McCormick & Company, Incorporated (NYSE: MKC), a global leader in flavor, announced its financial results for the third quarter of fiscal 2025, showcasing another period of consistent, volume-led growth despite ongoing macroeconomic challenges.
Brendan M. Foley, Chairman, President, and Chief Executive Officer, highlighted the company’s resilience and disciplined execution amid a dynamic global trade and cost environment.
“Our third quarter results marked our fifth consecutive quarter of volume-led growth, underscoring our differentiation in the market and the benefits of continued investments in our brands, expanded distribution, and innovation,” said Foley. “While rising costs and tariffs added pressure to our gross margin, we continued to deliver operating profit growth through the effective execution of cost savings initiatives. We remain disciplined on actions within our control and agile in adapting to external dynamics, positioning McCormick for sustained long-term growth.”
Foley emphasized that McCormick’s agility and brand strength continue to drive its leadership in the flavor category:
“As consumer trends evolve, demand for flavor remains strong. Our speed and agility in executing proven growth strategies enable us to capture this demand across all occasions and channels. Even amid rising inflation and higher commodity costs, we continue to invest in our growth plans, supported by cost savings initiatives that reinforce our resilience and strengthen our fundamentals. Our year-to-date performance, combined with our growth investments, bolsters our confidence in achieving our updated outlook for 2025 and sustaining long-term momentum.”
Foley also expressed appreciation for McCormick’s workforce, noting that employees remain central to the company’s success:
“McCormick’s employees worldwide are the driving force behind our performance. Their dedication and expertise power our growth, and we remain committed to advancing our ‘Power of People’ culture while cultivating the next generation of leaders and capabilities to fuel our future success.”
Third Quarter 2025 Results
McCormick reported net sales growth of 3% in the third quarter compared to the prior year, including a 1% favorable currency impact. Organic sales rose 2%, led by volume growth of more than 1% and a 1% contribution from pricing actions.
Segment Performance
- Consumer Segment: Net sales increased 4% year-over-year to $973 million, including a 1% currency benefit. Organic sales rose 3%, primarily driven by higher volume and favorable product mix as consumers continued to prioritize at-home cooking and premium flavors.
- Flavor Solutions Segment: Net sales increased 1% from the prior year to $752 million, with minimal currency impact. Organic sales were also up 1%, driven mainly by pricing initiatives in response to elevated input costs.
Profitability
Gross profit for the quarter decreased by $5 million compared to the prior year, while gross profit margin contracted by 130 basis points. On an adjusted basis—excluding special charges—gross profit margin contracted by 120 basis points, reflecting higher commodity costs, increased tariffs, and expenses related to capacity expansion for future growth. These headwinds were partially offset by cost savings achieved through McCormick’s Comprehensive Continuous Improvement (CCI) program.
Operating income for the quarter was $289 million, up slightly from $287 million a year ago. Excluding special charges, adjusted operating income was $294 million, representing a 2% year-over-year increase, driven by lower selling, general, and administrative (SG&A) expenses. The improvement was primarily due to reduced employee-related benefit costs and ongoing savings from CCI and SG&A streamlining initiatives, offset by lower gross margins and continued investments in marketing and technology.
Segment Operating Income
- Consumer Segment: Adjusted operating income increased 4% to $194 million, or 3% in constant currency. The growth reflected higher sales and reduced SG&A expenses, partially offset by increased commodity and tariff costs.
- Flavor Solutions Segment: Adjusted operating income decreased 2% to $100 million, impacted by higher input costs and tariffs, partially offset by pricing actions and lower SG&A expenses.
Earnings per Share
McCormick reported earnings per share (EPS) of $0.84, compared to $0.83 in the same quarter last year. Special charges reduced EPS by approximately $0.01. Excluding these items, adjusted EPS rose to $0.85, driven by higher operating income and strong cost management.
Fiscal Year 2025 Financial Outlook
McCormick reaffirmed its fiscal 2025 outlook, which reflects continued prioritization of strategic investments in key growth categories and disciplined cost control. The company remains focused on sustaining volume-led growth, driving profitability, and enhancing shareholder value, despite uncertainties in the consumer and trade environment.
The CCI program continues to serve as a critical enabler, funding growth initiatives while also contributing directly to operating profit expansion.
Key 2025 Outlook Highlights
- Net Sales:
McCormick anticipates total volume-led growth across its portfolio, supported by improving trends in its China Consumer business. - Operating Income:
The company expects gross margin expansion despite elevated commodity and tariff-related costs. Ongoing SG&A efficiencies from CCI initiatives will be partially offset by higher brand marketing and digital investments. McCormick anticipates approximately $20 million in special charges related to organizational streamlining and restructuring. - Earnings per Share (EPS):
Operating income growth is expected to be partially offset by:- A higher tax rate of roughly 22% (versus 20.5% in 2024).
- A high single-digit decline in income from unconsolidated operations, primarily due to U.S. dollar strengthening against the Mexican peso, although underlying performance at McCormick de México remains strong.
- Special charges are expected to reduce EPS by approximately $0.05 in fiscal 2025.
Foreign currency exchange rates are projected to negatively impact net sales by 1%, adjusted operating income by 1%, and adjusted EPS by 2% for the full year.
The company continues to expect strong cash flow generation, supported by profit growth and working capital improvements. McCormick plans to return a significant portion of this cash to shareholders through dividends, reaffirming its long-standing commitment to shareholder returns.
Use of Non-GAAP Financial Measures
McCormick’s management provided several non-GAAP financial metrics, including organic net sales, adjusted gross profit, adjusted operating income, and adjusted EPS. These measures exclude the impact of special charges—costs related to restructuring, process simplification, and integration efforts—to better reflect ongoing operational performance.
Management believes these non-GAAP measures enhance transparency and provide investors with meaningful insights into the company’s underlying trends and profitability, facilitating year-over-year comparisons and aiding future projections.
Additionally, McCormick reports certain results on a constant currency basis, excluding the effects of foreign currency translation. This approach isolates the true performance of operations from currency volatility, offering clearer insight into operational trends.
Finally, the company calculates organic net sales growth by excluding the effects of acquisitions, divestitures, and foreign exchange fluctuations, ensuring a more accurate picture of core business performance.
