McCormick & Co. Inc. reported Tuesday fiscal third-quarter profit that matched expectations but sales came up a bit short, as prices increased but volume declined due in part to a slower-than-expected economic recovery in China and the exit of some businesses.
Shares of the parent of flavor brands including McCormick’s spices, Frank’s RedHot and French’s
“Our results reflect strong underlying business trends that were in line with our expectations across our business, notwithstanding our Consumer segment in APAC [Asia-Pacific], where the pace of China’s economic recovery has been slower than anticipated,” said Chief Executive Brendan Foley. “We remain confident in our ability to deliver on our outlook and in the sustained trajectory of our business.”
Net income for the quarter to Aug. 31 fell to $170.1 million, or 63 cents a share, from $222.9 million, or 82 cents a share, in the same period a year ago.
Excluding nonrecurring items, adjusted earnings per share slipped to 65 cents from 69 cents, but was in line with the FactSet consensus of 65 cents.
Sales grew 5.6% to $1.685 billion, while the average estimate of two analysts surveyed by FactSet was for sales of $1.697 billion, with growth reflecting an 8% rise in prices but a 2% decline in volume and mix.
The company said the factors affecting sales growth included “a slower than expected economic recovery in China, the Kitchen Basics divestiture, the exit of the Consumer business in Russia, and the Company’s strategic decisions to discontinue low margin business.”
Consumer segment sales increased 1% to $937.1 million, as prices rose 5% while volume declined 4%, and flavor solutions segment sales rose 12% to $747.6 million with pricing up 10% and volume up 1%.
For fiscal 2023, the company raised its adjusted EPS guidance range to $2.62 to $2.67 from $2.60 to $2.65, but affirmed its sales growth outlook of 5% to 7%.
The stock, which was on track to open at the lowest prices seen since March 24, has dropped 15.3% over the past three months through Monday, while the S&P 500 index SPX has lost 3.8%.