HUNT VALLEY, MD. – Supply chain constraints during the fourth quarter of fiscal 2020 forced McCormick & Co. to put some North American customers on allocation to meet elevated levels of demand. Easing of the constraints during the first quarter of fiscal 2021 led retailers to restock inventory and that created a slingshot effect that contributed to strong earnings during the quarter.

“For the first time in several quarters, our sales increase was higher than our US IRI consumption growth,” said Lawrence E. Kurzius, chairman, president and chief executive officer, during a March 30 conference call with financial analysts. “We are realizing the benefit of our capacity expansion at the end of last year. The difference between shipments and consumption is attributable to beginning to catch up on the under-shipment of consumption across all quarters of last year that resulted in depleted retailer and consumer pantry inventory. Demand has remained high and the steps we’ve taken to increase supply are beginning to show.

“Throughout our first quarter, we removed products from suspension and continued to see service levels improved, which, combined with our over shipping consumption, indicates we are beginning to refill the inventory pipeline.”

The effect was positive for the company’s top and bottom line.  Net income for the quarter ended Feb. 28 rose 12% to $161.7 million, equal to 61¢ per share on the common stock.

Quarterly sales rose 22% to $1.48 billion when compared to the same period of the year prior.

Mr. Kurzius said the inventory replenishment will progress throughout the year and he estimated that more than half of the products suspended during the period are now back on retail shelves.

“The categories most impacted by supply constraints, spice and seasonings and dry recipe mix, we know there is a high correlation between our share performance and the shelf conditions resulting from product suspension or allocation,” he said. “Products that have had strong supply and remained on shelves have performed well. As suspended products are restocked on shelf, we’re seeing similar performance. We anticipate regaining share as conditions continue to improve.”

McCormick’s Consumer business segment, which primarily services the retail market, had quarterly sales of $947 million, a 32% increase over the same period of the previous year on a constant currency basis. The Cholula brand, which was acquired in November 2020, contributed 5% to the sales growth, according to the company.

The Flavor Solutions segment, which services consumer packaged goods companies and foodservice customers, had a sales increase of 3% to $535 million. The acquisitions of Cholula and FONA International contributed 5% to segment sales.

Management issued a bullish forecast for fiscal 2021, saying sales are expected to grow 6% to 8% on a constant currency basis. Adjusted earnings per share are expected to rise 5% to 7% and be in a range between $2.97 and $3.02 per share.

“… We expect sales growth to vary by region in quarter in 2021, given 2020’s level of demand volatility and the pace of the COVID-19 recovery,” said Mike Smith, chief financial officer. “But importantly, we continue to expect we will drive overall organic sales growth for the full year in both of our segments.

“We are now projecting our 2021 adjusted gross profit margin to be comparable to 2020 due to increasing inflationary pressure, mainly due to transportation costs. But our inflation expectation for the full year remains a low single-digit increase.”