McCormick & Co. saw sales jump in the third quarter as consumers hunkered down to cook and eat at home during the pandemic.
The Hunt Valley spice and flavorings maker also announced Tuesday its first 2-for-1 stock split in 18 years, reflecting an outlook for continued growth. Sales are projected to grow as much as 5% in 2020.
Sales for the three months ending Aug. 31 rose 8% to $1.43 billion, led by a 15% jump in sales of consumer products at stores.
Shares of McCormick closed Tuesday at $189.89 each, down 2.75%.
One analyst kept a “hold” opinion on the stock, noting that the quarter’s growth had slowed from the previous quarter’s 9.6% rate because of supply chain issues stemming from surging demand.
The company “is swiftly working to add capacity, which we think will continue to negatively impact margins" in the fourth quarter, wrote Arun Sundaram, an analyst with CFRA Research, in a report Tuesday. “The good news is that [McCormick] notes consumers are accelerating the use of spices, seasonings, and condiments as the pandemic has progressed, a hopeful sign that this growth can stick in a post-pandemic world.”
But because McCormick counts on the restaurant sector for about a fifth of its business, he said he expects limited upside for the shares.
The quarter’s strong sales reflect consumers’ desire to cook more at home during the pandemic, a trend that’s expected to continue for the rest of the year and likely well into next year, said Lawrence E. Kurzius, McCormick’s chairman, president and CEO. McCormick said it also has benefited from brand marketing, new product launches and an ability to reach consumers digitally.
McCormick’s sales of spices and flavorings to restaurants and food manufacturers fell 3% for the quarter. While customers in the quick service restaurant and food packaging sectors have been recovering, many of the full-service restaurants that McCormick supplies remain closed or operating at limited capacity, Kurzius told analysts during a conference call.
“As we enter the fourth quarter, we believe the continued momentum we are seeing in our business positions us well” to reach sales projections, “recognizing there remains a degree of uncertainty in the operating environment," he said in a statement.
The company reported income of $206.1 million, or $1.53 per share, compared with $191.9 million, or $1.43 per share in the third quarter of last year. Adjusted earnings of $1.53 per share just topped analysts’ expectations of $1.52 per share.
McCormick’s board approved a 2-for-1 stock split of the company’s common and common nonvoting shares for shareholders of record on Nov. 20. The split will double the number of outstanding common and common nonvoting shares, and trading on a split-adjusted basis will start Dec. 1.