Hershey (NYSE:HSY) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Hershey Company reported confidence in achieving 2% to 4% sales growth in 2027, aligning with long-term targets, despite macroeconomic pressures.
The company highlighted significant innovation efforts, including a 50% increase in the innovation pipeline for 2027, focusing on new products like Hershey Creme Bar and Reese’s Oreo.
Hershey’s management emphasized strategic initiatives to improve competitiveness, including refreshed media campaigns, targeted promotions, and increased investments in automation to enhance manufacturing efficiency.
Challenges noted include market share loss, which the company aims to counteract through stronger R&D and marketing investments, particularly in premium and better-for-you product segments.
Gross margin improvements are expected for 2027, driven by productivity enhancements and cost management, particularly in freight logistics and cocoa hedging strategies.
Operationally, the company is addressing supply constraints in its salty snacks business, with new manufacturing lines expected in 2027 to meet rising demand.
Hershey is committed to investing in brand growth and expects a 10% increase in brand investment for the year, focusing on innovation and new marketing campaigns.
Management remains cautious about consumer spending trends, particularly due to inflation and rising gas prices, which may impact sales in certain channels like convenience stores.
Full Transcript
OPERATOR
Greetings. Welcome to the Hershey Company’s third quarter 2026 question and answer session. To join the queue, please press star 1 on your telephone keypad. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Adori Naughton, Vice President of Investor Relations for Hershey. Thank you. You may begin.
Adori Naughton (Vice President of Investor Relations)
Good morning, everyone. Thank you for joining us today for the company’s third quarter 2026 earnings Q&A session. I hope everyone has had the chance to read our press release and listen to our prerecorded management remarks, both of which are available on our website. In addition, we have posted a transcript of the prerecorded remarks. At the conclusion of today’s live Q&A session, we will also post a transcript and audio replay of this call. Please note that during the Q&A session we may make forward-looking statements that are subject to various risks and uncertainties. These statements include expectations and assumptions regarding the company’s future operations and financial performance. Actual results could differ materially from those projected. The company undertakes no obligation to update these statements based on subsequent events.
A detailed listing of such risks and uncertainties can be found in today’s press release and the company’s SEC filings. Finally, please note that we may refer to certain non-GAAP financial measures that we believe provide useful information for investors. This information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Reconciliations for the GAAP results are included in this morning’s press release.
Joining me today are Hershey’s President and CEO, Kirk Tanner, and Hershey’s Senior Vice President and CFO, Dave Hulay. Operator, we can kick it over for the first question, please.
OPERATOR
Thank you. If you would like to ask a question, it is star 1 on your telephone keypad. You may press star 2 if you would like to remove your question from the queue. We ask that you please limit to one question and one follow-up question. Our first question is from Andrew Lazar with Barclays. Please proceed.
Andrew Lazar (Analyst at Barclays)
Great. Thanks so much. Good morning, Kirk and Dave and Adori.
Kirk Tanner (Chief Executive Officer)
Good morning, Andrew.
Andrew Lazar (Analyst at Barclays)
Maybe to start, in your prepared remarks you state Hershey still has visibility to sales growth in 2027 in line with your long-term algorithm of 2% to 4%. So my question, I guess, is what gives you this level of visibility in light of the tougher macro backdrop? And is it increasingly likely they’re solely from carryover price, or should we expect maybe to get back to some even modest level of volume as the company more fully laps price?
Kirk Tanner (Chief Executive Officer)
Yeah, thanks, Andrew. I’ll take that one. Look, we’re confident in the actions, control, and the results that we’re delivering, so we are holding that 2% to 4% outlook. Now, the consumer and macro backdrop, as you mentioned, will influence where we land in that range. I like to think about this in what we can control and what’s kind of out of our control. The things that we can control are our competitiveness driven by refreshed media, innovation, programming. Let me talk a little about each. Our media that we’ve seen in the first half of the year is working. We’ve got a good return on investment. We’ve seen our Hershey brand grow 7% in the last 13 weeks. We have three new campaigns, so we’re getting momentum with the media that we’re spending; we’re getting a higher return on investment. So I like what we’re doing there.
