McCormick(MKC) - 2025 Q3 - Quarterly Results

Executive Summary McCormick achieved volume-led growth in Q3 2025, with increased net sales and operating income, while updating its FY2025 outlook due to rising costs and tariffs CEO Remarks McCormick's Chairman, President, and CEO, Brendan M. Foley, highlighted the fifth consecutive quarter of volume-led growth in Q3 2025, driven by brand investments, expanded distribution, and innovation. Despite gross margin pressure from rising costs and tariffs, operating profit grew due to effective cost savings initiatives. The company remains confident in its ability to capture flavor demand and achieve its updated 2025 outlook, emphasizing employee contributions and a commitment to long-term growth. - Achieved fifth consecutive quarter of volume-led growth in Q3 2025, reflecting differentiation and investments in brands, distribution, and innovation[2] - Gross margin was pressured by rising commodity costs and tariffs due to the dynamic global trade environment[2] - Operating profit growth was driven by effective execution of cost savings initiatives, positioning McCormick for sustained long-term growth[2] Q3 2025 Financial Highlights McCormick reported a 3% increase in net sales for the third quarter of 2025, with organic sales growing 2% primarily due to volume. Operating income and earnings per share also saw slight increases compared to the prior year, with adjusted figures showing stronger growth. Q3 2025 Financial Highlights | Metric | Q3 2025 (As Reported) | Q3 2024 (As Reported) | % Change (%) | Q3 2025 (Adjusted) | Q3 2024 (Adjusted) | % Change (%) | | :-------------------- | :-------------------- | :-------------------- | :------- | :----------------- | :----------------- | :------- | | Net Sales | - | - | 3% | - | - | - | | Organic Sales Growth | - | - | 2% | - | - | - | | Operating Income | $289 million | $287 million | 0.8% | $294 million | $288 million | 1.8% | | Earnings per Share | $0.84 | $0.83 | 1.2% | $0.85 | $0.83 | 2.4% | FY 2025 Outlook Update For fiscal year 2025, McCormick reaffirmed its sales growth outlook but updated its operating income and earnings per share outlook to account for rising commodity costs and incremental tariffs. - Reaffirmed sales growth outlook for fiscal year 2025[3] - Updated operating income and earnings per share outlook for fiscal year 2025 to reflect rising commodity costs and incremental tariffs[3] Third Quarter 2025 Financial Results McCormick reported increased net sales driven by volume, though gross profit margins contracted due to higher costs, while operating income improved from SG&A efficiencies Sales Performance McCormick's net sales increased 3% in the third quarter of 2025, with organic sales growing 2% driven by volume. The Consumer segment showed stronger growth, while the Flavor Solutions segment also contributed positively, primarily through pricing. Third Quarter 2025 Sales Metrics | Metric | As Reported % Change (%) | Volume/Mix (%) | Price (%) | Organic % Change (%) | | :-------------------- | :------------------- | :--------- | :---- | :--------------- | | Total Net Sales | 2.7 % | 1.2 % | 0.6 % | 1.8 % | | Total Consumer | 3.8 % | 2.2 % | 0.4 % | 2.6 % | | Total Flavor Solutions| 1.2 % | (0.3)% | 0.9 % | 0.6 % | - Net sales increased 3% in Q3 2025, including a 1% favorable impact from currency. Organic sales increased 2%, driven by volume (more than 1%) and price (1%)[7] - Consumer segment net sales increased 4% (3% organic) to $973 million, driven by volume and product mix. Flavor Solutions segment net sales increased 1% (1% organic) to $752 million, driven by price[11] Profitability Analysis Gross profit decreased slightly, with margins contracting due to higher commodity costs and tariffs, partially offset by cost savings. Operating income and adjusted operating income increased, primarily driven by decreased SG&A expenses and CCI program savings, despite lower gross margin and increased investments. Third Quarter 2025 Profitability Metrics | Metric | Q3 2025 (As Reported) (million USD) | Q3 2024 (As Reported) (million USD) | % Change (%) | Q3 2025 (Adjusted) (million USD) | Q3 2024 (Adjusted) (million USD) | % Change (%) | | :-------------------- | :-------------------- | :-------------------- | :------- | :----------------- | :----------------- | :------- | | Gross profit | $645.1 | $649.9 | (0.7)% | $646.1 | $649.9 | (0.6)% | | Gross profit margin | 37.4 % | 38.7 % | (130) bps| 37.5 % | 38.7 % | (120) bps| | Operating income | $288.7 | $286.5 | 0.8% | $293.6 | $288.4 | 1.8% | | Operating income margin| 16.7 % | 17.1 % | (40) bps | 17.0 % | 17.2 % | (20) bps | | Net income | $225.5 | $223.1 | 1.1% | $229.1 | $224.4 | 2.1% | | Earnings per share - diluted| $0.84 | $0.83 | 1.2% | $0.85 | $0.83 | 2.4% | - Gross profit decreased by $5 million, and gross profit margin contracted 130 basis points (120 bps adjusted) due to higher commodity costs, tariffs, and capacity costs, partially offset by CCI program cost savings[8] - Adjusted operating income increased 2% in constant currency, driven by decreased SG&A expenses (lower employee benefits, CCI savings, streamlining) partially offset by lower gross margin, brand marketing, and technology investments[9] - Consumer segment adjusted operating income increased 4% (3% in constant currency) due to higher sales and decreased SG&A, partially offset by increased commodity costs and tariffs. Flavor Solutions segment adjusted operating income decreased 2% (2% in constant currency) due to higher commodity costs and tariffs, partially offset by pricing and decreased SG&A[12] Fiscal Year 2025 Financial Outlook McCormick reaffirmed its sales growth outlook for FY2025 but adjusted operating income and EPS guidance to reflect commodity costs and tariffs, while anticipating strong cash flow Updated Guidance McCormick updated its fiscal year 2025 guidance for operating income and EPS, reflecting the impact of rising commodity costs and incremental tariffs. Net sales growth outlook remains unchanged. Fiscal Year 2025 Financial Guidance Update | Metric | Current Guide (Oct 2025) Reported | Current Guide (Oct 2025) Constant Currency | Prior Guide (June 2025) Reported | Prior Guide (June 2025) Constant Currency | | :-------------------- | :-------------------------------- | :--------------------------------------- | :------------------------------- | :-------------------------------------- | | Net sales growth | 0% to 2% (%) | 1% to 3% (%) | 0% to 2% (%) | 1% to 3% (%) | | Operating income | 1% to 3% (%) | - (%) | 2% to 4% (%) | - (%) | | Adjusted operating income| 2% to 4% (%) | 3% to 5% (%) | 3% to 5% (%) | 4% to 6% (%) | | Earnings per share (EPS)| $2.95 to $3.00 (1% to 3%) | - | $2.98 to $3.03 (2% to 4%) | - | | Adjusted EPS | $3.00 to $3.05 (2% to 4%) | 4% to 6% | $3.03 to $3.08 (3% to 5%) | 5% to 7% | - Foreign currency rates are expected to unfavorably impact net sales by 1%, adjusted operating income by 1%, and adjusted earnings per share by 2%[16] Key Factors and Expectations The 2025 outlook incorporates mitigation plans for tariffs and anticipates continued volume-led growth, gradual improvement in China Consumer, and gross margin pressure from commodity costs and tariffs. SG&A benefits from the CCI program are expected to be partially offset by growth investments. - Outlook reflects mitigation plans for tariffs currently in place, which have increased since August 1, 2025. Mitigation actions include sourcing plans, cost savings, and revenue growth management[14] - Expectations include total volume-led growth, gradual improvement in China Consumer, and gross margin expansion impacted by increased commodity costs and tariffs[17] - SG&A benefits from the CCI program (including streamlining initiatives) are anticipated, partially offset by growth investments in brand marketing and digital. Special charges of $20 million are expected, primarily for organizational and streamlining actions[17] Cash Flow and Shareholder Returns For fiscal 2025, McCormick expects strong cash flow driven by profit and working capital initiatives, with a significant portion anticipated to be returned to shareholders through dividends. - Strong cash flow is expected for fiscal 2025, driven by profit and working capital initiatives[18] - A significant portion of cash flow is anticipated to be returned to shareholders through dividends[18] Non-GAAP Financial Measures Reconciliation McCormick