MKC Reports Slight Net Sales Increase, But Q1 EPS Falls Short

McCormick & Company, Incorporated (NYSE: MKC) has reported its financial results for the first quarter ending February 28, 2025. The company, renowned for its leadership in flavor, observed a steady performance with net sales amounting to $1.61 billion, slightly up from the previous year’s $1.60 billion. This increase was driven by a 2% organic sales growth, primarily attributed to an uptick in volume and product mix, despite facing a 2% adverse impact from currency fluctuations.

The company’s gross profit saw an increase to $604 million, compared to $599 million in the same quarter last year, with a gross profit margin expansion of 20 basis points.

The consumer segment recorded sales of $919 million, aligning closely with the previous year’s figures. The segment experienced a 1% organic sales increase, propelled by a 3% rise in volume and product mix, which was partially offset by a 2% decrease due to pricing adjustments. Meanwhile, the flavor solutions segment reported a 1% increase in sales to $686 million, supported by a 3% organic sales growth driven by a combination of volume, product mix, and pricing adjustments.

Operating income for the quarter stood at $225 million, down from $234 million in the previous year, reflecting a 3.6% decline.

McCormick Reports Q1 with $0.60 EPS

In comparing current performance against expectations, McCormick’s earnings per share (EPS) of $0.60 fell short of the projected $0.6415. The company’s revenue of $1.61 billion, however, met expectations. The adjusted operating income, which was reported at $225 million, marked a 5% decline from the previous year, missing the forecasted figures. This decline was influenced by increased selling, general, and administrative expenses, along with a shift in the timing of stock-based compensation costs and heightened investments in brand marketing and technology.

Despite these challenges, the flavor solutions segment showcased a robust performance with a 28% growth in operating income, driven by favorable product mix and pricing strategies. Conversely, the consumer segment experienced a 17% decline in operating income, primarily due to pricing pressures and increased marketing expenditures.

The unfavorable currency impact contributed to a $0.03 per share decline in EPS, further affecting the company’s overall performance against expectations.

McCormick Reaffirms Fiscal 2025 Outlook

Looking ahead, McCormick has reaffirmed its fiscal 2025 outlook, projecting net sales growth of 0% to 2%, with a constant currency growth expectation of 1% to 3%. The company anticipates operating income growth of 3% to 5%, with adjusted EPS projected to range between $2.99 and $3.04. Adjusted EPS, excluding special charges, is expected to be between $3.03 and $3.08.

McCormick remains committed to its Comprehensive Continuous Improvement (CCI) program, which is expected to drive growth investments and operating margin expansion.

The company anticipates a 1% unfavorable impact from foreign currency on sales and a 2% impact on adjusted EPS. Despite these challenges, McCormick is optimistic about its volume-led growth strategy across both segments and expects a gradual improvement in the China consumer market.

The company also plans to offset costs related to U.S. import tariffs on China through CCI savings and targeted price adjustments.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.

About the author

Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird’s US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.