🏢 What the Company Does
The Hershey Company is one of the world’s largest snack manufacturers and a leader in chocolate and confectionery products. In addition to iconic brands such as Hershey’s, Reese’s, Kisses, and Kit Kat (U.S. license), the company has expanded into salty snacks through brands including SkinnyPop, Dot’s Homestyle Pretzels, and Pirate’s Booty.
The company operates through three business segments: North America Confectionery, North America Salty Snacks, and International. Products are sold through supermarkets, convenience stores, mass retailers, club stores, e-commerce platforms, and other retail channels in more than 90 countries.
📊 Financial Highlights
- Net sales increased 4.4% to $11.7 billion in FY2025.
- Profitability declined significantly as cocoa costs increased sharply, reducing gross profit, operating income, and net income.
- Operating cash flow remained strong at approximately $2.3 billion, supporting capital investments, acquisitions, dividends, and business operations.
- The balance sheet remained solid, with higher cash balances and improved short-term liquidity despite increased long-term debt.
⚠️ Key Risks
- Volatility in cocoa and other agricultural commodity prices.
- Maintaining the strength and reputation of Hershey’s brands.
- Changing consumer preferences and continued innovation in snacks.
- Supply chain, manufacturing, and seasonal execution risks.
- Food safety, regulatory compliance, cybersecurity, and successful integration of acquisitions.
📈 MD&A Highlights
Management identified record-high cocoa costs as the primary factor affecting FY2025 profitability. While pricing actions and productivity improvements helped offset part of the cost increase, they were not enough to fully protect margins.
Management continued investing in manufacturing capacity, product innovation, international expansion, and the salty snacks business while maintaining strong operating cash flow and regular dividend payments. The company also emphasized disciplined capital allocation and long-term brand investment despite the challenging commodity-cost environment.
📝 Takeaway
FY2025 was a year of revenue growth but margin pressure. Hershey continued expanding sales and generating strong operating cash flow, but historically high cocoa costs significantly reduced earnings. The company remains focused on strengthening its core confectionery business while expanding its snack portfolio and investing for long-term growth.
📊 Income Statement Summary
Unit: $ millions (EPS in $)
| FY2023 | FY2024 | FY2025 | |
|---|---|---|---|
| Revenue | 11,165.0 | 11,202.3 | 11,692.6 |
| Cost of Goods Sold | 6,167.2 | 5,901.4 | 7,769.9 |
| Gross Profit | 4,997.8 | 5,300.9 | 3,922.7 |
| SG&A | 2,436.5 | 2,373.6 | 2,460.6 |
| Operating Income | 2,560.9 | 2,898.2 | 1,441.5 |
| Non-Operating Income/Expense | 237.2 | 258.6 | 37.1 |
| Interest Income/Expense | 151.8 | 165.7 | 190.2 |
| Income Before Tax | 2,171.9 | 2,473.9 | 1,214.2 |
| Income Tax | 310.1 | 252.7 | 330.9 |
| Net Income | 1,861.8 | 2,221.2 | 883.3 |
| EPS | 9.1 | 10.9 | 4.3 |
Plain English
Hershey delivered another year of revenue growth in FY2025, with sales increasing to $11.7 billion, up about 4.4% from FY2024. However, higher sales did not translate into stronger profitability because the company faced an unprecedented increase in cocoa costs during the year.
The biggest change was in cost of goods sold (COGS), which jumped from $5.9 billion to $7.8 billion. COGS represents the direct cost of producing products, including ingredients, manufacturing, packaging, and transportation. The sharp increase significantly reduced gross profit despite higher revenue.
As a result, gross profit declined by more than $1.3 billion, falling from $5.3 billion to $3.9 billion. This indicates that commodity inflation—particularly cocoa prices—placed substantial pressure on Hershey’s product profitability.
Selling, General and Administrative (SG&A) expenses remained relatively stable. SG&A includes advertising, employee compensation, administrative functions, and other operating costs that support the business but are not directly tied to manufacturing products. The modest increase suggests management maintained good operating cost discipline even while facing higher input costs.
