Slowing Demand and Rising Expenses Take a Toll on McCormick’s Profit Outlook
The maker of Cholula hot sauce, McCormick, has forecasted a disappointing annual sales and profit growth, citing a persistent decline in demand for its spices and condiments, particularly in China. This downward trend is not unique to McCormick, as other packaged food companies like General Mills and Conagra Brands are also facing similar challenges.
Global Economic Pressures Weigh on Consumer Spending
Sticky inflation has led to budget-conscious consumers seeking value even in essential items like groceries, resulting in slowing demand across geographies. This shift in consumer behavior has forced companies to increase their marketing and advertising efforts, further straining their profit margins. McCormick’s marketing expenses, for instance, rose 2.3% in the fourth quarter.
Lowered Expectations for Fiscal Year 2025
McCormick now expects its annual adjusted profit to grow at a rate of 3% to 5%, falling short of analysts’ estimates of 6.5%. The company’s sales forecast for fiscal year 2025 is also underwhelming, with expectations of flat or 2% growth, compared to analysts’ predictions of a 2.4% rise.
Trade Tensions Add to Uncertainty
The potential import tariffs proposed by U.S. President Donald Trump could further exacerbate McCormick’s challenges, given the company’s reliance on ingredients sourced from China and Europe. This uncertainty has already taken a toll on the company’s stock, which fell 1.4% in premarket trading.
Fourth Quarter Results Offer a Glimmer of Hope
Despite the challenges, McCormick reported a narrow beat for sales and profit in the fourth quarter ended Nov. 30. The company’s net sales reached $1.8 billion, surpassing analysts’ estimates of $1.77 billion. Adjusted profit per share was 80 cents, exceeding expectations of 77 cents. However, the 6.9% decline in sales in the Asia-Pacific region, which includes China, remains a concern.
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