การประชุมชี้แจงผลประกอบการไตรมาส 3 ปี 2026 ของเฮอร์ชีย์ (HSY): ยังคงแนวโน้มการเติบโตของยอดขายปี 2027 ไว้ที่ 2%-4%

ประเด็นสำคัญ

• เดอะ เฮอร์ชีส์ คอมพานี (The Hershey Company) คงคาดการณ์การเติบโตของยอดขายปี 2027 ไว้ที่ 2% ถึง 4% โดยผู้บริหารเปิดเผยว่า แรงกดดันของผู้บริโภคที่ดำเนินอยู่อย่างต่อเนื่องอาจกดดันให้การเติบโตเข้าใกล้กรอบล่างของช่วงคาดการณ์ดังกล่าว
• บริษัทคาดว่าจะมีการปรับขึ้นราคาจำหน่ายที่ส่งผลต่อเนื่องมาจากปีก่อนหน้า (carryover pricing) ในระดับหลักเดียวช่วงต้นในปี 2027 ขณะที่ผู้บริหารคาดการณ์ว่าแนวโน้มยอดขายเชิงปริมาณและจำนวนชิ้นจะทยอยปรับตัวดีขึ้นเนื่องจากการปรับขึ้นราคาเริ่มชะลอตัวลง ทั้งนี้ บริษัทระบุว่ายอดขายสามารถเติบโตได้แม้ว่าปริมาณการขายจะยังไม่กลับมาเป็นบวกอย่างสมบูรณ์ก็ตาม
• เฮอร์ชีส์มีแผนที่จะเพิ่มผลิตภัณฑ์นวัตกรรมใหม่ในปี 2027 ขึ้น 50% เมื่อเทียบกับปี 2026 โดยผู้บริหารคาดว่าผลิตภัณฑ์นวัตกรรมจะช่วยหนุนการเติบโตเพิ่มขึ้นเป็น 3 เท่าในปี 2027
• แบรนด์ Hershey เติบโต 7% ในช่วง 13 สัปดาห์ที่ผ่านมา นอกจากนี้ บริษัทยังรายงานผลตอบแทนจากการลงทุนในสื่อ (Media ROI) ที่ปรับตัวดีขึ้น 8%
• ผู้บริหารคาดว่าอัตรากำไรจะปรับตัวดีขึ้นอย่างมีนัยสำคัญในปี 2027 และยังคงตั้งเป้าหมายที่จะกลับสู่ระดับอัตรากำไรที่ 40% กลาง ๆ ในระยะยาว ซึ่งหมายถึงตั้งแต่ปี 2028 เป็นต้นไป
• กรอบเป้าหมายกำไรต่อหุ้น (EPS) ปี 2027 ยังคงเผชิญแรงกดดันจากค่าขนส่ง โลจิสติกส์ และต้นทุนวัตถุดิบอื่น ๆ ที่ไม่ใช่โกโก้ โดย Dave Hulays ประธานเจ้าหน้าที่ฝ่ายการเงิน (CFO) กล่าวว่าสภาวะในปัจจุบันอาจทำให้การเติบโตของ EPS ต่ำกว่ากรอบเป้าหมายเดิมที่วางไว้

ข้อมูลทางการเงินที่สำคัญ

ผลการดำเนินงานและธุรกิจ

เฮอร์ชีส์ระบุว่าทิศทางปริมาณการขายและจำนวนชิ้นกำลังปรับตัวดีขึ้นจากการปรับขึ้นราคาที่ชะลอตัวลง โดยผู้บริหารชี้ให้เห็นถึงแนวโน้มที่ดีขึ้นของแบรนด์ Hershey, KitKat, Cadbury และ Kisses แม้ว่าจะเตือนว่าการฟื้นตัวดังกล่าวอาจไม่ได้เป็นไปอย่างสม่ำเสมอเป็นเส้นตรงก็ตาม

ผลิตภัณฑ์นวัตกรรมยังคงเป็นหัวใจสำคัญของกลยุทธ์การสร้างอุปสงค์ของบริษัท โดยการเปิดตัวล่าสุด ได้แก่ Hershey Creme bars, Reese’s Oreo และ Reese’s Filled Pretzels สำหรับปี 2027 แผนการเปิดตัวจะมุ่งเน้นไปที่ธุรกิจขนมหวานที่เป็นธุรกิจหลัก รวมถึงผลิตภัณฑ์ของทานเล่นรสเค็มระดับพรีเมียม ขนมกินเล่นทางเลือกเพื่อสุขภาพ (permissible salty) และผลิตภัณฑ์ฟังก์ชันนัล ทั้งนี้ การเปิดตัวครั้งใหญ่ที่สุดบางรายการมีกำหนดเกิดขึ้นในไตรมาสแรก

