好時 (HSY) 2026 年第三季財報電話會議：2027 年銷售成長展望維持在 2%-4%

重點摘要

• 好時公司維持其 2027 年銷售額成長 2% 至 4% 的展望。管理層表示，持續的消費者壓力可能使成長落於該區間的低段。
• 預計 2027 年將有低個位數的價格滯後效應，隨著價格趨緩，管理層預期單位與銷量趨勢將持續改善。該公司表示，即使銷量未完全轉正，銷售額仍可實現成長。
• 好時計劃將 2027 年的創新產品陣容比 2026 年增加 50%。管理層預期創新將在 2027 年貢獻三倍的成長。
• 好時品牌在過去 13 週內成長了 7%。該公司還報告媒體投資報酬率提升了 8%。
• 管理層預期 2027 年利潤率將顯著改善，並持續以長期（即 2028 年及以後）回升至 45% 左右的利潤率為目標。
• 2027 年每股盈餘（EPS）框架仍面臨貨運、物流與非可可原料成本的壓力。財務長 Dave Hulays 表示，當前形勢可能使 EPS 成長低於原先的框架。

關鍵財務數據

業務與營運表現

好時表示，隨著價格調整趨緩，其銷量與單位走勢正在改善。管理層強調好時（Hershey）、奇巧（KitKat）、吉百利（Cadbury）與好時之吻（Kisses）的趨勢均有所提升，但同時警告復甦不會是一條直線。

創新仍是該公司需求策略的核心。近期推出的產品包括 Hershey Creme 巧克力棒、Reese's Oreo 聯名款和 Reese's 夾心鹹餅乾。2027 年的產品陣容將聚焦於核心糖果業務，以及高端、無負擔鹹味零食與功能性產品。公司計劃中部分最大規模的新品上市排定於第一季。

管理層不打算全面降價。相反地，好時正透過包裝價格結構、精準促銷與入門價格點，來因應消費者對物超所值的關注，特別是在便利商店通路。

鹹味零食業務繼續面臨供應限制，需求超過可用供應。服務水準正在改善，新生產線預計將於 2027 年上半年投產。自動化投資亦旨在提高單包裝與多包裝規格的產能。

好時預計鹹味零食在 2027 年將對營收和獲利做出更大貢獻。訂單滿足率的提高、對現貨貨運依賴的減少，以及運輸路線與客戶訂單的優化，預計將有助於推升獲利能力。

戶外消費與特約零售通路仍是糖果與鹹味零食業務額外的成長機會。管理層將這些通路視為進入 2027 年的順風因素。

管理層指引

好時維持其 2027 年銷售額成長 2% 至 4% 的區間。管理層指出，創新、增加行銷專案、品牌投資、通路拓展以及低個位數的價格滯後效應為可控的成長驅動力。然而，家庭支出的持續壓力可能會使結果偏向低段。

該公司預計 2027 年利潤率將顯著改善。其長期目標是在營收成長管理、產品組合、生產力與營運改善的支撐下，自 2028 年起回升至 45% 左右的利潤率。

關鍵的生產力計畫包括工廠數位化與自動化、決策智慧化、營運資金與浪費減少，以及物流優化。利潤率復甦的時間點也將取決於貨運、物流與其他原料成本的通膨情況。

在扣除 2026 年基期中 0.25 美元的關稅退款後，好時的 2027 年每股盈餘（EPS）框架考慮實現雙位數成長。管理層表示，若營運環境改善，原先的框架仍有可能實現，但目前的情況可能導致成長低於該框架。儘管面臨短期成本壓力，該公司仍計劃繼續投資於行銷、創新和商品展示。

風險與關注焦點

消費支出仍受到汽油價格上漲、通膨與利率居高不下的壓力。管理層表示，消費者在選擇通路上更加深思熟慮，偏好大眾零售、電商與會員制倉儲店，而便利商店的客流量則持續疲軟。

貨運、物流與非可可原料成本增加了 2027 年獲利框架的下行風險。銷量負槓桿效應也在影響獲利能力，儘管管理層預計隨著價格調整趨緩與品牌計畫擴大規模，需求趨勢將會改善。

可可價格持續波動。管理層表示聖嬰現象的投機炒作正影響市場價格，但不預估可可長期會維持在目前水平。好時指出其擁有更健康的庫存、更多元化的供應以及多個地區種植面積的增加，同時保持紀律嚴明且具彈性的避險策略。

鹹味零食的產能仍低於需求，服務水準尚未達到管理層的目標。預計 2027 年上半年將有新增產能上線。

分析師問答亮點

分析師高度關注好時能否在銷量未完全復甦的情況下實現 2027 年的成長。管理層表示，即使銷量維持輕微負成長，價格滯後效應、創新與行銷專案仍可支撐營收成長，同時預計 2027 年單位趨勢將有所改善。

在市占率方面，管理層承認競爭對手的創新與短期活動增加。好時預期其規模擴大 50% 的創新產品陣容、更廣泛的商品展示以及增加的媒體支援，將在 2027 與 2028 年提升競爭力。

關於價差的問題促使管理層強調採取精準的價值措施，而非全面降價。該策略的核心在於針對特定通路量身打造的包裝規格、入門價格點與選擇性促銷。

在毛利率方面，管理層表示由於可可避險的時間點，第 4 季並非 2027 年合適的起始基準。預計不同的避險部位將在明年反映於業績中，並伴隨生產力節省與預期的銷量改善。

管理層還澄清，不應將第 4 季的銷售趨勢視為 2027 年的起始運轉率。季度後期的創新、2027 年初推出的新品以及新的價值舉措預計將改變成長趨勢。

法說會完整逐字稿

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完整財報電話會議逐字稿

管理層陳述

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.

分析師問答

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.