McCormick & Co. is on track to boost sales an ambitious 3% to 5% this year after reporting record growth with $6.3 billion in sales in 2021, the Hunt Valley spice and flavorings maker said Thursday.
Sales last year jumped 13%, driven by retail sales to consumers as more people eat and work from home and as sales to food service and restaurant customers have begun to recover. Earnings rose to $2.80 per share from $2.78 each in 2020.
The world’s largest spice maker boosted sales by “actively responding to changing consumer behaviors, and capitalizing on new opportunities, all while remaining forward looking in the challenging global environment,” Lawrence E. Kurzius, McCormick’s president and CEO, said in an announcement Thursday.
Sales in the fourth quarter, which ended Nov. 30, rose 11% to $1.73 billion compared with the last three months of the previous fiscal year, the company said. Net income dipped slightly to $197.4 million, or 73 cents per share, compared with $200.7 million, or 74 cents each, in the fourth quarter of 2020. When adjusted for special charges and transaction and integration expenses, earnings were 84 cents per share, beating analysts’ expectations of 80 cents per share.
McCormick shares closed up 6.8% at $98.20 each Thursday.
“This was a good quarter,” Edward Jones analyst John Boylan said in a report Thursday. “We thought that cost inflation would have more of an impact on its results and outlook than it did.”
Though supply chain snags and transportation inflation have plagued consumer staples companies, and McCormick buys spices and ingredients from around the world, the company’s investments in distribution “appear to be paying off faster than we anticipated,” said Boylan, whose firm has a hold rating on shares.
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Sales from the 2020 acquisitions of the Cholula hot sauce brand and FONA natural flavorings maker contributed 4% to the annual sales increase.
Kurzius, the company’s chairman, said profit in 2021 was tempered by higher inflation and broad-based supply chain challenges. But the company has benefited from a shift to cooking more at home, digital engagement related to cooking and recipes, and consumers’ reliance on known brands, the CEO said.
Some analysts questioned McCormick’s growth expectations that in the 3% to 5% range go beyond Wall Street projections of 2%.
“This will be no easy feat considering several headwinds, including accelerating cost inflation, supply chain disruptions,” and other factors, said Arun Sundaram, an analyst with CFRA Research, in a report. But “we’re giving [McCormick] the benefit of the doubt as it has been executing well and competes in fast-growing, on-trend categories.”
During a morning conference call, Kurzius sought to reassure analysts.
“We have a pretty upbeat view of where our sales going,” he said. “The underlying trends that support our business ... are strong. The demand for flavor is not cyclical or ... pandemic-related but undergirded by real demographics. Younger generations are fueling that demand, and we think that the shift to consumption at home that’s happened in recent years is just a continuation of a long-term trend.”
McCormick expects earnings for the current fiscal year in the range of $3.07 to $3.12.