McCormick (MKC) reaffirmed its fiscal view but reported a narrowed first-quarter profit on cost challenges that it said have weighed on its profit and will likely continue to do so in the months to come.
The Sparks, Md.-based maker of spices, marinades, sauces and specialty foods under brands such as Old Bay and Simply Asia posted net income of $92 million, or 69 cents a share, compared with $102.4 million, or 76 cents a share, in the same quarter last year.
Analysts polled by Thomson Reuters were expecting on average earnings of 64 cents.
Despite narrowing its earnings, the company's chief executive, Alan Wilson, said McCormick was pleased with double-digit sales growth in both its consumer and industrial segments, which he attributed to new products, distribution gains, higher prices and investments in brand marketing.
Revenue for the three months ended Aug. 31 was $920 million, up 16% from $794.6 million a year ago, trumping the Street’s view of $872.1 million.
The company said acquisitions have also fueled higher sales, highlighted by the company’s successful takeover of Polish mustard and spice company Kamis SA earlier this year.
But, McCormick said it will likely face cost increases ahead, particularly for spices and herbs such as pepper and cinnamon. It pledged to continue implementing cost saving initiatives and revaluating its prices in an effort to tackle economic headwinds.
The company reaffirmed its fiscal earnings guidance in the range of $2.74 to $2.79 a share, with sales growth between 6% and 8%. Wall Street is predicting earnings of $2.78 a share on sales of $3.63 billion.