McCormick (MKC) Gains on Innovation & Pricing Amid Cost Woes
McCormick & Company, Inc. MKC has reinforced its position in the spices and seasonings industry by focusing on strategic efforts to boost sales volumes and profitability. This strategy encompasses investments in marketing, innovation and product development to meet changing consumer tastes and increase market presence.
The company is set to concentrate its resources on initiatives aimed at enhancing sales volumes and achieving sustained growth. These efforts include fine-tuning pricing strategies, launching products, ramping up brand marketing to boost demand, and refreshing packaging designs to attract consumers and improve market competitiveness.
Image Source: Zacks Investment Research
Pricing Strategy Bodes Well
The company's adept pricing strategy, driven by robust product demand, resulted in 3% year-over-year growth in sales to $1,752.8 million in the fourth quarter of fiscal 2023. This increase was notably supported by 5% growth from pricing measures, showcasing McCormick's capability to effectively navigate inflationary challenges.
The Consumer business and Flavor Solutions segments saw sales increases due to strategic pricing decisions. These adjustments have effectively mitigated cost pressures and contributed to revenue growth in all business areas.
CCI & GOE Programs - Key Drivers
For fiscal 2024, McCormick is optimistic about achieving profitable growth and volume-led expansion. The company intends to use its Comprehensive Continuous Improvement (CCI) and Global Enablement Office (GOE) programs to enhance operating margins and stimulate sales volume. These efforts, combined with strategic investments in marketing, product innovation and strategic acquisitions, aim to bolster sales trends and overall financial results.
The company’s fourth-quarter and fiscal 2023 gross profit margin expanded 320 and 180 basis points, respectively, due to efficient pricing and cost savings from the CCI and GOE programs.
Strategic acquisitions have significantly contributed to McCormick's expansion, enriching its product lines and reinforcing its position in the flavor solutions market. Acquiring companies like FONA International, Cholula Hot Sauce and RB Foods has diversified McCormick's product offerings and opened up growth opportunities.
Cost Hurdles
McCormick is navigating challenges like cost inflation and concerns over sales volume. As a percentage of net sales, SG&A increased 190 basis points in the fiscal fourth quarter. Management expects a low-single-digit increase in cost inflation for fiscal 2024. Shares of this Zacks Rank #3 (Hold) company have gained 2.7% in the past three months, underperforming the industry’s growth of 8.5%.
Three Solid Picks
Some better-ranked stocks from the same sector are Lancaster Colony Corporation LANC, Treehouse Foods THS and Inter Parfums, Inc. IPAR.
Lancaster Colony is a manufacturer and marketer of specialty food products for the retail and foodservice markets. LANC currently sports a Zacks Rank #1 (Strongly Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lancaster Colony’s current fiscal-year earnings and sales indicates growth of 29.5% and 3%, respectively, from the fiscal 2023 reported figures. LANC has a negative trailing four-quarter average earnings surprise of 1%.
Treehouse Foods is a manufacturer of packaged foods and beverages. The company currently has a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Treehouse Foods’ current financial-year earnings indicates growth of 106% from the 2022 reported figures. THS has a trailing four-quarter average earnings surprise of 26.5%.
Inter Parfums is engaged in the manufacturing, distribution and marketing of a wide range of fragrances and related products. The company currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year earnings and sales indicates growth of 20.2% and 21.7%, respectively, from the 2022 reported figures. IPAR has a trailing four-quarter average earnings surprise of 45.7%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
McCormick & Company, Incorporated (MKC) : Free Stock Analysis Report
TreeHouse Foods, Inc. (THS) : Free Stock Analysis Report
Inter Parfums, Inc. (IPAR) : Free Stock Analysis Report
Lancaster Colony Corporation (LANC) : Free Stock Analysis Report
