McCormick’s price hikes spice up quarterly results despite sluggish demand

McCormick reported stronger sales and higher profits in the third quarter, driven by pricier seasonings and sauces that offset weaker consumer demand. The company's net sales surged at their fastest rate since 2021, with the acquisition of McCormick de Mexico contributing to the growth. This boost lifted McCormick's shares by around 4% in premarket trading, while the stock has declined approximately 32% this year.

The packaged goods sector, including McCormick, Conagra Brands, and General Mills, has been relying on price hikes to maintain margins amid uncertainties from US tariffs and rising costs due to the Middle East conflict. In the US, factors such as higher gas prices and a cyclospora outbreak affecting foodservice and grocery channels have dampened demand. McCormick CEO Brendan Foley noted in remarks that the outbreak primarily impacted fast-food restaurants.

For the quarter ending August 31, McCormick's prices rose 2.2% compared to the previous year, while organic volumes declined by 0.3%. The company's volumes fell by 0.5% in the prior quarter. In its Consumer Americas division, volumes dropped 2.5% in the quarter, the sole segment to report a decrease. Barclays analysts suggested that the slower-than-expected volume recovery in this segment may keep investors wary.

McCormick has reaffirmed its sales and profit forecasts for the year for the third time this fiscal year as it grapples with an unpredictable consumer spending environment. The company affirmed that integration planning for the proposed $65-billion merger with Unilever's foods business is progressing on schedule and anticipates significant earnings-per-share gains post-closure.