HSY · 10-Q · 2026Q3 · Full report

Gross Margin Drivers

HERSHEY CO · 2026-10-29 · Importance 69 · Surprise 64 · No source text

Third-quarter gross margin increased to 46.1% from 32.6%, a 1,350-basis-point improvement, as cost of sales fell $379.6 million to $1,764.5 million. The decline included $367.0 million primarily from lower commodity costs, AAA Initiative savings and tariff refunds, plus $49.1 million of favorable commodity-derivative mark-to-market activity; higher freight and logistics costs offset $36.2 million. For the first nine months, gross margin rose to 43.6% from 32.3%, driven by price realization, AAA savings and tariff refunds, partly offset by supply-chain costs and volume declines.

Key facts

• Third-quarter 2026 cost of sales was $1,764.5 million, down $379.6 million or 17.7% from $2,144.1 million in third-quarter 2025. source
• First-nine-months 2026 cost of sales was $5,170.0 million, down $653.7 million or 11.2% from $5,823.7 million in the same period of 2025. source
• First-nine-months cost-of-sales reduction included $191.5 million of favorable commodity-derivative mark-to-market activity intended to economically hedge future years’ commodity purchases. source
• Third-quarter 2026 gross margin was 46.1%, compared with 32.6% in third-quarter 2025, an increase of 1,350 basis points. source
• First-nine-months 2026 cost-of-sales reduction was partly offset by $385.8 million, primarily related to increased supply chain costs and unfavorable mix. source
• First-nine-months 2026 gross margin was 43.6%, compared with 32.3% in the same period of 2025, an increase of 1,130 basis points. source
• Third-quarter cost-of-sales reduction included $49.1 million of favorable commodity-derivative mark-to-market activity intended to economically hedge future years’ commodity purchases. source
• Third-quarter 2026 gross-margin growth was driven by favorable net price realization, derivative mark-to-market activity, tariff refunds, and AAA Initiative savings, partly offset by volume declines and higher freight and logistics expenses. source

Impact estimates