Innovation we’ve talked a lot about. We’ve had really good innovation this year: snack mix, Hershey Creme Bar is the number one innovation the last four weeks. Reese’s filled pretzels, Reese’s Oreo that we’ve talked about — that’s the largest innovation over the last 52 weeks. But when we look into 2027, we have a 50% increase in our innovation pipeline. We’re going to be much more competitive on innovation. Programming — we talked about tentpole events like March Madness, S’mores, Back to School. We have seen improvement on those and double-digit growth, so we have more programming against those big events next year. We also believe that our salty business can definitely produce more for us in 2027, both on the top line and the bottom line. And I tell you we have great RGM strategies that include low single-digit carryover pricing next year.
Now, those things that are out of our control are consumer spending, which is certainly pressured by higher gas prices and overall cost inflation. And as a result, if the category is a little lower than expected, then we would expect to be in the lower part of the range. That’s kind of how we’re thinking about next year.
Andrew Lazar (Analyst at Barclays)
Thanks for that. And then along the lines of becoming increasingly competitive, I guess when we strip away the year-over-year timing and sort of macro dynamics, one of the pushbacks we get consistently — and I’m sure you hear it too — is that Hershey, despite all of the activity this year in the market, is still losing market share, I guess at its core. Why do you think this is and how should we expect share to progress as we exit this year into 2027?
Thanks so much.
Kirk Tanner (Chief Executive Officer)
You bet. Look, in the third quarter we saw retail performance was generally in line with expectation. We had some momentum. Profitable share, I will tell you, is at the center of our strategy, and a stronger innovation pipeline in the right spaces. All those things that I talked about — effective media, broader merchandising and distribution — those are things that are winning when we look at this year. Competitors have increased short-term, I’d say short-term news-driven activity, and it has been an innovation opportunity in the category. That’s what makes this category so rich and vibrant. And I am confident the investments we’ve made in R&D innovation in our pipeline for 2027 and 2028 make us much more competitive. I’ve seen the innovation myself for 2028 — it looks fantastic. 2027, like I said, is 50% more than 2026, and that’s how this category is competitive.
It is fresh ideas, innovation. And I feel really good about where we’re going with this space, and it is in those spaces that matter most for the Hershey Company. It’s in those areas like premium, sweet, functional, and better-for-you. So we have a complete package going into 2027.
Dave Hulay (Senior Vice President and Chief Financial Officer)
Just to add, we had some early strength in the quarter, and share performance did accelerate as we were in July and August until we ran into the tougher Reese’s Oreo comparisons in September. That will continue through the balance of the year, and that is why we called that out in how we’re thinking about Q4 performance relative to the category. But our performance will look good — continue to be strong — on a two-year basis for confection.
Andrew Lazar (Analyst at Barclays)
Thank you for that.
Adori Naughton (Vice President of Investor Relations)
Thanks, Andrew.
OPERATOR
Our next question is from David Palmer with Evercore ISI. Please proceed.
David Palmer (Analyst at Evercore ISI)
Thanks. Good morning. I’m sure you’ve heard from investors about Hershey’s price gaps and how they might be too wide versus competitors, and how that might be the key driver of what’s going on here with market share — the category that might also hit some walls after years of cumulative price increases. Could you comment on whether there might be a price-value issue, and what are your consumer insights showing you there? What are your retailer discussions telling you, and how does that inform your strategy from here on pricing?
Kirk Tanner (Chief Executive Officer)
Yeah, thanks, David. Look, I think pricing remains rational. This is how we’re looking at it. The category overall is healthy. I think that it’s not a category that promotional activity really drives to the bottom. It’s not one of those tools that you see in this category. Category growth has been driven largely by innovation and new ideas. We are, though, investing in consumer value through pack-and-price, through targeted promotions. We’re looking at areas like in convenience as you see a consumer that’s under pressure — to give more value and drive pricing through bespoke promotions versus overall price decreases. It is much more about meeting the consumer where they’re at with the right pack and price, and then leveraging innovation to drive excitement in the category. It’s not about rolling back prices, because I think that if you look at the category, it is still rational and as we would expect.
David Palmer (Analyst at Evercore ISI)
Thanks for that. One of the other things that I wanted to ask you about is the pace of innovation. You mentioned how you’re lapping Oreo Reese’s and that’s tough. But the other thing we hear, and you can see it in the data, is that your competitors have been really active on innovation both in and out of chocolate in the confectionery space. Could you talk about the 2027 pipeline? How does it look? Maybe you can comment on whether your pace of innovation and effectiveness of innovation might be different this next year than it was this year.
And thanks.
