Management highlighted that consumer demand for both chocolate and salty snacks improved, driven by innovation, expanded shelf space, and promotional activity. CEO Michele Buck pointed to the company’s ability to grow volumes in a challenging environment, emphasizing that "top line momentum" and strategic reinvestment in marketing and technology were key to the quarter’s outcome. The company also acknowledged ongoing pressures from commodity costs, particularly cocoa, and noted progress in profit recovery initiatives.

Looking forward, Hershey’s guidance emphasizes sustained pricing actions, cost transformation programs, and increased investment in innovation to support both revenue and margin growth for the rest of the year and into 2026. Management stated that their "profit recovery plans are well underway" and outlined expectations for additional gross margin improvement, albeit with continued headwinds from cocoa inflation and tariffs. CFO Steve Voskuil cautioned that while recent pricing will aid margin recovery, it will not fully offset cost inflation, adding, "all of the other levers are going to continue to be important" for hitting earnings targets.

Key Insights from Management’s Remarks

Management attributed the quarter’s outperformance to higher sales volumes, successful new product activity, and brand investments, while also discussing ongoing margin pressure from input costs and the impact of recent pricing actions.

• Volume-driven growth: Hershey benefited from a 21% increase in sales volumes, largely due to increased consumer demand for both chocolate and salty snacks. Management credited innovation, expanded distribution, and instant consumables programs for driving higher household penetration.
• Salty snacks momentum: Brands like Dot’s and SkinnyPop outperformed a pressured salty snacks category. CEO Michele Buck noted that better-for-you positioning and flavor innovation, including exclusive offerings and multipack expansion, fueled ongoing growth in this segment.
• Nonseasonal chocolate acceleration: Nonseasonal chocolate products showed mid-single-digit growth, supported by new product launches and increased shelf space. Management expects recent innovation and expanded retail programs to sustain growth, although they cautioned that category comparisons may become more challenging in the second half.
• Pricing actions for margin recovery: The company initiated significant price increases to recover margin lost to cocoa inflation, but CFO Steve Voskuil made clear that pricing alone will not fully offset cost pressures, highlighting the need for further cost savings and operational efficiencies.
• Brand and technology investment: Hershey continued to reinvest in its core brands and technology infrastructure, including a new enterprise resource planning (ERP) platform and AI-driven efficiencies. These investments are targeted at long-term growth and operational resilience.

Drivers of Future Performance

Hershey’s forward-looking outlook centers on further price increases, expanded innovation, and cost savings, with ongoing risks from cocoa markets and tariffs likely to affect margin recovery.

• Continued pricing and innovation: Management expects recently implemented pricing actions and a robust innovation pipeline to support revenue growth into 2026. The company plans to reinvest behind new product launches and major brand events, aiming to maintain consumer engagement despite higher price points.
• Margin recovery initiatives: The company’s transformation program, including supply chain optimization and smart complexity reduction, is expected to contribute to gross margin expansion. However, management acknowledged that cocoa inflation and tariff uncertainty will continue to weigh on profitability, making further cost savings essential.
• External headwinds and agility: Hershey remains cautious about macroeconomic factors such as potential changes in consumer health trends, SNAP benefit adjustments, and possible regulatory shifts affecting ingredient sourcing. Management indicated that flexibility in supply chain and pricing strategy will be key in responding to evolving market conditions.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be closely tracking (1) the pace and effectiveness of Hershey’s pricing actions in recapturing lost margins, (2) the impact of new product launches and brand activations on both seasonal and nonseasonal sales, and (3) any regulatory developments related to cocoa tariffs and SNAP benefit changes. The company’s ability to maintain volume growth and manage commodity cost volatility will also be key markers of success.

Hershey currently trades at $175.86, down from $186.42 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

High Quality Stocks for All Market Conditions

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.