ผู้บริหารไม่มีแผนที่จะลดราคาในวงกว้าง แต่เฮอร์ชีส์กำลังใช้โครงสร้างราคาและขนาดบรรจุภัณฑ์ (pack-price architecture) การส่งเสริมการขายแบบเจาะกลุ่มเป้าหมาย และระดับราคาเริ่มต้นที่เข้าถึงง่าย เพื่อตอบสนองความกังวลด้านความคุ้มค่าของผู้บริโภค โดยเฉพาะในช่องทางร้านสะดวกซื้อ

ธุรกิจขนมทานเล่นรสเค็มยังคงเผชิญกับข้อจำกัดด้านอุปทาน โดยความต้องการซื้อสูงกว่าอุปทานที่มีอยู่ อย่างไรก็ตาม ระดับการให้บริการกำลังปรับตัวดีขึ้น และสายการผลิตใหม่มีกำหนดเปิดดำเนินงานในครึ่งแรกของปี 2027 การลงทุนในระบบอัตโนมัตินี้ยัังมีวัตถุประสงค์เพื่อเพิ่มกำลังการผลิตสำหรับรูปแบบซองเดี่ยวและแพ็กเกจรวมหลายชิ้น (multipack)

เฮอร์ชีส์คาดว่าธุรกิจขนมทานเล่นรสเค็มจะสร้างรายได้และกำไรเพิ่มขึ้นในปี 2027 โดยอัตราการส่งสินค้าสมบูรณ์ (fill rates) ที่ดีขึ้น การลดการพึ่งพาการขนส่งแบบตลาดสปอต ตลอดจนการปรับเส้นทางจัดส่งและคำสั่งซื้อของลูกค้าให้มีประสิทธิภาพสูงสุด คาดว่าจะช่วยสนับสนุนความสามารถในการทำกำไร

การจัดจำหน่ายในช่องทางนอกบ้าน (Away-from-home) และร้านค้าปลีกเฉพาะทาง ยังคงเป็นโอกาสในการเติบโตเพิ่มเติมสำหรับทั้งกลุ่มขนมหวานและขนมทานเล่นรสเค็ม โดยผู้บริหารอธิบายว่าช่องทางเหล่านี้เป็นปัจจัยหนุนเชิงบวกในการก้าวสู่ปี 2027

แนวทางการดำเนินงานจากผู้บริหาร

เฮอร์ชีส์ยังคงเป้าหมายการเติบโตของยอดขายปี 2027 ไว้ที่ช่วง 2% ถึง 4% โดยผู้บริหารระบุถึงนวัตกรรม แคมเปญส่งเสริมการขายที่เพิ่มขึ้น การลงทุนในแบรนด์ การขยายช่องทางจัดจำหน่าย และการปรับขึ้นราคาต่อเนื่องในระดับหลักเดียวช่วงต้น เป็นปัจจัยขับเคลื่อนการเติบโตที่สามารถควบคุมได้ อย่างไรก็ตาม แรงกดดันอย่างต่อเนื่องต่อการใช้จ่ายของภาคครัวเรือนอาจกดดันให้ผลลัพธ์ลงไปเบียดขอบล่างของช่วงเป้าหมาย

บริษัทคาดว่าอัตรากำไรจะปรับตัวดีขึ้นอย่างมีนัยสำคัญในปี 2027 โดยเป้าหมายระยะยาวคือการฟื้นตัวสู่ระดับอัตรากำไรที่ 40% กลาง ๆ ตั้งแต่ปี 2028 เป็นต้นไป ซึ่งได้รับการสนับสนุนจากการบริหารจัดการการเติบโตของรายได้ สัดส่วนผลิตภัณฑ์ การเพิ่มผลิตภาพ และการปรับปรุงการดำเนินงาน

