Tootsie Roll Earnings Slide as Cocoa Costs Bite
Tootsie Roll Industries reported second-quarter net earnings of $13.3 million, down 24% from a year earlier, as rising cocoa and chocolate costs outpaced a modest sales shift.
Tootsie Roll Industries (TR) reported a second-quarter profit decline that broke a multi-year run of steady growth, as higher cocoa and chocolate costs overwhelmed the confectioner's pricing gains. Net earnings fell to $13.3 million from $17.5 million a year earlier, a 24% drop, while earnings per share fell to $0.18 from $0.23.
The quarter marked a reversal from the trajectory the company had built over the prior year. Net sales fell 1% to $151.9 million from $153.2 million, compared with growth of 2% in the first quarter, 2% in the fourth quarter of 2024, 3% in the third quarter of 2024, and 3% in the year-ago second quarter. Tootsie Roll attributed the softness to a timing shift that pushed seasonal sales into the third quarter and to higher trade promotion spending, both of which reduced reported net sales, a factor not cited in prior quarters' releases.
The earnings decline was steeper than the sales decline suggests, pointing to margin compression as the primary driver. For the first half of 2025, net sales rose 1% to $301.4 million even as net earnings fell 13% to $31.0 million from $35.6 million and EPS fell 13% to $0.41 from $0.47. The gap between rising revenue and falling profit reflects cost pressure on the company's core inputs.
That pressure marks a sharp turn in Tootsie Roll's cost narrative. Significantly higher cocoa and chocolate unit costs weighed on margins in the second quarter, reversing language from the third-quarter and second-quarter 2024 releases, which both credited higher price realization, manufacturing efficiencies, and cost reductions for margin benefits. New pressure from elevated energy costs raised freight and delivery expenses, along with higher resin-based packaging costs, neither of which appeared in the first-quarter filing.
The broader earnings trend has decelerated sharply. Twelve-month net earnings grew 16% in the 2024 fourth-quarter release and nine-month net earnings grew 13% in the third-quarter release, but that growth reversed into a 13% decline for the first half of 2025.
On the outlook, Tootsie Roll moved up its timeline for cost relief. The company now expects lower cocoa and chocolate costs to be realized as early as the second half of 2025 and into 2026, compared with prior guidance in the first-quarter and fourth-quarter releases that placed the benefit in late 2025 and into 2026.
The anchor release also omitted two items that had featured in recent filings. It did not disclose an effective tax rate figure, after the first-quarter release cited a rate of 25.1% versus 21.6% a year earlier tied to non-deductible deferred compensation. It likewise dropped discussion of tariff effects on cocoa, chocolate, edible oils, and packaging costs that had appeared in each of the three prior quarterly releases.