uses non-GAAP measures to provide clearer insights into operational performance by excluding special charges, acquisitions, and foreign currency impacts Definition and Purpose McCormick utilizes non-GAAP financial measures such as organic net sales, adjusted gross profit, adjusted operating income, and adjusted EPS to complement GAAP results. These measures exclude special charges, acquisitions/divestitures, and foreign currency impacts to provide enhanced comparability to prior periods and better insight into underlying operational performance and trends. - Non-GAAP financial measures (e.g., organic net sales, adjusted gross profit, adjusted operating income, adjusted EPS) are used to complement GAAP results[19] - These measures exclude special charges (expenses for cost reduction, process improvement, competitiveness, and transaction/integration costs), acquisitions/divestitures, and foreign currency impacts[19][25] - The purpose is to provide additional information for enhanced comparisons to prior periods, facilitate future projections, measure ongoing profitability, and analyze business performance and trends[20] Q3 and YTD Reconciliation Tables The provided tables reconcile GAAP financial measures to their adjusted non-GAAP counterparts for the three and nine months ended August 31, 2025, and 2024. Key adjustments include special charges impacting gross profit, operating income, income tax expense, and net income. Reconciliation of GAAP to Adjusted Financial Measures (Q3 and YTD) | Metric | Three Months Ended 8/31/2025 (million USD) | Three Months Ended 8/31/2024 (million USD) | Nine Months Ended 8/31/2025 (million USD) | Nine Months Ended 8/31/2024 (million USD) | | :-------------------------------- | :--------------------------- | :--------------------------- | :-------------------------- | :-------------------------- | | Gross profit (GAAP) | $645.1 | $649.9 | $1,871.9 | $1,868.8 | | Impact of special charges | $1.0 | $0.0 | $1.0 | $0.0 | | Adjusted gross profit | $646.1 | $649.9 | $1,872.9 | $1,868.8 | | Operating income (GAAP) | $288.7 | $286.5 | $759.7 | $754.1 | | Impact of special charges | $4.9 | $1.9 | $17.7 | $7.9 | | Adjusted operating income | $293.6 | $288.4 | $777.4 | $762.0 | | Net income (GAAP) | $225.5 | $223.1 | $562.8 | $573.3 | | Impact of special charges | $3.6 | $1.3 | $13.4 | $5.8 | | Adjusted net income | $229.1 | $224.4 | $576.2 | $579.1 | | Earnings per share - diluted (GAAP)| 0.84 USD | 0.83 USD | 2.09 USD | 2.13 USD | | Impact of special charges | 0.01 USD | 0.00 USD | 0.05 USD | 0.02 USD | | Adjusted earnings per share - diluted| 0.85 USD | 0.83 USD | 2.14 USD | 2.15 USD | Constant Currency and Organic Growth Rates McCormick provides constant currency and organic growth rates to isolate the impact of foreign exchange fluctuations and other non-operational factors. For Q3 2025, total net sales grew 1.8% on a constant currency and organic basis, with varying performance across segments and regions. Year-to-date, total net sales also showed a 1.8% organic growth. - Constant currency basis excludes the translation effects of changes in foreign currency exchange rates to provide insight into underlying operational performance[24] - Organic net sales growth rates exclude the effect of foreign currency exchange rate fluctuations, acquisitions, and divestitures to show underlying sales performance[25] Percentage Change on Constant Currency and Organic Basis (Q3 2025) | Metric | Percentage Change as Reported (%) | Impact of Foreign Currency Exchange (%) | Percentage Change on a Constant Currency and Organic Basis (%) | | :-------------------- | :---------------------------- | :---------------------------------- | :--------------------------------------------------------- | | Total Net Sales | 2.7 % | 0.9 % | 1.8 % | | Total Consumer | 3.8 % | 1.2 % | 2.6 % | | Americas | 2.7 % | 0.0 % | 2.7 % | | EMEA | 11.4 % | 7.0 % | 4.4 % | | APAC | 0.0 % | 0.8 % | (0.8)% | | Total Flavor Solutions| 1.2 % | 0.6 % | 0.6 % | | Americas | 0.1 % | (0.8)% | 0.9 % | | EMEA | 2.1 % | 5.2 % | (3.1)% | | APAC | 7.7 % | 1.4 % | 6.3 % | Percentage Change on Constant Currency Basis (Adjusted Operating Income, Q3 2025) | Segment | Percentage Change as