โครงการเพิ่มผลิตภาพที่สำคัญประกอบด้วยการนำระบบดิจิทัลและระบบอัตโนมัติมาใช้ในโรงงาน ระบบอัจฉริยะเพื่อการตัดสินใจ การลดทุนหมุนเวียนและของเสีย รวมถึงการปรับปรุงระบบโลจิสติกส์ให้มีประสิทธิภาพสูงสุด ทั้งนี้ ระยะเวลาในการฟื้นตัวของอัตรากำไรจะขึ้นอยู่กับเงินเฟ้อในส่วนของค่าขนส่ง โลจิสติกส์ และต้นทุนวัตถุดิบอื่น ๆ ด้วย

กรอบเป้าหมาย EPS ปี 2027 ของเฮอร์ชีส์ตั้งเป้าการเติบโตในระดับสองหลัก หลังจากตัดเงินคืนภาษีศุลกากรจำนวน 0.25 ดอลลาร์ออกจากฐานปี 2026 แล้ว ผู้บริหารกล่าวว่ากรอบเป้าหมายเดิมยังคงเป็นไปได้หากสภาพแวดล้อมการดำเนินงานปรับตัวดีขึ้น แต่สภาวะปัจจุบันอาจส่งผลให้การเติบโตต่ำกว่ากรอบดังกล่าว บริษัทมีแผนที่จะลงทุนอย่างต่อเนื่องในด้านการตลาด นวัตกรรม และการบริหารจัดการสินค้าแม้จะเผชิญแรงกดดันด้านต้นทุนในระยะสั้นก็ตาม

ความเสี่ยงและประเด็นที่ต้องจับตา

การใช้จ่ายของผู้บริโภคยังคงได้รับแรงกดดันจากราคาน้ำมัน อัตราเงินเฟ้อ และอัตราดอกเบี้ยที่สูงขึ้น ผู้บริหารเปิดเผยว่าผู้ซื้อมีความระมัดระวังในการเลือกช่องทางการซื้อมากขึ้น โดยหันไปให้ความสำคัญกับร้านค้าปลีกขนาดใหญ่ (mass retail) อีคอมเมิร์ซ และร้านค้าแบบสมาชิก (club stores) ขณะที่จำนวนผู้ใช้บริการในร้านสะดวกซื้อยังคงซบเซา

ค่าขนส่ง โลจิสติกส์ และต้นทุนวัตถุดิบที่ไม่ใช่โกโก้ได้เพิ่มความเสี่ยงขาลงต่อกรอบเป้าหมายผลกำไรปี 2027 นอกจากนี้ การลดลงของปริมาณการขายที่ส่งผลต่อการสูญเสียการประหยัดจากขนาด (volume deleverage) ยังส่งผลกระทบต่อความสามารถในการทำกำไร แม้ว่าผู้บริหารจะคาดว่าแนวโน้มอุปสงค์จะปรับตัวดีขึ้นเมื่อการปรับขึ้นราคาชะลอตัวลงและแคมเปญของแบรนด์ขยายผลได้มากขึ้น

ราคาโกโก้ยังคงผันผวน โดยผู้บริหารระบุว่าการเก็งกำไรเกี่ยวกับปรากฏการณ์เอลนีโญกำลังส่งผลกระทบต่อราคาในตลาด แต่ไม่คาดว่าราคาโกโก้จะยืนอยู่ในระดับปัจจุบันในระยะยาว ทั้งนี้ เฮอร์ชีส์ได้อ้างถึงระดับสินค้าคงคลังที่ดีขึ้น อุปทานที่มีความหลากหลายมากขึ้น และพื้นที่เพาะปลูกที่เพิ่มขึ้นในหลายภูมิภาค พร้อมทั้งยังคงแนวทางการป้องกันความเสี่ยง (hedging) ที่มีวินัยและมีความยืดหยุ่น

กำลังการผลิตขนมทานเล่นรสเค็มยังคงต่ำกว่าความต้องการซื้อ และระดับการให้บริการยังไม่บรรลุเป้าหมายของผู้บริหาร ทั้งนี้ คาดว่าจะมีการเพิ่มกำลังการผลิตเพิ่มเติมในช่วงครึ่งแรกของปี 2027

