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McCormick & Co Inc Non-Voting MKC

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Red Hot Sales Growth in First Quarter Fails to Justify McCormick's Heated Valuation

Erin Lash, CFA Sector Director

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.

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Company Profile

Business Description

In its 130-year history, McCormick has become the leading global manufacturer, marketer, and distributor of spices, herbs, extracts, seasonings, and other flavorings. McCormick's customer base includes top quick-service restaurants, retail grocery chains, and other packaged food manufacturers, with about 40% of sales generated beyond its home turf to include 150 other countries and territories. Beyond its namesake brand, the firm's portfolio includes Old Bay, Zatarain's, Thai Kitchen, Frank's RedHot, French's, and the recently acquired Cholula brand.

24 Schilling Road, Suite 1
Hunt Valley, MD, 21031
T +1 410 771-7301
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Feb 28, 2021
Fiscal Year End Nov 30, 2021
Stock Type Classic Growth
Employees 13,000