Update Version 5 - Despite weak demand, McCormick's price increases added highlights to its quarterly performance

Updated the stock price data in paragraph 2 and added details after the earnings call in paragraph 9

Anuja Bharat Mistry/Alexander Marrow

Reuters, October 1 - McCormick (MKC.N) on Thursday reported quarterly sales and profit growth, driven by higher seasoning and sauce prices, which helped to offset weaker consumer demand and declining volumes resulting from high gasoline prices and a cyclospora outbreak.

Like other branded food companies, McCormick faces rising costs, while financially strained consumers are turning to more affordable private-label goods. The company's share price has dropped about 32% this year and fell another 1% in highly volatile early trading, erasing pre-market gains.

This Cholula hot sauce manufacturer and its competitors—such as Conagra Brands (Conagra Brands, (link) CAG.N) and General Mills (link) GIS.N)—have all raised prices to protect profit margins against U.S. tariff uncertainty and surging input costs caused by Middle East conflicts.

“In the United States, higher gasoline prices and the cyclospora outbreak have increased pressure, reducing traffic in both foodservice and grocery channels,” CEO Brendan Foley said in prepared remarks.

Cyclospora is a foodborne parasite that sickened thousands of Americans this summer. McCormick noted that the outbreak mainly affected fast-food restaurants.

In the quarter ended August 31, McCormick's prices rose 2.2% year-over-year, while organic volume fell 0.3%. In the previous quarter, sales volume had dropped 0.5%.

McCormick’s main “Americas Consumer Products” division reported a 2.5% sales decline this quarter, the only segment to see a decrease.

While navigating an uncertain consumer spending environment, the company maintained its annual earnings outlook for the third time this fiscal year.

McCormick executives also said during the earnings call that they expect fourth-quarter margins to come under pressure due to higher commodity and freight costs as well as increased commercial investment in the Americas Consumer segment.

“Recovery in the Americas Consumer division has been slower than anticipated, which is likely to remain the biggest concern for investors,” Barclays analysts said in a note.

McCormick also said that integration planning for the proposed $65 billion merger with Unilever’s(ULVR.L) food business (link) is progressing smoothly, and the company remains confident the deal will deliver significant per-share earnings growth after completion.

According to data compiled by London Stock Exchange Group (LSEG), the company’s third-quarter sales reached $2.02 billion, exceeding analysts’ expectations of $1.98 billion.

Quarterly adjusted earnings per share came to 86 cents, topping the estimate of 76 cents.

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