Hershey Warns of 38% Profit Decline Due to Tariffs, Cocoa Costs

Hershey, the global leader in chocolate confectionery, has issued a warning that its annual profits may decline by up to 38% due to the dual impact of tariffs and rising cocoa costs. The company cited the escalating prices of cocoa, a core ingredient, and the tariff policies implemented by the Trump administration as the primary reasons for the increased costs.

Hershey has revised its full-year earnings forecast, anticipating that the tariff costs alone could amount to between $1.7 billion and $1.8 billion. This significant increase in expenses has led the company to project a 36% to 38% decrease in its adjusted earnings per share for the year. The company had previously issued a similar warning in May, highlighting the ongoing challenges posed by these external factors. The combination of higher cocoa prices and tariffs has created a challenging environment for Hershey, forcing it to adjust its financial expectations for the year.

Despite the challenges, Hershey remains committed to maintaining its annual net sales growth target of at least 2%, which is higher than the expectations of most analysts. The company's management has chosen to focus on sustaining growth rather than withdrawing or significantly reducing its performance targets, despite the heavy burden of tariffs.

In a conference call with analysts, Chief Financial Officer Steve Voskul expressed hope for improvements in tariff policies through ongoing trade negotiations with key trading partners. However, he acknowledged that the company has not factored in any tariff relief for the current year.

On July 22, Hershey announced a significant price increase for its chocolate and candy products due to the historically high prices of cocoa. This price adjustment includes both an increase in the listed price and a reduction in the weight and quantity of products within the packaging, a strategy known as "shrinkflation." This marks the second substantial price increase in as many years, reflecting the company's efforts to manage the financial strain caused by tariffs and rising raw material costs.

Over the past two years, cocoa prices have surged due to supply shortages caused by disease and adverse weather conditions in Ivory Coast and Ghana, which together account for over 60% of the global cocoa supply.

Earlier this month, Hershey appointed Kirk Tanner as its next president and CEO. Tanner, who previously served as the president and CEO of Wendy's, is set to take over the role on August 18.