Kirk Tanner (Chief Executive Officer)
Yeah, let me put a little color on that one. One thing on the last question: we do see unit growth, and the trajectory on our volume and unit growth improving. So we’re seeing that as expected. So from a pricing standpoint, let’s talk a little bit about innovation. We are innovating like we talked about. Hershey Creme Bars is off to a really good start — it’s the largest innovation in the category the last four weeks. But that’s not the only innovation we have for Q4. We have Hershey Rolls, which is a chocolate-covered wafer that’s hitting the market — it’s fantastic. We’re also launching an opening price point on our Ice Breakers gum. So refreshment is growing, and we needed an entry price point, so we have a stick gum that we’re launching this quarter.
Hershey truffles and caramels, we have Kit Kat seasonal shapes, we’ve got a new Dot’s Buffalo Snack Mix, we have a Reese’s cocoa-filled pretzel, and we have SkinnyPop Parmesan Garlic — all happening in quarter four. Now when we roll over into 2027, we have some of our biggest innovation that is going to happen in Q1. We haven’t talked about those innovations yet from a competitive standpoint, but the pipeline is robust and it is on our core business. It addresses opportunities for us in sweet and in premium. We have more permissible salty coming out, and we have some functional innovation coming. So we’re targeting those spaces. Overall it’s up 50%, and I think that’s important.
It’s a significant step up for us, and it will contribute three times more to the growth in 2027.
David Palmer (Analyst at Evercore ISI)
Thank you.
OPERATOR
Our next question is from Peter Gaba with Bank of America. Please proceed.
Peter Gaba (Analyst at Bank of America)
Hey, good morning. Thanks for taking the question. I wanted to go back to maybe expand on Andrew’s question on organic sales into 2027. A bit of a math exercise, but just thinking about if we take kind of the implied Q4 of kind of flattish organic, looking at Q1 of 2027 — obviously we know the shorter Easter, that kind of being a bit of a headwind, we have the week that’s shifting — I just want to understand kind of the shape or the direction of travel of how we might think about organic sales for next year as we contemplate wherever we’re going to land in the range, low end, high end.
But just is it kind of more of a back-half-weighted year versus some of the headwinds on exit rate in Q1?
Dave Hulay (Senior Vice President and Chief Financial Officer)
Sure. So fourth quarter — I’ll start with fourth quarter — it’s still being impacted by the tougher laps on Reese’s Oreo and the C‑store softness that we talked about. The innovation has built later; it will build later within the quarter, within Q4. You’re going to see that carry into 2027, and then we are getting off to a strong start. As Kirk said, some of the biggest ideas that we have next year will come early in the calendar. There’s a value playbook that we’re executing against.
So you can think of that as both innovation and price-pack activities, and those are intended to address C‑store and some of the broader consumer value needs. So I wouldn’t interpret Q4 as a starting point for 2027.
Peter Gaba (Analyst at Bank of America)
That’s helpful, Kirk. Going back to your comments in the prepared remarks on 27 earnings, still looking for double digit. I think there’s obviously some things that have changed relative to the outlook when you provided it in March. Maybe you can just talk about the puts and takes for next year. What might push downside risk into those numbers given where you stand today? Thanks very much.
Kirk Tanner (Chief Executive Officer)
Yeah, I’ll let you take it. Dave.
Dave Hulay (Senior Vice President and Chief Financial Officer)
I should talk about the EPS growth. So we don’t see the initial EPS framework as completely off the table, but we would need to see the environment improve in the areas we’re focused on, and looking for improvement in are freight logistics, more favorable commodity outlook. We’re working on stronger returns for productivity and our demand-generating investments. And of course there’s always a healthier consumer. On the flip side, there would be more risk if there’s deterioration in either consumer demand or the cost environment.
Kirk called out, we are focused on what we can control. So that means staying agile, using data to direct investment towards the highest return opportunities for us.
Peter Gaba (Analyst at Bank of America)
Great, thanks very much.
OPERATOR
Our next question is from Thomas Palmer with JPMorgan. Please proceed.
Thomas Palmer (Analyst at JPMorgan)
Sorry, thanks for the questions. I wanted to follow up on this last question from Pete just on the 27 puts and takes. To what extent does the outlook contemplate changes in marketing and/or pricing actions relative to the prior outlook? I know you just noted some, you know, potential flexibility there. Just wondering if there are any changes in that low double digit outlook.
