Hershey's price rises outweigh a 10-point volume drop; adjusted gross margin reaches 42.7%

The Hershey Company (NYSE: HSY) said higher prices added about 11 points to third-quarter sales while volume fell about 10 points, leaving organic sales up 0.8%, according to its third-quarter results release dated Thursday, October 29.

What happened

Net sales rose 3.0% to $3,275.5 million in the quarter ended September 27, from the third quarter of 2025. Organic, constant-currency net sales, which exclude currency effects and the 2025 LesserEvil acquisition, rose 0.8%, the company said. Net price realization was approximately 11 points, and volume declined approximately 10 points, which Hershey attributed to elasticity effects in North America Confectionery and International, shipment timing and planned portfolio optimization in International, partly offset by growth in North America Salty Snacks.

In North America Confectionery, its largest segment, net sales rose 1.6% to $2,656.5 million on about 13 points of price and about 11 points less volume. Segment income rose 66.2% to $949.7 million and segment margin was 35.8%, up 1,400 basis points. Hershey said U.S. candy, mint and gum retail takeaway rose 0.8% in the 12 weeks to September 27, against a significant Reese innovation launch a year earlier, and that its share declined.

North America Salty Snacks net sales rose 22.3% to $392.7 million, of which the LesserEvil acquisition contributed about 20 points. Segment income fell 17.9% to $47.4 million, which the company attributed to higher freight, logistics and manufacturing costs, higher net commodity costs and more consumer marketing. International net sales fell 7.5%, or 9.7% on an organic constant-currency basis.

Why it matters

Profit rose much faster than sales. Reported gross margin was 46.1%, compared with 32.6% a year earlier. Adjusted gross margin, which leaves out derivative mark-to-market gains, was 42.7%, up 1,090 basis points. Hershey said the increase came from net price realization, productivity program savings, tariff refunds and lower net commodity costs, which more than offset lower volume and higher freight and logistics expenses.

Reported net income was $580.8 million, or $2.88 per diluted share, up 111.8%. Adjusted earnings per diluted share were $2.64, up 103.1%. The company said adjusted earnings per share include about $0.22 from tariff refunds received in the third quarter, so the figure without them would be $2.42 (computed). Pre-tax derivative mark-to-market gains were $113.4 million, against $24.3 million a year earlier.

Spending rose too. Advertising and related consumer marketing expenses increased 17.1%, and selling, marketing and administrative expenses increased 15.4%, the company said.

Chief executive Kirk Tanner said in the release: "Our second-half demand creation initiatives are gaining momentum, even as consumers grow more cautious."

What to watch

Hershey updated its 2026 outlook. It now expects net sales growth of about 5%, from 4.5% to 5% before, and organic net sales growth of about 3%, from 3% to 3.5%. Adjusted earnings per share growth is now expected at 36% to 38.5%, from 32.5% to 35%. The company said the outlook does not include potential future tariff refunds.

For the nine months to September 27, net sales rose 6.6% to $9,167.0 million and organic constant-currency sales rose 4.0%. The next quarterly report will show whether volume keeps falling as price increases stay in place, and whether organic sales growth reaches the roughly 3% the company now expects for the full year.