An account of two portions by McCormick & Co.
Maryland’s Hunt Valley Rarely are works by Charles Dickens mentioned in company quarterly earnings statements. However, McCormick & Company, Inc.’s chief financial officer, Michael R. Smith, referred to the company’s second quarter as a “tale of two segments,” referring to Flavour Solutions, which largely serves the foodservice industry, and McCormick’s Consumer business unit, which concentrates mostly on retail. Luckily for the business, a higher proportion of its sales come from the Consumer market.
In comparison to the prior year, when the firm made $149 million, or $1.13 per share, net income for the second quarter ended May 31 was $196 million, or $1.47 per share on the common stock.
To $1.4 billion, quarterly revenues increased by 8%.
Sales in the consumer segment increased 26% to $963 million in the quarter, mostly as a result of the coronavirus (COVID-19) and a shift in consumer preferences towards cooking at home. During the quarter, segment operating income increased by 68% to $232 million.
During a June 25 conference call, Chairman, President, and CEO Lawrence E. Kurzius expressed his belief that the trend of more people eating at home will continue.
“We do not anticipate the same level of consumption that we saw during the quarter to persist for the remainder of the year,” he stated. However, given the change in customer preferences, we do anticipate that consumption will continue at some high levels.
Furthermore, we would anticipate that if a recession were to strike, consumers would profit from eating at home, in line with our historical sales results during previous recessions. We continue to observe high consumer and scanner data demand as the second half of the year gets underway.
According to Mr. Kurzius, information from Information Resources Inc. indicated that McCormick’s branded portfolio increased by 55% in the Americas during the second quarter. Additionally, data for the week ending June 13 revealed a 32% growth in the portfolio.
The segment sales for Flavour Solutions experienced a severe fall in demand from restaurants and other foodservice customers during the quarter, resulting in an 18.5% decline to $439 million. During the quarter, the business unit’s operating income fell by 63% to $29 million.
“We started to notice late in the quarter, and think the slow recovery that varies each market will continue to occur,” Mr. Kurzius stated. “While the rest of the foodservice industry is growing more slowly, quick-service restaurants are rebounding more quickly. QSRs are mostly open in China, and traffic has recovered to almost normal levels. Outdoor eating choices have reopened, and indoor dine-in services are starting to open on a limited basis in select markets throughout the Americas and EMEA (Europe, the Middle East, and Africa). Delivery and drive-thru options for QSRs were reinstated in EMEA in June, and the company is already experiencing some initial demand spikes.
In March, McCormick & Co. lowered their earnings projections because to the global acceleration of COVID-19’s effects. According to Mr. Smith, the business anticipated returning to guidance on the June 25 earnings teleconference, but decided against it because of the ongoing unpredictability in the world and the potential consequences of a virus return.
“We’re focused on execution and we’re confident that we can continue on our growth trajectory and perform in this dynamic environment as we have so far,” Mr. Kurzius stated.
McCormick & Co. reported earnings of $341 million, or $2.56 per share, for the first half of fiscal 2020. This is a rise from the $297 million, or $2.25 per share, the business reported the year before.
The period’s sales increased from $2.5 billion to $2.6 billion.