Dave Hulay (Senior Vice President and Chief Financial Officer)
Sure. There is no change to the 27 EPS framework other than reflecting the higher freight logistics and non-cocoa input costs. So, you know, we’re going to continue to invest. Our posture remains the same. We’ll invest in growth levers, marketing, innovation and merchandising, and we’re doing that to support 27 but also to prep for and support 2028. We’ll continue to leverage, as you think about EPS, continuous improvement, RGM, tech-enabled productivity levers, and there’s a few big ones that maybe I’ll call out as we think about where we see big opportunity next year.
So one is digitization and factory automation that’s underway. There’s a lot of white space we’re going after over the next couple of years to drive manufacturing efficiency; decision intelligence, which is something that’s broadly being rolled out; things like working capital and waste reduction; and then logistics optimization, which will include lane and customer order management efficiencies. And so that’s work that’s underway that picks up next year and will carry forward into great.
Thomas Palmer (Analyst at JPMorgan)
Thanks for that. I also wanted to ask on Halloween: if I recall a year ago it was noted as being a bit soft and I think the calendar was part of it. And so there was this expectation for more of a rebound this year in part from the Saturday timing. Prepared remarks discussed more flat year over year. To clarify, how much is simply a reflection of the current macro environment, or are there execution items we should be thinking about this year that maybe could be addressed next year?
Kirk Tanner (Chief Executive Officer)
Yeah, let me take that one. Look, if you look at the Saturday Halloween, about 35% of the seasonal sales happen this week. So that’s the impact. So the selling days are still hefty. The category is on track in that sense in a compressed season—meaning late was late and then you have a Saturday Halloween. So that’s how that shapes up. The Hershey share is up in most classes of trade and the execution is out there. If you look at kind of the learnings that we had last year, the shipments are up.
So the buy to start with was up and we shipped it. The displays are in the marketplace and we’ve got great partnerships with our customers. But these final days are important and these big trick-or-treat packs, they are to our benefit. We have a shared advantage in the larger packs and that’s what consumers are looking for the last few days. Now, when we look at the consumer insights, participation intent is in line with last year. Now we need, you know, we need consumers to show up. We need them. The last few days are really critical. We’re starting to see it. So, you know, we’re keeping an eye on these last few days.
Thomas Palmer (Analyst at JPMorgan)
Great, thanks for all the details there.
OPERATOR
Our next question is from Robert Moscow with TD Cowen. Please proceed.
Robert Moscow (Analyst at TD Cowen)
Hi. I was hoping to maybe drill down a little bit on gross margin. There’s a change in the guidance that implies I think an exit rate of about a 39% gross margin in fourth quarter. And then, you know, for 2027 there has to be a substantial step up. And so I want to know, like, is this exit rate, does it— is it informative to think about 2027 at all? Because I think you’d have to be up like over 200 basis points to hit, you know, these EPS numbers.
And then secondly, the volume is down quite a bit and there must be some impact from volume deleveraging on the business. I’ve heard that your capacity is flexible enough to adapt to that. So is that true? Is that why these two things can happen at the same time? Thanks.
Dave Hulay (Senior Vice President and Chief Financial Officer)
Yeah. I’ll start with the exit rate. The big difference between the fourth quarter and what we’re going to see next year is the timing of cocoa hedges. So you can expect things to look different next year as the different hedges roll through. And that’s part of the algorithm. On the volume deleverage? Yeah, to an extent there is an impact, but we expect that volume will get better. We’re seeing it get better, and that’s also why the productivity initiatives are so important, and there’s low-hanging fruit there.
Robert Moscow (Analyst at TD Cowen)
Okay, Dave, can you be more specific about seeing it get better? Because, you know, the volume’s down 10% in the quarter. Where are you seeing it get better? Is it that retail tracking is less bad as you exit third quarter?
Dave Hulay (Senior Vice President and Chief Financial Officer)
Yeah, I think, you know, we’re going from high double digit, high teens pricing in Q3 to single digit pricing in Q4. And we’re investing in our brand. So it’s not just going to be elasticity. It’s our job to drive demand. And where we have our programming and our investment focus, we’re seeing the turn and improvement in volume trends.
Kirk Tanner (Chief Executive Officer)
Yeah, when we look at specific brands like Hershey, KitKat, Cadbury, our Kisses line, we see meaningful unit trend improvement. So we’ll see that that trend improvement will continue in Q4. It’ll continue in Q1 and Q2 of next year as well. So we’ll be on a trend of volume and unit improvement. It’s not going to be exactly linear, but it is, you know, we’re confident that we’re going to see continuous progress built on the programming and execution that we have.