ประเด็นสำคัญจากการถาม-ตอบของนักวิเคราะห์

นักวิเคราะห์ให้ความสนใจอย่างมากว่าเฮอร์ชีส์จะสามารถบรรลุการเติบโตในปี 2027 โดยปราศจากการฟื้นตัวอย่างเต็มที่ของปริมาณการขายได้หรือไม่ ซึ่งผู้บริหารชี้แจงว่าการปรับขึ้นราคาต่อเนื่อง ผลิตภัณฑ์นวัตกรรม และกิจกรรมส่งเสริมการขาย สามารถช่วยสนับสนุนการเติบโตของรายได้รวมได้ แม้ว่าปริมาณการขายยังคงติดลบเล็กน้อย ขณะที่แนวโน้มยอดขายเชิงจำนวนชิ้นคาดว่าจะทยอยปรับตัวดีขึ้นตลอดปี 2027

เกี่ยวกับส่วนแบ่งทางการตลาด ผู้บริหารยอมรับว่าคู่แข่งมีการเปิดตัวนวัตกรรมและกิจกรรมการตลาดระยะสั้นเพิ่มขึ้นอย่างมาก ทั้งนี้ เฮอร์ชีส์คาดว่าแผนผลิตภัณฑ์นวัตกรรมที่ใหญ่ขึ้น 50% การจัดจำหน่ายสินค้าที่ครอบคลุมยิ่งขึ้น และการสนับสนุนด้านสื่อที่เพิ่มขึ้น จะช่วยเพิ่มความสามารถในการแข่งขันในปี 2027 และ 2028

คำถามเกี่ยวกับส่วนต่างราคาทำให้ผู้บริหารต้องย้ำถึงมาตรการด้านความคุ้มค่าแบบเจาะกลุ่มเป้าหมาย แทนที่จะเป็นการลดราคาในวงกว้าง โดยกลยุทธ์จะเน้นไปที่ขนาดบรรจุภัณฑ์ ระดับราคาเริ่มต้นที่เข้าถึงง่าย และการส่งเสริมการขายแบบเลือกสรรที่เหมาะกับแต่ละช่องทางเฉพาะ

เกี่ยวกับอัตรากำไรขั้นต้น ผู้บริหารกล่าวว่าไตรมาส 4 ไม่ใช่จุดเริ่มต้นที่เหมาะสมสำหรับปี 2027 เนื่องจากจังหวะเวลาของการป้องกันความเสี่ยงราคาโกโก้ โดยสัญญาป้องกันความเสี่ยงในตำแหน่งที่ต่างกันคาดว่าจะส่งผลต่อผลการดำเนินงานในปีหน้า ควบคู่ไปกับการประหยัดต้นทุนจากการเพิ่มผลิตภาพและการปรับตัวดีขึ้นของปริมาณการขายตามที่คาดการณ์ไว้

ผู้บริหารยังชี้แจงเพิ่มเติมว่าไม่ควรใช้แนวโน้มยอดขายในไตรมาส 4 เป็นอัตราการดำเนินงานเริ่มต้น (run rate) สำหรับปี 2027 เนื่องจากนวัตกรรมในช่วงปลายไตรมาส การเปิดตัวสินค้าใหม่ในช่วงต้นปี 2027 และโครงการส่งเสริมความคุ้มค่าใหม่ ๆ คาดว่าจะช่วยปรับเปลี่ยนทิศทางการเติบโต

บันทึกคำต่อคำฉบับเต็มของการแถลงผลประกอบการ

บทถอดเสียงฉบับเต็มของการประชุมทางโทรศัพท์ผลประกอบการ

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Operator

Greetings. Welcome to the Hershey Company's Third Quarter 2026 question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Anoori Naughton, Vice President of Investor Relations for the Hershey Company.

Anoori Naughton

Good morning, everyone. Thank you for joining us today for the Hershey 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 today's 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 in consideration in isolation or as a substitute for financial information presented in accordance with GAAP. Reconciliations to 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 Hulays. Operator, we can kick it over for the first question.

Operator

[Operator Instructions] Our first question is from Andrew Lazar with Barclays.

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Andrew Lazar

Maybe start in your prepared remarks, you stated Hershey still has visibility to sales growth in '27 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 we get there solely from carryover price? Or should we expect maybe Hershey to get back to some even modest level of volume growth next year as the company more fully lapse pricing? .

Kirk Tanner

Yes. Thanks, Andrew. I'll take that one. Look, we are confident in the actions we control and the results that are already 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'd 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, our competitiveness is really driven by refresh media, innovation, programming, Let me talk a little bit about each.

