Hershey Reports 60% Decline in 2025 Net Income and EPS Driven by Soaring Costs and Derivative Losses

summarizeSummary

Hershey reported a sharp 60% drop in 2025 net income and EPS, primarily due to significantly higher commodity and supply chain costs, alongside unfavorable derivative valuations. The company also completed two notable acquisitions and issued $2.0 billion in new long-term debt.

check_boxKey Events

• Significant Profitability Decline

  Net income decreased by 60.2% to $883.3 million, and diluted EPS fell by 60.3% to $4.34 in 2025 compared to 2024. Gross profit declined by 26.0% and operating profit by 50.3%.

• Escalating Costs and Derivative Losses

  Cost of sales increased by $1.87 billion (31.7%), driven by $736.6 million in higher commodity costs, $287.2 million in increased supply chain costs (including tariffs), and $491.0 million in unfavorable mark-to-market activity on commodity derivatives.

• Substantial Debt Issuance

  The company issued $2.0 billion in new long-term notes in February 2025, partially offset by $600 million in repayments, resulting in a net increase in long-term debt.

• Strategic Acquisitions

  Hershey completed the acquisition of LesserEvil, LLC for $769.1 million in cash (plus up to $200 million in contingent consideration) and the Fulfil brand for $73.6 million in 2025.

auto_awesomeAnalysis

The Hershey Company's 2025 annual report reveals a substantial deterioration in financial performance, with net income and diluted EPS plummeting by over 60%. This significant decline was primarily driven by a 31.7% surge in cost of sales, attributed to $736.6 million in higher commodity costs, $287.2 million in increased supply chain expenses (including tariffs), and a $491.0 million unfavorable mark-to-market impact from commodity derivatives. Gross profit fell by 26.0% and operating profit by 50.3%. The International segment was particularly hard hit, with segment income decreasing by 97.0%. While the company engaged in strategic acquisitions, such as LesserEvil for $769.1 million and the Fulfil brand for $73.6 million, and issued $2.0 billion in new long-term debt, these actions were overshadowed by the severe profitability pressures. The absence of share repurchases in 2025, compared to $494.2 million in 2024, also signals a shift in capital allocation priorities amidst the challenging environment. Investors should be concerned about the company's ability to manage escalating input costs and restore profitability in its international operations.