Price cuts, promotions and lagging performance in China saw spices and sauces maker McCormick (MKC) first quarter earnings miss expectations. The owner of Cholula and Frank’s hot sauces reported Fiscal Q1 earnings per share of $0.60, short of the $0.64 expected on Wall Street, sending the stock down around 4% in early trade on Tuesday. It also reported operating income was down to $225 million in the first quarter compared to $234 million in the year-ago period.
Promotional Activity Rises
Much like General Mills (GIS), McCormick has been ramping up promotional activity and slashing prices to win back customers. Sales were broadly flat on last year with volume growth of 2% offset by unfavorable currency impacts.
It comes after the company reported sales fell almost 7% in Asia Pacific in its Fiscal fourth quarter as demand in China fell and weighed on the outlook for future growth. Performance was tempered by China, which was slightly worse than originally expected, President and CEO Brendan Foley said on the earnings call.
He said then that consumers remain challenged and “exhibiting value seeking behavior, making more frequent trips to the grocery store with smaller baskets and shopping just for what they need,” adding that they are also focused on cutting waste and making budgets stretch further.
APAC Picks Up
Asia Pacific sales seem to be picking up again though thanks to the impact on pricing, with APAC sales up 15.3% on an organic basis in Q1 2025, versus a 3.9% decline in Europe, the Middle East and Africa, and a 3.6% rise in the Americas.
For fiscal year 2025, McCormick reaffirmed its sales, operating profit, and earnings per share outlook, and said it sees “gradual improvement” in China’s consumers. The company, which also owns the EL Guapo Mexican food brand and French’s mustard, anticipates earnings of $2.99 to $3.04 a share this year on operating income growth of between 3% and 5%, while sales growth is still lackluster at between 0 and 2%.
“Our continued volume-driven performance reflects the success of our prioritized investments in the areas that are driving the greatest value and will sustain our momentum for the remainder of 2025 and beyond,” said Foley in a statement accompanying the Q1 2025 update.
Is MKC a Good Stock to Buy?
On Wall Street, MKC has a Moderate Buy rating based on five Buys, three Holds and one Sell. The average MKC price target of $87.00 implies about 10% upside, but these figures are likely to change after the earnings update.