Our media that we've seen in the first half of the year is working, is we've got a good return on investment. We've seen our Hershey brand grow 7% in the last 13 weeks. We have 3 new campaigns so we're getting momentum with the media that we're spending or 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 on dot Snack Mix, Hershey Creme bar is the #1 innovation in the last 4 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 '27, we have a 50% increase on our innovation pipeline. We're going to be much more competitive on innovation. Programming. We talked about tentpole events like March Madness, more back-to-school. We have seen improvement on those in 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 '27 both on the top line and the bottom line. And 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, our 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

And then along the lines of the -- becoming increasingly competitive, I guess when we strip away the year-over-year timing and sort of macro dynamics and 1 of the pushbacks we get consistently and I'm sure you hear it, too, is the 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 '27? .

Kirk Tanner

You bet. In the third quarter, we saw retail performance was generally in line with expectation. We had some momentum. Profitable share, I would tell you is at the center of our strategy. and stronger innovation pipeline in the right spaces and more 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 '27 and '28 make us much more competitive. I've seen the innovation myself for '28. It looks fantastic. '27, like I said, it's 50% more than '26 and that's how this category is competitive. It is fresh ideas, innovation, and I feel really good 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, suites, functional and better for you. So we have a complete package going into '27.

Anoori Naughton

Just to add, right, we had some release strength in the quarter and share performance did accelerate as we were in July and August until we ran into the tougher restore comparisons in September. that will continue through the balance of the year. And that is why we called that out and how we're thinking about Q4 performance relative to that category. But our performance will look good, continue to be strong on a 2-year basis for...

Operator

Our next question is from David Palmer with Evercore ISI.

David Palmer

I've heard -- 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 amid a category that might also be hitting 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

Yes. 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 drive to the bottom, it's not 1 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

One of the other things that I wanted to ask you about is the pace of innovation. You mentioned how you're lapping or your rises and that's tough. The other thing we hear and you can see it in the data 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? .

Kirk Tanner

Yes. Yes. Let me put a little color on that one. One thing I'll ask on the last question. that you had is we do see unit growth in unit -- 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 in the last 4 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 is fantastic.

We're also launching an opening price point on our icebreakers, gums, 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 Carmel, we have kit kat seasonal shaves. We've got a new dots Buffalo snack mix. We have Res'Coco-field pretzel and we have SkinnyPoparmer Jon-Garlic, all happening in quarter 4. Now when we roll over in the '27, we have -- some of our biggest innovation is going to happen in Q1. We haven't talked about those innovations yet from a competitive standpoint. The pipeline is robust, and it is on our core business. It addresses opportunities for us in suites, in premium.

We have more permissible salty coming out and we have some functional innovation coming. So we're targeting those spaces. So overall, it's up 50%. And I think that's important. It's a significant step up for us, and it will contribute 3x more to the growth in '27.

Operator

Our next question is from Peter Gaba with Bank of America.

Peter Galbo

I wanted to go back to maybe expand on Andrew's question on organic sales into '27, 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 '27. Obviously, we know the shorter Easter, that kind of being a bit of a headwind. We have the weak bit shifting. I just want to understand kind of the shape or the direction of travel? 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.

Kirk Tanner

Sure. So fourth quarter, I'll start with the fourth quarter. It's still being impacted by the tougher laps on Restoro 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 Galbo

Got it. Okay. That's helpful. And 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 in March. So 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?

Kirk Tanner

Yes, you got it. I'll give --No, I'll let you take it, Dave. Why don't you talk about the EPS growth.

Dave Hulays

So we don't see the initial EPS framework as completely off the table. But we would need to see the environment improve. And the areas we're focused on and looking for improvement are freight and logistics, more favorable commodity outlook. We're working on stronger returns from productivity in 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.

Operator

Our next question is from Thomas Palmer with JPMorgan.

Thomas Palmer

Sorry. I wanted to follow up on this last question from Peter 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 potential flexibility there. Just wondering if there are any changes in that low double-digit outlook.

Kirk Tanner

Sure, there is no change to the '27 EPS framework other than reflecting the higher freight logistics and non-cocoa input costs. So we're going to continue to invest. Our posture remains the same 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 and maybe I'll call out as we think about where we see big opportunity next year.

So 1 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 efficiencies. decision intelligence, which is something that's broadly being rolled out, enabling 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 '28.