And look, it is our job to stimulate demand here, and we have got those plans to do that. So we’ll see continuous improvement on volume and unit growth.
Dave Hulay (Senior Vice President and Chief Financial Officer)
And I’ll just add we’ll provide more color on volume cadence in February’s full year outlook, but we believe in top line growth even if volumes don’t get fully back to positive.
Robert Moscow (Analyst at TD Cowen)
Okay, thank you.
OPERATOR
Our next question is from Chris Carey with Wells Fargo Securities. Please proceed.
Chris Carey (Analyst at Wells Fargo Securities)
Hi, good morning everyone. I wanted to ask first about cocoa. You gave some context on supply and demand. Obviously we’re looking at more favorable position for next year. Just what are you seeing in the global crops currently as we head into next year? I’m conscious we’ve seen a pickup in the forward curves as we kind of look out to 2028. But supply and demand feels in your favor. So want to get a bit more context on what you’re seeing and how you’re going to be approaching hedging over the next 12 months or so.
And then I have a follow up on the snacks business.
Dave Hulay (Senior Vice President and Chief Financial Officer)
We’re continuing to see El Niño speculation impact market prices. We don’t expect cocoa to remain at current levels long term. And so about what we’re seeing and how we’re thinking about it, we’re coming off a historical surplus, 500 to 600,000 metric tons. Inventories are healthier, supply is more diversified, and we’re seeing production increase in new origins. We see satellite data and monitoring. It shows cocoa acreage is continuing in a number of regions as prices.
And you’re seeing examples of that in Ecuador, for example—biggest export output on record in September. Industry’s more agile. And so we believe market is already pricing in a bigger global decline than last cycle, and we have yet to see the evidence really to support that. So we’re remaining disciplined in our approach as far as hedging, and we’re leveraging the full toolkit, including flexible hedging instruments.
Chris Carey (Analyst at Wells Fargo Securities)
Okay, great. On the snack side of the business, the supply recovery clearly just taking a bit longer than expected. Can you just give us a bit of context on why it’s taking a bit longer and confidence levels that you can get back to where you want to be in the near term? And then just, do you think that supply issues are starting to impact any of the consumption that we see, which is still obviously quite strong? But are you seeing any supply and out of stocks beginning to hit the business?
And any context on how you would see that going forward? Thanks.
Kirk Tanner (Chief Executive Officer)
Yeah. I would tell you that our overall core salty business can contribute more to the top line and the bottom line and will grow in 27. Our service levels are improving. They’re not exactly where we want them to be, but we’ve made the investments to catch up. Demand is definitely outstripping supply, but we are catching up and we’ve made those investments. We have manufacturing lines coming online in the first half of next year. We’ve also invested in automation because a lot of the demand is showing up in single serve and multi-packs, and that just drives a little level of complexity that we needed to invest in automation so that we could deliver those packs that consumers want. I’m confident that we will get there and a lot of this is behind us. But there’s still this capacity coming online that will give us good growth in 27 on our salty business and a more efficient way to get to market.
Dave Hulay (Senior Vice President and Chief Financial Officer)
I’ll add, as service improves, if you just think about this from a bottom line standpoint as well, we expect to get more efficient use of freight logistics in the coming months. The higher rates will remain a headwind, but there’s a number of things we’re doing there. Kirk mentioned the fill rate improvement. There’s a lot of work happening around shipping full to reduce our reliance on spot rate, which is important in salty because it has greater spot rate exposure there.
And then I talked about it, but there’s work going on around optimizing lanes and customer orders, and that will partly offset the bottom line, the inflation impacts. I’ll say you asked about constraints in terms of the impact on the full year and I would say they have pulled growth down. But we are confident we’re going to get those back to 27, Kirk said.
Chris Carey (Analyst at Wells Fargo Securities)
Okay, understood. Thanks.
OPERATOR
Our next question is from Leah Jordan with Goldman Sachs. Please proceed.
Leah Jordan (Analyst at Goldman Sachs)
Good morning. Thank you for taking our question. So, Dave, in an earlier question, you highlighted stronger productivity as a lever that could help offset some of the inflationary creep this year as we look ahead to next year. So, Justine, if you could update on what opportunities you still see for productivity, you know, what you would highlight, like efforts from this year that can wrap around and benefit next year. And then even somewhat related, how are you thinking about mitigation outside of hedging for cocoa at this point?
