McCormick & Co. sees drop in first-quarter profit

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Spice maker McCormick & Co. said Tuesday that its profit slid during the first quarter, but it reaffirmed its financial outlook for fiscal year 2023 because of strong demand.

The results beat Wall Street expectations, and shares of McCormick stock rose 9.6% Tuesday to close at $81.18 each.


The Hunt Valley-based company’s net income during the three months that ended Feb. 28 fell to $139 million, or 52 cents per share, compared with $155 million, or 57 cents per share, in the same period a year earlier. McCormick’s reported adjusted earnings of 59 cents per share topped Wall Street estimates of 50 cents per share.

Sales rose 3% to nearly $1.57 billion during the December-to-February period. Its sales growth was squeezed by the divestiture of the Kitchen Basics brand, pulling out of the consumer business in Russia and lower consumption in China because of COVID-related disruptions, the company said.


“We delivered solid first-quarter results which reflect strong demand and early results from our actions to increase our profit realization in 2023,” said Lawrence E. Kurzius, chairman and CEO, in the earnings announcement.

Kurzius said the quarter’s record sales show the strength of McCormick’s global portfolio and the effective results of its strategies.

The company expects “robust” growth this year as it introduces new products and freshens up existing items. The brand is rolling out its first new design in 40 years for its core red cap spices, using a new lid designed to enhance freshness.

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Brittany Quatrochi, an Edward Jones analyst, upgraded the company’s stock to a “buy,” saying in a report she sees a chance for earnings to recover this year and beyond.

“Like peers, McCormick has faced many challenges that have weighed on profits,” such as inflation, Quatrochi said in the report. “However, McCormick has a longer, more complex supply chain. This is causing profitability to be impacted more and is causing it to take longer to recover than peers.”

McCormick’s earnings growth should benefit from new cost-savings initiatives, improved pricing in its commercial Flavor Solutions business, new manufacturing plants and a recovery in China. Longer term, McCormick “can grow faster than food peers due to the faster growth of the spice and flavor industry,” she said in the report. “It has few large premium-branded competitors.”

Arun Sundaram, senior equity analyst at CFRA Research, maintained a hold on McCormick shares but lifted the 12-month price target by $11 to $86 per share.

“Sales growth should accelerate as [McCormick] laps last year’s COVID-19 shutdowns in China and the exit of its consumer business in Russia,” Sundaram said in a report Tuesday.


Kurzius said gross profit margins improved despite the highest cost inflation the company is expecting for the year. The company is on track to realize $75 million in cost savings this year.

McCormick reaffirmed its sales and earnings per share outlook for the fiscal year. The company expects sales this year to jump between 5% and 7% compared with last year.