HUNT VALLEY, MD. — Charles Dickens novels are rarely referenced during corporate quarterly earnings presentations. But Michael R. Smith, the chief financial officer for McCormick & Company, Inc., said the company’s second quarter was a “tale of two segments,” referencing McCormick’s Consumer business unit that focuses primarily on retail and Flavor Solutions, which focuses mostly on foodservice. Fortunately for the company, the Consumer segment makes up a larger percentage of its sales.
Net income for the second quarter ended May 31 was $196 million, equal to $1.47 per share on the common stock, and an increase when compared with the previous year when the company earned $149 million, or $1.13 per share.
Quarterly sales rose 8% to $1.4 billion.
Consumer segment sales rose 26% to $963 million during the quarter, with the sales lift driven by the impact of the coronavirus (COVID-19) and many consumers shifting to cooking at home. Segment operating income jumped 68% to $232 million during the quarter.
Lawrence E. Kurzius, chairman, president and chief executive officer, said during a June 25 conference call that he believes the trend toward more consumers eating at home will continue.
“We don’t expect the same level of consumption to continue for the balance of the year that we experienced throughout the quarter,” he said. “However, we do expect consumption to remain at some elevated levels driven by the shift in consumer preference.
“Additionally, we would expect to benefit from consumers eating at home if we were to enter a recessionary period, consistent with our historical sales performance during past recessions. As our second half of the year begins, we continue to see elevated demand from our customers and through scanner data.”
In the Americas, Mr. Kurzius said data from Information Resources Inc. showed McCormick’s branded portfolio grew 55% during the second quarter. And data released for the week ended June 13 showed the portfolio growing 32%.
Flavor Solutions segment sales fell 18.5% during the quarter to $439 million due to sharp declines in demand from restaurants and other foodservice customers. The business unit’s operating income plummeted 63% to $29 million during the quarter.
“Late in the quarter, we began to see, and believe we will continue to see, a gradual recovery, which, again, will vary by market,” Mr. Kurzius said. “Quick-service restaurants are recovering quicker with the rest of foodservice building more slowly. In China, QSRs are largely open and traffic has returned at fairly normal levels. In certain markets in the Americas and EMEA (Europe, the Middle East and Africa), indoor dine-in service are beginning to open on a limited basis and outdoor dining options have reopened. In EMEA, QSRs delivery and drive-thru options began to resume in June, and they are seeing initial surges in demand.”
McCormick & Co. withdrew its earnings guidance in March as the impact of COVID-19 accelerated around the world. Mr. Smith said the company expected to resume guidance on the June 25 earnings call, but declined to do so due to continued global uncertainty and the possible impact of any resurgence of the virus.
“We’re focused on execution and remain confident in our ability to perform in this dynamic environment, as we have thus far, and continue on our growth trajectory,” Mr. Kurzius said.
For the first six months of fiscal 2020, McCormick & Co. earned $341 million, or $2.56 per share, and an increase when compared to the year prior when the company earned $297 million, or $2.25 per share.
Sales for the period rose to $2.6 billion from $2.5 billion.