Where are we on that journey as well? Thank you.
Dave Hulay (Senior Vice President and Chief Financial Officer)
Sure. So we have a strong pipeline. We’ve got good visibility into productivity and operational levers. Just stepping back, we continue to stay focused on achieving mid-40% margin recovery over the long term. And so all the levers we’ve used historically — mix, RGM, productivity — we see operational improvement based on some of the things that we learned this year that will all contribute. The roadmap is, I would say, multifaceted, but technology is going to play a significant role.
So I mentioned some of those technology initiatives already: the digitization of factory decision intelligence, logistics optimization. And then I’d just say as far as cocoa, it’s too early to comment on 2028. There’s lots of time between now and then, but our strategies remain the same and we continue using flexible hedging structures to capture favorable market moves. We have sourcing, we built a new chocolate paste-making facility, and we can go straight to the origin as well when appropriate to capture value. So we’ve got a lot of levers.
Kirk Tanner (Chief Executive Officer)
Yeah, we’re going to continue to invest. The full-year brand investment is going to be around 10%. We’ll carry forward some of the investment from Q3. We have new campaigns coming out that are coming out right now — Cadbury, Fulfil, PayDay — we’re all getting new campaigns with strength and support as well, and those are ramping as we speak.
OPERATOR
Our next question is from Alexa Howard with Bernstein. Please proceed.
Alexa Howard (Analyst at Bernstein)
Good morning, everyone. Thank you for the question. Can I just ask about the prepared remark comments about improving unit volumes as price growth slows on non-seasonal items? Can you put any color around that? We’ve seen it move from down double digits or down high single digits to a mid-single-digit decline as that price growth has started to — any commentary on that?
Kirk Tanner (Chief Executive Officer)
Yeah, we are seeing that improvement as pricing moderates. We’re seeing that improvement. We’re seeing that improvement specifically on some of our big brands — Hershey, KitKat, Cadbury, our Kisses lineup. That continues to improve, and we’ll continue to see that improvement throughout next year. Some of that is built into some of the programming, so the path isn’t going to be exactly linear, but it is. We’re confident that the improvement will continue throughout 2027.
Anything to add?
Dave Hulay (Senior Vice President and Chief Financial Officer)
Yes, in Q4 specifically, that’s partly offset by tough comparisons, and so we talked about Resorreo as being one of those. Yeah. In Q3 the moderation in the net price realization was very modest. It only began late in the quarter, and you’re going to see that continue into Q4 while the programming that we put in place is also ramping up. So we’ll give you an update as we get through this quarter and we start to see more of that. But we did see the bend in the trend, and that’s the most important data point that we wanted to provide to you.
Alexa Howard (Analyst at Bernstein)
Thanks. Thank you for that. And then can I just follow up on where are you at on advertising as a percent of sales and where do you want to be over time? Is there further investment that will need to kick in next year?
Kirk Tanner (Chief Executive Officer)
Yeah, we’re going to continue to invest behind brands, behind the innovation and programming that we have. We talked about an uptick in some of that programming and innovation next year, and so we’re going to carry forward the investments against those. The other thing we’re working on — and you’re seeing it come through, or we’re seeing it come through in our sort of net performance and impact from brand investment — is really the efficiency. So Dave mentioned an 8% improvement in ROI. We have a much more dynamic, more real-time market mix model that we’re using to really leverage and stay agile as we’re seeing what’s working and where we have opportunities to drive efficiency.
So we’ll keep that moving forward into next year. Yeah, I would just say our overall posture is to be incredibly competitive around driving awareness for our brands, effective media and marketing spend on top of our investment in R&D and innovation. I think those two key areas are important for us to drive demand and we’re focused on doing that. We like what we’re seeing and the brand build we’re doing. We’ll continue to invest in those spaces at the levels that we’re at.
Alexa Howard (Analyst at Bernstein)
Thank you. I’ll pass it on.
OPERATOR
Our next question is from Kezar Gromit, UBS. Please proceed.
Kezar Gromit (Analyst at UBS)
Great, thank you. Good morning, everyone. So you touched on some — yeah, good morning, guys. You touched on some of the category in September and how that has persisted into October. Can you unpack a bit more around what you’re seeing from a channel and category perspective? Has it gotten worse sequentially in October, or is it broadly similar to what you saw in September? I guess, just as we think about the guidance, what are you embedding from a category perspective through the balance of the year?