Operating income declined sharply from $2.9 billion in FY2024 to $1.4 billion in FY2025. Operating income measures the profit generated by the company’s core business before interest and taxes, making it one of the most important indicators of operating performance.
Interest expense continued to increase as Hershey carried more debt during the year. Higher borrowing costs further reduced earnings before taxes, although interest expense remained relatively manageable compared with operating income.
Net income fell dramatically to $883 million, compared with $2.2 billion one year earlier. Diluted earnings per share also declined from $10.9 to $4.3, reflecting the significant impact that higher cocoa costs had on overall profitability.
Although FY2025 was clearly a difficult earnings year, revenue growth remained positive and the company continued generating profits. This suggests Hershey’s core consumer demand remained resilient even while its margins experienced temporary pressure from unusually high commodity costs.
📊 Key Financial Ratios
Unit: %, except where noted (x = times)
| Ratio | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| ROE (%) | 50.3% | 50.4% | 18.9% |
| ROA (%) | 16.3% | 17.9% | 6.6% |
| ROTC (%) | 29.7% | 31.5% | 15.1% |
| ROIC (%) | 26.8% | 30.7% | 12.2% |
| Gross Margin (%) | 44.8% | 47.3% | 33.5% |
| Operating Margin (%) | 22.9% | 25.9% | 12.3% |
| Pretax Margin (%) | 19.5% | 22.1% | 10.4% |
| Net Margin (%) | 16.7% | 19.8% | 7.6% |
| Debt-to-Equity Ratio (D/E) (%) | 110.0% | 95.4% | 105.7% |
| Net Debt / EBITDA (x) | 1.4x | 1.1x | 2.0x |
| Interest Coverage Ratio (x) | 16.9x | 17.5x | 7.6x |
| Current Ratio (%) | 96.8% | 95.7% | 119.2% |
| Quick Ratio (%) | 40.7% | 39.0% | 55.0% |
| Fixed Asset to Long-term Capital Ratio (%) | 41.9% | 43.8% | 37.9% |
Plain English
FY2025 looked very different from the previous two years. Hershey remained profitable, but nearly every profitability ratio declined as cocoa costs surged. Gross margin fell from 47.3% to 33.5%, while operating margin dropped to 12.3%. These numbers show that the company’s pricing actions could not fully offset the sharp increase in raw material costs during the year.
Returns on capital also weakened significantly. ROE (Return on Equity), which measures how efficiently a company generates profit from shareholders’ capital, declined from about 50% to 18.9%. ROIC (Return on Invested Capital), one of the most closely watched Wall Street quality metrics, fell from 30.7% to 12.2%. Even after this decline, Hershey continued generating returns above many consumer staples companies, although well below its own historical level.
Leverage remained manageable despite additional borrowing. The Debt-to-Equity Ratio increased to 105.7%, while Net Debt / EBITDA rose from 1.1x to 2.0x. This indicates that debt increased relative to earnings, primarily because EBITDA declined rather than because debt expanded aggressively.
The company’s ability to service debt remained solid. Interest Coverage, which measures how many times operating income covers annual interest expense, decreased from 17.5x to 7.6x. Although this represents a meaningful decline, Hershey still generated operating income that comfortably exceeded its annual interest obligations.
Liquidity improved during FY2025. Both the Current Ratio and Quick Ratio increased as cash balances strengthened and current liabilities declined. This suggests Hershey entered 2026 with greater short-term financial flexibility despite experiencing one of the most challenging commodity-cost environments in recent years.
📝 Disclaimer
This article is intended for educational purposes only. It does not constitute financial, investment, or legal advice. All investment decisions involve risks, and readers should conduct their own research or consult with a licensed financial advisor.
👉 The Hershey Company (HSY) FY 2025 10-K Analysis (Filed 2026) | Explained for Beginners
Originally published on Finvincio