Tootsie Roll Q3 profit falls 35% on cocoa costs and trade promotions

Tootsie Roll Industries reported a 35% drop in third-quarter net earnings for 2026, with the Chicago-based confectioner citing higher input costs and increased trade promotions as primary drivers. Net earnings for the quarter stood at $23,216,000, down from $35,659,000 in the same period last year, while net sales declined by 1% to $227,163,000.

Chairman Ellen R. Gordon attributed the financial pressure to the timing of sales, including seasonal Halloween volumes, which shifted between the third and fourth quarters compared to the prior year. The company also noted that gross margins were adversely affected by higher unit costs for ingredients, primarily cocoa and chocolate, as well as packaging materials. Although cocoa and chocolate costs were more favorable in the third quarter of 2026 than in the first half of the year, Gordon stated that commodity prices remain well above historical levels following their peak in 2025.

Elevated energy costs further strained operations by driving up freight and delivery expenses through higher diesel fuel surcharges. The company expects these logistics costs to remain elevated through the fourth quarter of 2026 and likely into 2027. Additionally, increased costs for plant labor, benefits, maintenance, and supplies contributed to margin compression during the period.

To support its brands, Tootsie Roll increased advertising and trade promotions during the third quarter. Because trade promotions are accounted for as a reduction in reported net sales, these higher levels of support had an adverse effect on the top line. The company’s effective income tax rate for the third quarter of 2026 was 25.6%, compared to 26.7% in the prior year period.

On a nine-month basis for 2026, net sales decreased by $1,731,000 to $528,594,000. Net earnings for the nine-month period fell by 24% to $54,224,000, with earnings per share dropping from $0.95 to $0.72. The company recognized approximately $2,500,000 in acquisition-related expenses during this period following its September 1, 2026 acquisition of a confectionery business in Mexico comprising the Winis brand.

Gordon stated that the company remains focused on the long term, continuing investments in plant manufacturing operations to meet customer demands and improve operational efficiencies. While net earnings benefited from some tariff refund recoveries, investment income from marketable securities was lower than in the comparable prior-year periods. The company cautioned that forward-looking statements are subject to risks including changes in U.S. tariffs and the ability to recover input costs through price increases.