McCormick Raises Annual Profit Forecast as Higher Prices Offset Slowing Demand

McCormick, the Cholula hot sauce maker, has raised its annual profit forecast due to expectations of higher prices for its spices and condiments. This increase in prices is aimed at compensating for slowing demand and a sluggish recovery in China. The company has been steadily raising prices to offset higher input costs caused by supply chain issues that escalated last year.

Despite the positive forecast, McCormick experienced a decline of 2% in sales volumes during the third quarter. This can be attributed to record-high rentals and fuel prices, which led consumers to seek more affordable options for items like spices and salad dressings. As a result, the company’s shares were down 3% in premarket trading.

However, McCormick remains confident in its financial outlook. The company now expects annual adjusted earnings per share between $2.62 and $2.67, surpassing its previous forecast of $2.60 to $2.65 per share. Additionally, McCormick reaffirmed its net sales forecast for the full year.

Gross margins in the reported quarter rose by 150 basis points compared to the previous year, primarily driven by the company’s higher pricing strategy. The Asia-Pacific region witnessed a drop in volumes in the consumer segment, particularly in sauces and recipe mixes, due to lower consumption in China.

Although McCormick’s net sales for the quarter ended August 31 rose by 5.6% to $1.68 billion, it fell short of analysts’ average estimate of $1.70 billion. However, the company’s adjusted earnings per share of 65 cents for the quarter aligned with Wall Street expectations.

McCormick’s ability to navigate supply chain challenges and adapt to changing consumer preferences positions it well for continued growth in the spice and condiment market.