Reported (%) | Impact of Foreign Currency Exchange (%) | Percentage Change on Constant Currency Basis (%) | | :-------------------- | :---------------------------- | :---------------------------------- | :------------------------------------------- | | Consumer segment | 3.7 % | 0.5 % | 3.2 % | | Flavor Solutions segment| (1.8)% | (0.2)% | (1.6)% | | Total adjusted operating income| 1.8 % | 0.2 % | 1.6 % | FY2025 Outlook Reconciliation The fiscal year 2025 projections for net sales, adjusted operating income, and adjusted earnings per share are also presented on a constant currency basis, with foreign currency exchange expected to have an unfavorable impact across these metrics. The reconciliation of estimated GAAP EPS to adjusted EPS for 2025 is also provided. FY2025 Projection on Constant Currency Basis | Metric | Projection for the Year Ending November 30, 2025 (%) | | :------------------------------------------------ | :----------------------------------------------- | | Percentage change in net sales | 0% to 2% | | Impact of unfavorable foreign currency exchange | 1 % | | Percentage change in net sales in constant currency| 1% to 3% | | Percentage change in adjusted operating income | 2% to 4% | | Impact of unfavorable foreign currency exchange | 1 % | | Percentage change in adjusted operating income in constant currency| 3% to 5% | | Percentage change in adjusted earnings per share diluted| 2% to 4% | | Impact of unfavorable foreign currency exchange | 2 % | | Percentage change in adjusted earnings per share in constant currency - diluted| 4% to 6% | Reconciliation of Estimated EPS to Adjusted EPS (FY2025) | Metric | 2025 Projection (USD) | 11/30/24 (USD) | | :-------------------------- | :-------------- | :------- | | Earnings per share - diluted| 2.95 to 3.00 | 2.92 | | Impact of special charges | 0.05 | 0.03 | | Adjusted earnings per share - diluted| 3.00 to 3.05 | 2.95 | Company Information McCormick is a global flavor leader operating in two segments, with its forward-looking statements highlighting potential risks and uncertainties affecting future performance About McCormick McCormick & Company, Incorporated is a global flavor leader with over $6.7 billion in annual sales across 150 countries. It manufactures and distributes herbs, spices, seasonings, condiments, and flavors to various food industry sectors. Operating in two complementary segments, Consumer and Flavor Solutions, McCormick leverages its portfolio and insights to capitalize on consumer demand for flavor, guided by its purpose to Stand Together for the Future of Flavor. - McCormick & Company is a global leader in flavor, with over $6.7 billion in annual sales across 150 countries and territories[37] - The company manufactures, markets, and distributes herbs, spices, seasonings, condiments, and flavors to retailers, food manufacturers, and foodservice businesses[37] - Operates in two segments: Consumer and Flavor Solutions, which complement each other and drive sustainable growth[37][38] Forward-Looking Statements This section contains forward-looking statements regarding expected performance, sales growth, earnings, cost savings, and other financial and operational aspects. These statements are based on management's current views and assumptions, involving risks and uncertainties that could materially affect actual results, and the company undertakes no obligation to update them. - The release contains "forward-looking statements" concerning expected performance, including net sales, gross margin, earnings, cost savings, and the impact of foreign currency rates[33] - These statements are based on management's current views and assumptions and involve risks and uncertainties that could significantly affect expected results[34] - Risks include general economic conditions, consumer spending, supply chain issues, commodity prices, tariffs, competition, and the ability to drive productivity improvements[33][35] Financial Statements (Unaudited) Unaudited consolidated financial statements for Q3 and YTD 2025 detail the company's income, balance sheet, and cash flows, showing key financial positions and performance Consolidated Income Statement The unaudited consolidated income statement