Better-than-expected results
Business performance
In Q3, McCormick’s organic sales grew 2% year-over-year, driven by volume growth of over 1%. Gross margin decreased by 130 basis points in the quarter. Margins were impacted by higher commodity costs, tariffs, and costs to support future growth investments. These headwinds were partly offset by cost savings from the Comprehensive Continuous Improvement (CCI) program.
Net sales in the Consumer segment increased 4% to $973 million. Organic sales grew 3%, driven by volume and product mix. This segment saw sales growth in the Americas and EMEA regions while APAC stayed flat. It also saw volume growth in these regions, barring APAC which saw a decline. It benefited from gains in categories like spices and seasonings, mustard, and hot sauce.
Sales in the Flavor Solutions segment rose 1% to $752 million, with organic sales also up 1%. This segment saw sales growth across all regions. Volumes dipped in the Americas and EMEA regions but in APAC, it grew 9%. This division benefited from strong QSR performance in the Americas and APAC regions, but was hurt by soft volumes from CPG customers in the Americas and EMEA, and by weak foot traffic in branded foodservice in the Americas.
Guidance cut
McCormick lowered its earnings outlook for fiscal year 2025 to reflect rising commodity costs and incremental tariffs. The company now expects GAAP EPS to range between $2.95-3.00, representing a year-over-year growth of 1-3%, versus its previous expectation of $2.98-3.03.
Adjusted EPS is now expected to be $3.00-3.05, representing YoY growth of 2-4%, or 4-6% in constant currency, versus the earlier expectation of $3.03-3.08. MKC continues to expect net sales growth of 0-2%, or 1-3% in constant currency, for the year.