Hershey sees strong 2026 even as cocoa costs weigh

By Aatrayee Chatterjee

Feb 5 (Reuters) - Hershey HSY.N forecast annual sales and profit above Wall Street estimates on Thursday, supported by resilient demand for its confectionery and salty snacks and continued benefits of earlier price hikes implemented to absorb rising costs.

Shares of the company rose 3% in premarket trading, after it also surpassed the fourth-quarter estimates.

U.S. snacking trends held firm during the quarter, bolstered by loyal customers and the Halloween rush — the biggest sales window for the chocolates and candy maker.

Sales in Hershey's North America salty snacks unit jumped 28%, driven by brands such as SkinnyPop and Dot's Pretzels.

Hershey has steadily increased prices over the past year to cushion the impact of tariff swings and surging costs of cocoa after severe supply disruptions in West Africa, which accounts for about 70% of the global output of the key chocolate ingredient.

Even so, soaring cocoa prices squeezed the company's gross margin during the quarter, down 17 percentage points at 37%.

While wholesale prices have eased from the peaks seen in late 2024, manufacturers are still passing on higher input costs to shoppers.

"HSY has yet to fully recover cocoa costs, the commodity remains fickle," RBC Capital Markets analyst Nik Modi said.

Overall company volumes were down 3%, while pricing rose 9%. CEO Kirk Tanner said Hershey expects "slightly lower volume sensitivity to pricing actions" than previously planned.

Increased advertising and marketing investments, along with its expansion into healthier, zero-sugar products, also aided sales.

Hershey expects 2026 net sales to grow between 4% and 5%, while analysts estimated a 2.69% rise, according to data compiled by LSEG.

It forecasts adjusted earnings per share in the range of $8.20 to $8.52, compared with expectations of $7.15.

This stands in contrast with peer Mondelez's MDLZ.O warning of a subdued year as past price hikes pressured volumes.

Hershey's adjusted per-share profit of $1.71 for the quarter ended December 31 topped the estimated $1.40. Net sales rose 7% to $3.09 billion, also beating expectations of $2.98 billion.