McCormick’s income jumped nearly 30% due to pandemic-driven home cooking trend
Leading spice and sauce company McCormick & Company (NYSE: MKC) released fiscal second-quarter results Thursday that reflected the shift to a stay-at-home lifestyle necessitated by the COVID-19 pandemic. For the period ended May 31, sales grew 10% in constant currency year-over-year, a major acceleration from the 3% revenue growth recorded during the 2019 financial year as a whole. Adjusted earnings per share jumped 27% from the year-ago quarter, the company said.
McCormick is benefiting from a growth trend in home cooking that took a natural boost when most restaurants closed (whether completely or for dine-in service only) and people started to flock to shelter in place to help slow the spread of COVID-19. The company saw a “substantial increase in demand” in its consumer segment that more than offset the steep 18% drop in sales through its flavor solutions segment, which supplies restaurants and other foodservice customers.
Specifically, McCormick said its consumer segment sales increased 26% in the second quarter, including a 2% negative currency impact. A favorable product mix helped increase gross profit margins by 230 basis points year-over-year, as did the company’s cost-cutting program.
As McCormick ramped up production to meet increased demand, it simultaneously moved some of its manufacturing capacity to Hunt Valley, Maryland, and London, Ontario, to produce enough hand sanitizer to supply its employees, after which he continued to produce more to donate to local hospitals and emergency response efforts.
McCormick did not provide guidance for fiscal year 2020 due to the general lack of clarity on the course the COVID-19 pandemic will take or what other economic shocks it will bring. But he said demand remains strong in the consumer segment, and management expects that trend to continue in the second half.
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