Thomas Palmer

Great. 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. Just 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

Yes. Let me take that one. Look, if you look at the Saturday Halloween, about 35% of the seasonal sales happened this week. So that's the impact. So the biggest selling days are still ahead of us. The category is on track in that sense, in a compressed season, meaning the Labor Day was late and then you have a Saturday Halloween. So that's how that shapes up. Hershey's 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. that these final days are important and these big trick-or-treat packs, they are to our benefit. We have a share 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 consumers to show up. We need them, the last few days are really critical. We're starting to see it. So we're keeping an eye on these last few days.

Operator

Our next question is from Robert Moskow with TD Cowen.

Robert Moskow

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 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 of what to think about 2027 at all because I think you'd have to be up like over 200 basis points to hit 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 2 things can happen at the same time?

Dave Hulays

Yes, 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 Coco 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, yes, 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 Moskow

Okay. And Dave, can you be more specific about seeing it get better? Because the volume is down 10% in the quarter. Where are you seeing it get better? Is it the retail tracking is less bad as you exit third quarter?

Dave Hulays

Yes. I think we're going from high double-digit -- high teens pricing in Q3 to single-digit pricing in Q4 and we're investing in our brands. 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.

Unknown Executive

Yes. When we look at specific brands like Hershey, KitKat, Cadburys, our Kisses line, we see meaningful unit trend improvement. So we'll see that, that trend improvement will continue in Q4. It will 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 -- 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.

Unknown Executive

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. .

Operator

Our next question is from Chris Carey with Wells Fargo Securities.

Christopher Carey

I'd like to ask -- 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 I wanted 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.

Kirk Tanner

We're continuing to see El Nino speculation impact market prices. We don't expect cocoa to remain at current levels long term. And so let me just talk about what we're seeing and how we're thinking about it. So we're coming off of a historical surplus of 500,000 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 in monitoring. It shows that cocoa acreage is continuing to rise in a number of regions in response to the high prices.

And you're seeing examples of that in Ecuador, for example, biggest export output on record in September. The industry is more agile. And so we believe the 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 tool kit, including flexible hedging instruments.

Christopher Carey

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 out of stocks beginning to hit the business? And any context on how you would see that going forward?

Kirk Tanner

Yes. I would tell you that our overall, our salty business can contribute more to the top line and the bottom line, and we'll do so 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. So 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 multipack and that just drives a little level of complexity that we needed to invest in automation so that we can deliver those packs that consumers want. I'm confident that we will get there. And some -- 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.

Unknown Executive

I'll add, 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 fall to reduce our reliance on spot rate which is important in salty because there has a 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, Again, 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 in 2027 as Kirk said.

Operator

Our next question is from Leah Jordan with Goldman Sachs.

Leah Jordan

So Dave and earlier question, highlighted potentially stronger productivity as a lever that could help offset some of the inflationary headwinds that have crept up this year as we look ahead to next year. So Justin, if you could provide an update on what opportunities you still see for productivity, 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 tools outside of hedging for cocoa at this point? Like where are we on that journey as well?

Unknown Executive

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 road map is, I would say, multifaceted, but technology is going to play a significant role. So I mentioned some of those technology initiatives already earlier, the digitization of the factory, decision intelligence, logistics optimization, and then I'd just say as far as Coco, 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 flexibility. We built a new chocolate 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.

Leah Jordan

Okay. That's helpful. And then for my second question, just on brand investments, they're expected to step up here. again in the fourth quarter. Should we think of that being more of the same of what you highlighted for 3Q? Or any updates to the brands and channels you're targeting? Just curious if there's any change in the approach as the consumer has been soft here recently?

Kirk Tanner

Yes. 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, fulfill, payday or all getting new campaigns with strength and support as well, and those are ramping as we speak. .

Operator

Our next question is from Alexia Howard with Bernstein.

Alexia Howard

Can I just ask about the prepared remarks comments about improving unit volumes as price growth flows on nonseasonal items. Can you put any color around that on -- we've seen it move from down double digits or down high single digits -- a mid-single-digit decline as that price growth has started to slow. Any commentary on that? .

Kirk Tanner

Yes. 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 Kiss lineup that continues to improve, and we'll continue to see that improvement throughout next year. And 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 '27. Anything to add...

Unknown Executive

Yes, in Q4 specifically, that's partly offset by tough comparisons. And so we talked about REO as being 1 of those.

Anoori Naughton

Yes. In Q3, the operation 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 gun in the trend, and that's the most important data point that we wanted to provide you.

Alexia Howard

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

Yes. 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 Kirk 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.