Kirk Tanner (Chief Executive Officer)
Yeah, a couple of things kind of on channel performance. I think the biggest layer was we saw for the category in C-stores — we saw that continue into October. So that concern is still on C-stores, but when you look at everywhere else — everyday candy, mints, and gum — the category is up 3.7% in Q3.
Dave Hulay (Senior Vice President and Chief Financial Officer)
You want me to take that? Yeah, yeah. So if you just let me step back, and then I’ll talk a little bit more about your specific question. We are seeing the consumer more cautious on inflation. Gas prices and interest rates are strains on households. They are making more deliberate choices across channels — more in mass, more in e-comm, more in club. C-store has been the challenge; category is down 5% in September. We have seen that continue into October.
And Kirk said everywhere else our business is actually up 3.7% in Q3. So when we do step back, we see it as more of a channel and trip problem, not as much a category issue. And so we’re focused on value levers, innovation, price pack architecture, surgical promotion, and we can talk more about that. Kirk, you can probably add some color on what we’re doing there.
Kirk Tanner (Chief Executive Officer)
Yeah, no, I mean, I really think the category is in a decent place with all these consumer headwinds. Obviously we expected the C-store business to soften a little bit with gas prices, but we still see a robust category. It’s resilient across the rest of the channel. So we feel good about where we’re at. That informs kind of where we’re going and how we feel about 2027 as well.
Kezar Gromit (Analyst at UBS)
Awesome. And then Dave, maybe just a quick clarification. So just on the ’27 commentary, just around the growth or EPS growth, excluding the tariff refund — just to be clear, we should be taking that 25 cents out of the base for ’26 and then growing double digits from there. Is that the right way to think about it?
Dave Hulay (Senior Vice President and Chief Financial Officer)
That’s right.
Kezar Gromit (Analyst at UBS)
Okay, thank you so much. I’ll pass it on.
OPERATOR
Sure. Our next question is from Michael Avery with Piper Sandler. Please proceed.
Michael Avery (Analyst at Piper Sandler)
Thank you. Good morning. A couple questions touched on this already, but I want to come back to just your thoughts on next year and maybe just make sure I understand. When you say that growing pressure could restrain growth relative to your March expectations, is that pointing more just kind of to the low end of where you landed originally, or really just trying to flag downside risk actually below? And can you just maybe be specific about something about that wording?
Kirk Tanner (Chief Executive Officer)
Yeah. So let me take the top line. I’ll let Dave talk about EPS growth and bottom line. From a top-line standpoint, you know, we’re sticking with the range that we guided you. If the pressure remains or gets worse, then it’s going to be in the lower part of the range. I think that’s a practical approach to how we’re seeing it. We’re still seeing a resilient category. We’re still seeing consistency. I like the growth drivers in innovation, etc. But if pressures remain and some channels are still under a high level of pressure, then it’s going to be in the lower part of the range.
I’ll let Dave talk about how that impacts the bottom line and EPS.
Dave Hulay (Senior Vice President and Chief Financial Officer)
Yes. If today’s conditions remain, we could be shy of the original range or framework. We’re going to continue to invest in the business for the long term, so we’re going to invest behind growth in the things that we do — talked about earlier.
Michael Avery (Analyst at Piper Sandler)
Okay, that’s helpful. And then just back to your comment earlier — committed to mid-40s margin recovery over the long term. Any sense of how we should think about timing for that? And when you say long term, is it likely further out or is that within reach? What’s the right way to frame just how that trajectory might unfold?
Dave Hulay (Senior Vice President and Chief Financial Officer)
Yes. So just start in 2027. We do expect meaningful margin improvement in 2027. That long-term ambition is 2028 forward. And as I said, we have a rich productivity pipeline that we’re going to continue to build and leverage to work towards that, and continuous improvement and all those other levers that we typically leverage will be a part of that algorithm. What might affect the timing are the new pieces — so logistics and freight and some of the other input cost inflation.
If that turns, improves sooner, you’ll see some margin move sooner. If it takes longer, it’ll take a little bit longer for us to get there.
Michael Avery (Analyst at Piper Sandler)
Okay, thanks. I’ll pass them on.
