Hershey is counting on a last-minute Halloween candy shopping surge to help offset slumping volumes as inflation, high gas prices and elevated interest rates weigh on consumers and threaten to undermine the company’s sales growth.
“Our category remains central to seasonal and cultural traditions. Halloween participation is expected to be in line with 2025, though financial pressures could shape final purchase decisions,” Hershey CEO Kirk Tanner warned in prepared comments about the company’s third quarter earnings.
In an Oct. 29 call with investment analysts, he cautioned that a late Labor Day this year resulted in a “compressed calendar” that “is affecting the season’s pace.” He explained that with the holiday falling on Saturday this year “about 35% of the seasonal sales happened this week,” and as of Thursday “the biggest selling days are still ahead of us.”
Tanner said he was “optimistic that our enhanced assortment, new pack types and value price points, seasonal innovation and increased investment will drive engagement in these final days leading into the weekend’s celebration.”
He also touted the company’s modern Halloween marketing, which led with Reese’s, leading to the brand’s Halloween item velocities increasing 13% and driving an 80-basis-point gain in seasonal sales.
The company also applied lessons from last Halloween and increased shipments, installed displays in the marketplace and focused on the power of retail partnerships to drive sales, Tanner said.
Macroeconomic headwinds persist
However, Tanner was also realistic about the impact of macroeconomic trends on the company’s performance.
“The operating environment has become more challenging as consumers manage the cumulative pressure of higher gas prices, inflation and interest rates,” he said. “As September progressed, we saw consumers become more deliberate about spending, particularly in channels most exposed to higher gas prices, like convenience stores where the US candy, gum and mint category declined nearly 5% in the month. That caution persisted into October, with growth moderating across snacking segments, though our categories are holding up comparatively well.”
The challenge Hershey faces at convenience stores is “a channel and trip problem, not as much a category issue,” Hershey CFO Dave Poultre told investment analysts. He explained that Hershey is doing what it can to bolster the channel, including pulling value levers, innovating, exploring price pack architecture and exacting “surgical” promotions.
Against this backdrop, Tanner stressed, in the run-up to Halloween “these final days are important, and these big trick-or-treat packs, they are to our benefit.”
If the next few days go well, the company expects it can still meet its long-term 2027 framework, including a previously predicted 2% to 4% organic sales growth and low-double-digit earnings per share growth. However, executives cautioned the company likely will land in the lower end of the range – especially if consumer conditions worsen.
Better-than-expected gains
Executives’ optimism reflects the company’s strong performance beyond the convenience store channel.
The company reported adjusted EPS that beat estimates by 25.1% at $2.64, while revenue also inched past expectations by less than 1% at $3.28 billion in the quarter. These surprise gains reflect the company’s effort to control costs and reinforce margins, as well as earlier price increases, rather than a sudden boost in demand.
Indeed, volume, which fell about 10% in the quarter, tells a different story and prompted pointed questions from some investment analysts on Thursday. Among them were whether the company planned to roll back prices or explore more promotions.
Tanner quickly tamped down the suggestion.
“Pricing remains rational. This is how we are looking at it: The category overall is healthy. I think that it is not a category that promotional activity really drives to the bottom. It is not one of those tools that you see in the category,” he said.
While he acknowledged that the company plans to meet consumers where they are in the convenience channel with “the right pack and price,” he said most “category growth has been driven largely by innovation and new ideas.”
Innovation ignites excitement
Innovation has been a focus point for Hershey this year and consumer response has been positive, according to Tanner.
For example, he said, the company’s recently released Crème Bars “are off to a really good start,” and are “the largest innovation in the category in the last four weeks.”
But that is not the only innovation the company has.
In the fourth quarter it is launching Hershey Rolls, which is a chocolate-covered wafer that is hitting the market and “is fantastic,” Tanner said. It also has KitKat seasonal shapes, new Dot’s Buffalo Snack Mix, Reese’s cocoa-filled pretzels and SkinnyPop Parmesan Garlic all happening in the quarter.
Looking forward, Hershey’s innovation pipeline will increase 50% in fiscal 2027 with “some of our biggest innovations” launching in the first quarter, he said. He added the new products will address opportunities in premium sweets, permissible salty and some functional innovation.
“It will contribute three times more to the growth in 2027,” he added.
Beyond innovation, Tanner said he expects volumes more broadly to improve in 2027 across the big brands, including Hershey’s, KitKat, Cadbury and Kisses.
He emphasized: “We are confident that the improvement will carry throughout 2027.”
