Shares of McCormick & Co. tumbled Thursday after the Hunt Valley-based spice maker warned of a weaker-than-expected third quarter marked by supply chain challenges and the impact of inflation on consumer spending.
McCormick’s stock dropped about 6.7% to close at $79.30 per share.
The company released preliminary financial results for the third quarter after the markets closed Wednesday. Sales for the three months that ended Aug. 31 are expected to increase about 3%, which includes an unfavorable impact from the divestiture of McCormick’s Kitchen Basics business.
While reaching a record level, sales fell short of the company’s expectations. Sales to consumers at stores slowed from last year’s elevated levels earlier than expected as inflation drove up the cost of living, said Lawrence E. Kurzius, McCormick’s chairman and CEO.
McCormick also struggled with longer-than-expected wait times for some hard-to-get items.
“Overall, the normalization of our supply chain costs is taking longer than expected, pressuring gross margin,” Kurzius said.
The company said it expects earnings of about 79 cents per share for the June-to-August period. When adjusted for special charges and transaction expenses, earnings are expected to be 65 cents per share, down from 80 cents per share in the third quarter of 2021.
McCormick also updated its financial outlook for fiscal year 2022. The manufacturer expects sales for the year to range from similar to 2021 to up 2%, instead of the previously expected 3% to 5% increase.
And earnings are expected in the range of $2.64 to $2.69 per share, compared with $2.80 each in 2021. On an adjusted basis, the company expects earnings in the range of $2.63 to $2.68, as compared with previously reported guidance of $3.03 to $3.08.
“We are increasing our brand marketing investments in our updated outlook and are focusing its messaging on value,” to help drive growth, Kurzius said in the announcement. “Cooking at home remains higher than pre-pandemic levels, reinforcing our expectation that the shift in consumer demand to at-home-consumption will be sustained.”
The company plans to announce final third-quarter results Oct. 6.