OPERATOR
Our next question is from Nick Modi with RBC Capital Markets. Please proceed.
Nick Modi (Analyst at RBC Capital Markets)
Yeah, thank you. Good morning, everyone. Kirk, I wanted to — good morning — I wanted to kind of revisit some comments you made, I think, last quarter about distribution opportunities outside of, you know, the traditional channels. So maybe you can give us an update on that. You know, could this be big enough to kind of help you kind of muscle through some of this downturn as we go into 2020?
Kirk Tanner (Chief Executive Officer)
Yeah. We talked about away-from-home being an opportunity, and that continues to be an opportunity. We’re doubling down in that space. And it’s really across both our salty and our confection business. So we’re seeing good growth. We’ll continue to see that — will be a tailwind for us, including specialty retail away-from-home. We’re creating new partnerships for distribution. It’s an exciting space. We have a lot of passion for this. We know it’s a great place for growth, but we importantly know it’s really a good place for us to build brands.
So expect more from us. That will be a tailwind going into ’27.
Dave Hulay (Senior Vice President and Chief Financial Officer)
And I’ll say, you know, we’re continuing to strengthen our already strong partnerships in the core channels as well. So we’re focused on that as well.
Nick Modi (Analyst at RBC Capital Markets)
Great. And then just kind of final one for me is just on agentic commerce. I mean, it just seems like its adoption is picking up pretty quickly. And just curious, like, has Hershey conducted an agent e-commerce audit in terms of how your brands show up across all these different platforms? Any thoughts on that would be interesting.
Kirk Tanner (Chief Executive Officer)
Oh, absolutely. Yeah. I mean, this is a really important space. We spent a lot of time with some of our partners too, to understand how this is showing up, how our brands show up, how we leverage this. Customers like Target, Amazon, Walmart — we’re working directly with them. This is an important space for us and something that I think we’re on the front foot with.
Nick Modi (Analyst at RBC Capital Markets)
Great. Thanks. I’ll pass it on.
OPERATOR
Our final question will come from Scott Marks with Jefferies. Please proceed.
Scott Marks (Analyst at Jefferies)
Hey, good morning, all. Thanks very much for taking our questions. I have two questions that I wanted to touch on. The first, you spoke about the Hershey movie a little bit in your prepared remarks, talking about merchandising plans above initial expectations. Could you maybe help us understand what’s the magnitude of uplift we should be expecting from that, and whether that’s incremental to the business, or does it replace otherwise maybe non-seasonal or holiday-type merchandising activity in stores?
Kirk Tanner (Chief Executive Officer)
Yeah, we’re really excited about this movie and the story that it’s going to tell. I would look, our Hershey brand right now is having an exceptional year and, you know, it started with how we opened up the year with the Olympics, and then how we celebrated the 250-year anniversary. Now, at the end of the year, we’re going to celebrate the movie. It comes out the day before Thanksgiving. We’ve been supportive. Retailers have really gotten behind this, and it’s just an exciting American story that’s relevant for our time. So we’ve seen a lot of support, and that’s going to show up in-store with inventory and displays and a connection back to the movie, so you’ll see that will be an uplift. That will be a tailwind for the portfolio, and especially Hershey, which has already had a terrific year. But we like the momentum that will build going into 2027.
Scott Marks (Analyst at Jefferies)
Thanks for the thoughts there. And then just one last point of clarification for me. In the prepared remarks, you also noted a little bit of the shipment timing headwind in North America confectionery. I believe you got a little bit of benefit in Q2. Can you just remind us the magnitude of benefit for Q2, what the headwind was in Q3, and as we sit here today, is there anything we should keep in mind as it relates to Q4 aside from the extra shipping day?
Dave Hulay (Senior Vice President and Chief Financial Officer)
Yeah, I’ll take that one. So for confectionery, that earlier ship of summer programs in Q2 was largely offset by that strong seasonal sell-in that we saw in Q3. So for Q4, I would say that we think that the timing dynamics are largely a wash against that additional shipping day, as well as we will be lapping some lower levels of retailer inventories that occurred in Q4. So I would say it’s largely a wash on the ship and timing dynamic for Q4.
Scott Marks (Analyst at Jefferies)
Okay, understood. Thanks very much.
Adori Naughton (Vice President of Investor Relations)
All right, thank you very much.
OPERATOR
We have reached the end of our question and answer session. You may now disconnect your lines, and thank you for your participation.
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