Hershey, McCormick Seeing $70-170 Million in Tariff Expenses

Two companies heavily dependent on imported ingredients – McCormick and Hershey – were hard hit by tariffs in their third quarter financial reports this month.

McCormick officials in July estimated the impact of tariffs for their fiscal year, which ends Nov. 30, to be $50 million; they now think it will be $70 million. “Since our last earnings call, new and higher tariffs have been introduced,” Chairman and CEO Brendan Foley said in the company's early-October report. At the current rate, an annualized tariff hit could be $140 million, they estimate.

“The situation remains fluid,” Foley said.

Those estimates are before a number of “mitigation” efforts the company has instituted. “We plan to offset as much as we can from productivity savings, alternate sourcing, supply chain initiatives and leveraging our revenue management capabilities,” added Marcos Gabriel, executive vice president and chief financial officer.

And while McCormick has largely held the line on pricing till now, some “surgical” price increases to offset tariffs are coming in this final quarter of this fiscal year.

Back in its May 1 report to investors, Hershey expected tariff expenses to be approximately $15-20 million in the second quarter only. In its Oct. 30 report, the company now estimates the hit will be $160-170 million for the full year – “as understood today.”

Hershey also is being hit with skyrocketing cocoa costs. The resulting higher prices to consumers made for a mixed bag of third-quarter financials: sales were up 6.5% to nearly $3.2 billion, volume was flat, but net income was down a whopping 38% to $276.3 million – although the 3Q2024 net income of $474 million would be difficult to repeat.