Hershey's Q1 Earnings Preview: Navigating Margin Pressures and Market Challenges

As Hershey Company (HSY) prepares to report Q1 2025 earnings, investors face a backdrop of significant headwinds. The consensus forecasts point to a sharp decline in revenue and EPS, driven by margin erosion, shifting consumer habits, and intensifying competition. Below, we dissect the key drivers of these expectations and what stakeholders should watch for in the upcoming report.
Revenue Outlook: A Challenging Start to 2025
Analysts project HSY’s Q1 revenue to drop 13.3% year-over-year to $2.82 billion, with declines across all major segments:
- North America Confectionery: The core segment is expected to fall 15% to $2.30 billion, as reduced foot traffic in convenience and drug stores (key channels for impulse purchases) and competition from smaller brands erode sales.
- North America Salty Snacks: Sales are anticipated to decline 1.1% to $272.06 million due to retailer inventory management and market softness.
- International Segment: Revenue is forecasted to plummet 17% to $224.36 million, reflecting global economic pressures and weak demand in key markets like Brazil and Mexico.

Margin Pressures: Cocoa Costs and Expired Hedges
The most critical challenge for HSY is margin contraction. Gross margins are expected to shrink by 410 basis points, primarily due to:
- Input Cost Inflation: Cocoa prices remain historically high, with existing hedge positions expiring in the second half of 2025. This will amplify cost pressures, though Q1 may still benefit from partial hedging.
- Operational Strains: Supply chain disruptions and rising operational costs (evident in unallocated corporate expenses rising to -$194.85 million) further squeeze profitability.
Competitive Landscape and Consumer Shifts
HSY’s struggles extend beyond cost pressures:
1. Consumer Behavior: Economic uncertainty is driving shoppers toward essentials, reducing impulse purchases in convenience stores—a core channel for Hershey’s products.
2. Competitive Erosion: Smaller brands are gaining share in club stores and dollar stores, where HSY’s presence is weaker. In markets like Brazil and Mexico, rivals are aggressively discounting, squeezing margins.
Analyst Forecasts and Market Expectations
- EPS Estimate: The consensus EPS of $1.94 (down 36.8% YoY) reflects downward revisions, though Zacks’ Earnings ESP model (+2.20%) suggests a potential beat.
- Zacks Metrics: HSY holds a #3 (Hold) rank, with average earnings surprises of 1.7% over the past four quarters.
- Long-Term Outlook: While 2025 sales growth is projected at just 1.9%, 2026 estimates hint at a modest rebound (2.81%).
Conclusion: Navigating the Uncertainty
Hershey’s Q1 results will be a litmus test for its ability to manage margin pressures and adapt to shifting markets. With gross margins expected to contract sharply and sales declining across segments, investors must scrutinize the following:
- Margin Performance: Did the 410-basis-point gross margin decline align with expectations, or were cocoa costs worse than feared?
- Sales Trends: Is North America Confectionery’s 15% drop permanent, or are there signs of stabilization?
- Earnings Surprises: A beat on the Zacks ESP model could buoy shares, but sustained weakness may pressure the stock further.
With HSY shares down 3.9% over the past month—and peers like Mondelez (MDLZ) and Mars under similar pressure—the company’s path to recovery hinges on cost management, channel diversification, and innovation. While Q1 is likely to be painful, the report’s tone on 2025 and beyond will be critical for long-term sentiment.
For now, the data suggests a challenging quarter, but investors will look for resilience in the face of these headwinds—and signs that Hershey’s turnaround strategies are gaining traction.
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