HUNT VALLEY, MD. — Executives at McCormick & Co. promised a good number of product launches in 2019. They held true to that promise in the fiscal year’s first quarter, which saw the company record sales growth of 1% despite a 3% unfavorable impact from currency.
Hunt Valley-based McCormick & Co. posted net income of $148 million, or $1.12 per share on the common stock, in the quarter ended Feb. 28, which was down from $422.6 million, or $3.22 per share, in the first quarter of the previous year. The previous year’s results included the non-recurring net favorable impact of the U.S. tax legislation. Adjusted earnings per share rose 12% to $1.12 from $1.
Net sales rose to $1,231.5 million from $1,215.4 million in the previous year’s first quarter. In constant currency, sales grew 4%.
“Our performance on the market is being driven by new products and expanded distribution, together with our strong marketing programs and merchandising execution,” said Lawrence E. Kurzius, president and chief executive officer, in a March 26 earnings call. “Additionally, we again had strong growth in unmeasured channels, including club, e-commerce and Hispanic retail chains.”
He said new products, including Frank’s RedHot frozen wings and Zatarain’s frozen items, gained momentum and contributed to first-quarter growth. He expounded on the company’s plans for new products in the first half of 2019.
“In the U.S., we have launched the Zatarain’s Garden District Kitchen range,” Mr. Kurzius said. “These meal solutions, inspired by the rich culinary heritage of New Orleans, are plant-based and high in both protein and fiber, and we continue to renovate our dry recipe mixes for simple and clean ingredient statements that still deliver delicious flavor.
“We are continually improving our portfolio to strengthen our relevance with consumers. In the U.S., we’re expanding our McCormick Gourmet line with a range of premium salts and peppers.”
McCormick & Co., together with the cooking video web site BuzzFeed Tasty, in the second quarter plan to launch a seasonings blends range available both through the direct-to-consumer channel and retail.
“We’re thrilled with this new partnership, which will deliver substantial incremental impressions and reach to an audience primarily under 35 years of age and further accelerate our digital platform,” Mr. Kurzius said.
McCormick & Co. also in 2019 will introduce its “ONE” product platform, a set of one-dish recipe mix flavors that include flavors created using the combination of artificial intelligence and the company’s consumer insights. McCormick & Co. is collaborating with IBM in its artificial intelligence efforts.
“We’re entering in a new era of flavor innovation,” Mr. Kurzius said. “This proprietary cutting-edge technology, which we have previously discussed as computational creativity, sets McCormick apart across our consumer and flavor solutions segments. Our product developers are now able to explore flavor territories across the globe more quickly and efficiently, utilizing technology to extract key insights for millions of data points across sensory science, consumer preference and flavor palette.”
Mr. Kurzius said sales growth in both the company’s consumer segment and its flavor solutions segment was entirely organic, driven by higher volume and product mix on base business and new products as there was no acquisition impact.
McCormick & Co.’s consumer segment had first-quarter net sales of $744.9 million, up slightly from $744.6 million. Operating income excluding special charges, transaction and integration expenses was $135.3 million, up 6% from $130.5 million. In the Americas, consumer segment sales rose 3%, primarily driven by higher volume and product mix across several product lines, including spices and seasonings, recipe mixes, and frozen products.
First-quarter sales in the company’s flavor solutions segment grew by 3% to $486.6 million from $470.8 million. Operating income excluding special charges, transaction and integration expenses was $63.7 million, up 4% from $61.5 million.
“In our flavor solutions segment, our Americas and EMEA (Europe, Middle East and Africa) regions drove significant growth in flavors, branded food service and condiments with strong contributions from both new products and the base business,” Mr. Kurzius said.
In the Americas, flavor solutions sales grew 6% behind increased sales to quick-service restaurants and continued flavors and seasonings momentum.
McCormick & Co. in fiscal 2019 expects a two-percentage-point unfavorable impact from currency rates on net sales, adjusted operating income and adjusted earnings per share. The company reaffirmed its outlook for 2019, which includes sales growth of 1% to 3% and earnings per share in a range of $5.09 to $5.19.