Hershey expects Q2 confection organic sales slightly down due to timing
Hershey delivered strong Q1 results with resilient consumer demand, but management is keeping full-year guidance unchanged, pointing to anticipated headwinds from SNAP cuts, higher gas prices, and new price-pack architecture. The Q2 sales dip is a timing issue. Gross margins are set to inflect sharply higher in Q2 and the back half of the year. Q1 consumer demand was resilient, with elasticities running better than planned, but the company remains cautious and is not raising guidance.
Buzzberg readHershey expects Q2 confection organic sales slightly down due to timingHershey delivered strong Q1 results with resilient consumer demand, but management is keeping full-year guidance unchanged, pointing to anticipated headwinds from SNAP cuts, higher gas prices, and new price-pack architecture. The Q2 sales dip is a timing issue. Gross margins are set to inflect sharply higher in Q2 and the back half of the year. Q1 consumer demand was resilient, with elasticities running better than planned, but the company remains cautious and is not raising guidance.Read full analysisCollapse analysis
Hershey delivered strong Q1 results with resilient consumer demand, but management is keeping full-year guidance unchanged, pointing to anticipated headwinds from SNAP cuts, higher gas prices, and new price-pack architecture. The Q2 sales dip is a timing issue. Gross margins are set to inflect sharply higher in Q2 and the back half of the year. Q1 consumer demand was resilient, with elasticities running better than planned, but the company remains cautious and is not raising guidance.
Q2 organic sales will be slightly down due to Easter timing, earlier spring shipments (s'mores), and international customer pull-forward, not due to a demand weakness.
Gross margins are expected to inflect upward, with a ~300 bps increase in Q2 and greater than 500 bps expansion in the back half of 2026.
Competition remains rational, but Hershey is seeing increased innovation from mainline and premium players. The company is winning spring resets and has strong plans for the back half.
Revenue$3.1042B
+0% QoQ
EPS$2.35
+37% QoQ
Gross margin39.39%
reported
Op margin20.64%
reported
What changed this quarter
01
Guidance
Hershey expects Q2 confection organic sales slightly down due to timing
Guidance · revenue to -2%
02
Margins
Gross margins to inflect in Q2 and accelerate in back half
Reported gross margin was 39.39%, reinforcing the quarter's better-than-guided profitability.
03
Demand
Elasticities running favorable versus plan; conservatism maintained
Management expressed confidence in second-half momentum driven by innovation and tentpoles, but remained cautious about macro headwinds and near-term elasticity, maintaining guidance.
04
Guidance
Tentpoles to add full point of growth; strong H2 visibility
Guidance · revenue to -2%
Demand & capex
Demand
Bookings & conversion
Elasticities running favorable versus plan; conservatism maintained. Management expressed confidence in second-half momentum driven by innovation and tentpoles, but remained cautious about macro headwinds and near-term elasticity, maintaining guidance.
Capex
Investment and capacity
Management indicated they are investing in R&D and innovation across premium, sweets, and better-for-you categories, with incremental R&D investment to build capability. They also mentioned plans to insource manufacturing for Reese's in Europe once scale is achieved, implying future capacity investment.
Tone · Measured
Management expressed confidence in second-half momentum driven by innovation and tentpoles, but remained cautious about macro headwinds and near-term elasticity, maintaining guidance.
Supply-chain alpha
A1
Hershey's second-quarter organic sales are expected to be slightly down, driven by stronger-than-expected Easter sell-through pulling Q2 spring shipments (like s'mores) into Q1, and international customers pulling forward orders to get ahead of potential Middle East disruptions.
“Easter sell-through was strong, and so one upshot from that was earlier shipping of some of our spring programming, including s'mores, for example, which is actually getting activated as we speak. That's earlier than we typically would hav…”
Hershey's price elasticity is running better than modeled, but management is not raising guidance. They are waiting to see the reaction to new price-pack architecture (PPA) hitting shelves, as elasticities could change.
“we're pleased to see it still holding. You know, we have some things that will be coming to market. Price pack architecture, for example, is hitting shelves right now. So, you know, we'll continue to watch that to see if elasticities evolv…”
Hershey is aggressively pushing into the 'accessible premium' space, with a new Hershey's brand innovation launching in the fall and plans for Cadbury and Brookside, aiming to capture Gen Z consumers shifting away from traditional chocolate.
“We'll have a big innovation on Hershey's in the fall as well that we're really excited about. It gets us into that accessible premium space. So that is really important.”
Management's commentary on cocoa indicates that despite a large short-term surplus, they view prices as structurally higher for the long term. They have hedged to manage 2026 but are prepared to participate in downside in 2027-28 if prices fall.
“we still remain of the view that long term, cocoa could remain above some of those really lower historical levels that we've seen. Now, we'll see how it plays out. So I'd say long term, we probably have a somewhat cautious view. In the nea…”