McCormick & Co. reported a first-quarter 2018 sales jump of 19% to $1.24 billion from the same period a year ago. The Maryland-based company attributed 12% of the sales increase to its acquisitions of Reckitt Benckiser's food division and Enrico Giotti. Adjusted net income was $133.2 million for the quarter, a 39% boost from $96 million a year earlier.
The company adjusted its sales outlook for 2018 to a 13% to 15% increase compared to last year. Operating income in 2018 is expected to grow 32% to 34% from $702 million in 2017.
McCormick also plans to use a portion of the savings from last year's corporate tax cut for one-time $1,000 bonus payments for eligible U.S. hourly employees and to accelerate wage hikes for the majority of its U.S.-based hourly workers.
McCormick continues to benefit from its recent Reckitt Benckiser foods acquisition, which brought French's mustard and Frank's RedHot brands to the product mix, and its 2016 purchase of Giotti, an Italian flavor manufacturer.
The company, which also owns its namesake brand, along with Zatarain’s, Simply Asia and Lawry’s, posted sales increases during the period to consumers and food manufacturers of 19% and 18% respectively — a sign the company is seeing demand for its products across the food industry.
Consumer sales in the Americas led overall growth by jumping 22% during the first quarter compared to the year-ago period, with Reckitt Benckiser accounting for much of that increase.
"Consumer demand for flavor seems to be endless," Lawrence Kurzius, McCormick's CEO, told Food Dive at the recent annual Consumer Analyst Group of New York conference in Florida. "Take the whole perimeter of the store and it's our products and our categories that make that perimeter taste good. There is a tailwind for us, for most of the center of the store there is a headwind.”
As consumers look to eat healthier by cutting out butter, salt and artificial ingredients, and millennials crave new and enticing flavors without sacrificing taste, McCormick is at the sweet spot even as other CPG companies struggle. The revised outlook, and the recent comments from Kurzius, suggest nothing is going to change in the near future.
"We think today’s results should be enough to sustain the company’s premium multiple," Andrew Lazar, a senior analyst for packaged foods at Barclays said in a note following the earnings report. "That said, organic sales growth in the quarter was a bit weaker than forecasted against the easiest YOY comparison for the full fiscal year -- though in light of current challenged industry dynamics, this still marks a solid start to the year."
McCormick has been innovating by adding trendy products to its lineup. It added 40 new products last fall such as bone broth, slow-cooker seasonings and Asian noodles, which are designed to appeal to busy people who still want flavorful home-cooked meals. It's also expanding its presence in beverages and new meal occasions.
The iconic company, founded in 1889, has managed to take advantage of consumer trends in spices and flavorings. With its strategic planning, e-commerce investments, astute acquisitions and on-trend innovations, the future continues to be a bright one for McCormick.