Analyst Note| Erin Lash, CFA |
Wide-moat McCormick posted outsize sales growth (up 16% on an underlying basis) in its first fiscal quarter, but we attribute this robust mark to lapping the lockdown in China in the year-ago period (where it operates three factories and generates around a low- to mid-teens percentage of sales by our estimates). In this context, McCormick’s consumer sales in Asia (which includes its branded quick-service restaurant business) shot up at a 55% clip in the first quarter, versus declines of 28% last year. While management qualitatively cited robust demand levels persist globally (and contends in-home cooking will prove a lasting trend), we suspect consumers yearn to navigate beyond their homes as vaccines become more widely distributed. As such, we don’t believe this represents a new sustainable high-water mark for the organization.