Shares of McCormick & Co. fell 9.5 percent Tuesday after the spice maker said its annual sales would likely be at the low end of the company's guidance as consumers trade down to less expensive spices, and restaurants and food manufacturers cut back on orders.
The Sparks-based company previously provided guidance of a 2 percent to 4 percent sales increase for its fiscal year, which ends in November. Investors responded by sending stocks down $3.18 to $30.26 a share.
McCormick announced the projection as it reported a 12 percent earnings increase for the fiscal first quarter. But the company said sales fell 1 percent to $718.5 million because of unfavorable currency rates.
While the economy has caused people to cook at home more and buy more spices, many consumers also are trading down from McCormick's premium spices to less expensive brands. With people eating out less, restaurants need fewer spices as well.
The company reported net income of $57.7 million, or 44 cents per share, for the quarter that ended Feb. 28, compared with $51.4 million, or 39 cents per share a year ago.
The company said it also is implementing a restructuring and cost reduction plan to save $30 million this year. The reductions wouldn't include cuts in U.S. jobs, said Alan D. Wilson, president and chief executive.
McCormick also said it will introduce an improved line of dry seasonings and increase its marketing spending next quarter.
"We are very happy with our earnings performance in the first quarter, and we expect that throughout the year we'll see margins improve and a return to good sales growth," Wilson said in a telephone interview Tuesday.