Unknown Executive

Yes. 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 2 key areas are important for us to drive demand and we're focused on doing that. And we like what we're seeing in our efficiency and the brand building that we're doing. So we'll continue to invest in those spaces at the levels that we're at.

Operator

Our next question is from Peter Grom with UBS.

Peter Grom

You touched on some -- you touched on some of the category weakness 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? And 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

Yes. A couple of things kind of on channel performance. I think the biggest outlier was C-stores. we saw a minus 5 for the category in C stores, I'm sorry, move voice now. We saw that continue into October. So that concern is still on C-stores. But when you look at everywhere else. So every day, candy, men's and gum, the category is a plus 3.7% in Q3. .

Unknown Executive

Do you want me take that?

Unknown Executive

Yes.

Unknown Executive

Yes. So -- if you just -- let me step back and then I'll talk a little bit more about the specific question. So we are seeing the consumer more cautious on inflation gas price -- because of gas prices and interest rates are strained on households. They are making more deliberate choices across channels, more in mass, more in e-com, more in club. C-store has been the challenge. Categories down 5% in September. We have seen that continue into October.

And then as Kirk said, everywhere else, our business is actually up 3.7% in Q3. So when we do step back, we see it at 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, we can talk more about that, Kirk can probably add some color on what we're doing there.

Kirk Tanner

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 category -- I mean, 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. .

Peter Grom

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 $0.25 out of the base for '26 and then growing double digits from there. Is that the right way to think about it.

Dave Hulays

That's right.

Operator

Our next question is from Michael Lavery with Piper Sandler.

Michael Lavery

I know a couple of questions I 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 the 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 that. Can you just maybe be specific about how to think about that wording? .

Kirk Tanner

Yes. So let me take the top line, and I'll let Dave talk about EPS growth in the bottom line. From a top line standpoint, we're sticking with the range that we guided to. if the consumer 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, et cetera. But if the 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. And I'll let Dave talk about how that impacts the bottom line and EPS. .

Dave Hulays

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 talked about earlier.

Michael Lavery

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? .

Kirk Tanner

Yes. So just starting in '27, we do expect meaningful margin improvement in 2027. That long-term ambition is '28 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 in all those other levers that we typically leverage will be a part of that algorithm. What might affect the timing or the new pieces. So logistics and freight and some of the other cost inflation, if that turns and improves sooner, you'll see some margin move sooner. If it takes longer, it will take a little bit longer for us to get there. .

Operator

Our next question is from Nik Modi with RBC Capital Markets.

Nik Modi

Kirk, I wanted to kind of revisit some comments you made, I think, last quarter about distribution opportunities outside of the traditional channels, so maybe you can give us an update on that. And could this be big enough to kind of help you kind of muscle through some of this downturn as we go into 2027.

Kirk Tanner

Yes. We talked about away from home being an opportunity, and that continues to be an opportunity. We're doubling down in that space. Yes, and it's really across both our Salty and our confection business. So we're seeing good growth. We'll continue to see growth. That will be a tailwind for us, including specialty retail away from home. Yes, 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.

Unknown Executive

And I'll say we're continuing to strengthen our already strong partnerships in the core channels as well. So we're focused on that as well.

Nik Modi

Great. And then just kind of a final 1 for me is just on agentic commerce. I mean it just seems like it's really adoption is getting really out of traction is picking up pretty quickly. And just curious, like how Hershey inducted an agentic-commerce like audit in terms of how your brands show up across all these different platforms? Any thoughts on that would be interesting. .

Kirk Tanner

Absolutely. Yes. I mean this is a really important space understanding. We spent a lot of time with some of our partners 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. .

Operator

Our final question will come from Scott Marks with Jefferies. .

Scott Marks

I have 2 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 nonseasonal or holiday-type merchandising activity in stores?

Kirk Tanner

Yes. We're really excited about this movie and the story that's going to tell. I would look at -- our Hershey brand right now is having an exceptional year. And 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. And we've been supportive -- retailers 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 that you'll see that, 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

And then just 1 last point of clarification from me. In the prepared remarks, you also noted a little bit of the shipment timing headwind in North America confectionery, I believe you've got a little bit of benefit in Q3, can you just remind us 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?

Anoori Naughton

Yes, 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 you 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 of '25. So I would say it's largely a wash on the shipment timing dynamics for Q4.

Kirk Tanner

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.