McCormick Eyes Growth in a Slow-Growth Scenario
McCormick poised to grow
McCormick (MKC) is a dominant player in the spices and seasonings industry. The company’s strong portfolio of leading brands, affordable pricing, and innovation-led new product launches set well with consumers. Effective marketing and multichannel product offerings further facilitate sales growth.
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That being said, the food industry as a whole is witnessing a slowdown. Renowned names, including General Mills (GIS), Kellogg (K), JM Smucker (SJM), and ConAgra Brands (CAG), are struggling to drive traffic. Instead, they’re focusing on reducing costs to boost margins.
But despite this scenario, McCormick has remained successful in driving sales through strategic acquisitions and price restructuring. It’s focusing on increasing its top line while reducing costs.
What to expect
During McCormick’s recently concluded Investor Day on April 4, 2017, it reaffirmed its long-term growth projections. Over the long run, from fiscal 2017 to fiscal 2019, it expects its top line to rise 4.0%–6.0% annually on a constant currency basis. It expects EPS (earnings per share) to rise 9.0%–11.0%.
McCormick also expects sales to reach at least $5.0 billion by fiscal 2019, supported by innovative product launches, strategic acquisitions, efficient marketing techniques, and expanded distribution. It projects EPS to reach $5.
The company also expects to generate about $300.0 million in cost savings from 2017 through 2019. It has forecast a rise of 7.0%–9.0% in operating income from fiscal 2017 through fiscal 2019. That would be a 40 basis point improvement in operating margins annually.