for the three and nine months ended August 31, 2025, and 2024, shows net sales, cost of goods sold, gross profit, operating income, and net income, along with earnings per share. Consolidated Income Statement (Unaudited) | Metric | Three months ended Aug 31, 2025 (million USD) | Three months ended Aug 31, 2024 (million USD) | Nine months ended Aug 31, 2025 (million USD) | Nine months ended Aug 31, 2024 (million USD) | | :------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net sales | $1,724.9 | $1,679.8 | $4,989.9 | $4,925.7 | | Cost of goods sold | $1,079.8 | $1,029.9 | $3,118.0 | $3,056.9 | | Gross profit | $645.1 | $649.9 | $1,871.9 | $1,868.8 | | Gross profit margin | 37.4 % | 38.7 % | 37.5 % | 37.9 % | | Selling, general and administrative expense| $352.5 | $361.5 | $1,095.5 | $1,106.8 | | Special charges | $3.9 | $1.9 | $16.7 | $7.9 | | Operating income | $288.7 | $286.5 | $759.7 | $754.1 | | Interest expense | $50.2 | $53.5 | $149.7 | $156.7 | | Other income, net | $9.4 | $13.2 | $29.0 | $36.7 | | Income from consolidated operations before income taxes| $247.9 | $246.2 | $639.0 | $634.1 | | Income tax expense | $39.3 | $41.0 | $130.2 | $116.8 | | Net income from consolidated operations| $208.6 | $205.2 | $508.8 | $517.3 | | Income from unconsolidated operations | $16.9 | $17.9 | $54.0 | $56.0 | | Net income | $225.5 | $223.1 | $562.8 | $573.3 | | Earnings per share - diluted | 0.84 USD | 0.83 USD | 2.09 USD | 2.13 USD | Consolidated Balance Sheet The unaudited consolidated balance sheet as of August 31, 2025, and November 30, 2024, presents the company's assets, liabilities, and shareholders' equity. Key changes include an increase in total assets and shareholders' equity, while total liabilities slightly decreased. Consolidated Balance Sheet (Unaudited) | Metric | August 31, 2025 (million USD) | November 30, 2024 (million USD) | | :------------------------------------- | :-------------- | :---------------- | | Assets | | | | Cash and cash equivalents | $94.9 | $186.1 | | Trade accounts receivable, net | $668.7 | $587.4 | | Inventories, net | $1,323.6 | $1,239.9 | | Total current assets | $2,224.0 | $2,139.0 | | Property, plant and equipment, net | $1,419.8 | $1,413.0 | | Goodwill | $5,314.2 | $5,227.5 | | Intangible assets, net | $3,302.5 | $3,318.9 | | Total assets | $13,247.0 | $13,070.3 | | Liabilities | | | | Short-term borrowings and current portion of long-term debt| $1,253.4 | $748.3 | | Trade accounts payable | $1,196.8 | $1,238.1 | | Total current liabilities | $3,120.0 | $2,882.8 | | Long-term debt | $3,104.9 | $3,593.6 | | Total liabilities | $7,463.4 | $7,753.5 | | Shareholders' equity | | | | Total McCormick shareholders' equity | $5,752.8 | $5,291.0 | | Total shareholders' equity | $5,783.6 | $5,316.8 | | Total liabilities and shareholders' equity| $13,247.0 | $13,070.3 | Consolidated Cash Flow Statement The unaudited consolidated cash flow statement for the nine months ended August 31, 2025, and 2024, details cash flows from operating, investing, and financing activities. Net cash provided by operating activities decreased, while net cash used in investing activities also decreased. Net cash used in financing activities significantly increased. Consolidated Cash Flow Statement (Unaudited) | Metric | Nine Months Ended Aug 31, 2025 (million USD) | Nine Months Ended Aug 31, 2024 (million USD) | | :------------------------------------- | :----------------------------- | :----------------------------- | | Net cash flow provided by operating activities| $420.2 | $463.2 | | Net cash flow used in investing activities| ($172.2) | ($189.1) | | Net cash flow used in financing activities| ($378.3) | ($205.9) | | Effect of exchange rate changes on cash and cash equivalents| $39.1 | ($34.0) | | Increase (decrease) in cash and cash equivalents| ($91.2) | $34.2 | | Cash and cash equivalents at end of period| $94.9 | $200.8 | - Net cash flow provided by operating activities decreased from $463.2 million in 2024 to $420.2 million in 2025[43] - Net cash flow used in financing activities significantly increased from $205.9 million in 2024 to $378.3 million in 2025, primarily due to higher dividends paid and common stock acquired by purchase[43]