Factors That Could Drive McCormick’s Fiscal 2Q17 Sales
Analysts expect McCormick & Company (MKC) to post sales of $1.1 billion in fiscal 2Q17,1 up 3.5% YoY (year-over-year). McCormick is a market leader in the spices and seasonings market, supported by its strong brand portfolio.
McCormick’s new products have been well-received by consumers and drive its sales growth. The company’s marketing strategy focuses on the digital channel, strategic acquisitions, price restructuring initiatives, and expanded distribution. The company expects these initiatives to supplement its sales growth.
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However, the company is not immune to the industry’s widespread softness and is witnessing weak trends in the US (SPY) and the UK. These trends are expected to pressure its top-line performance. Currency fluctuations also negatively impact its sales.
In comparison, McCormick’s peers are also reeling under pressure from continued softness in the food industry. For example, J.M. Smucker (SJM), which recently posted its fiscal 4Q17 results, marked a 1% YoY decrease in sales due to lower volumes. General Mills (GIS) and ConAgra Foods (CAG), which are set to report their quarterly numbers next week, are also expected to post declining sales.
McCormick (MKC) expects its fiscal 2017 sales to be driven by growth across its two business segments. Its management expects its sales to improve from 3% to 5% for fiscal 2017. Excluding the impact of currency, the company’s top line is expected to increase from 5% to 7%.
The company expects to facilitate its sales growth in several ways:
- innovative product pipeline
- expansion of distribution channels, including its fast-growing e-commerce platform
- price-restructuring initiatives to offset the rise in input costs
McCormick’s strategic acquisitions should act as a key catalyst for its top-line growth. These additions would enhance the company’s product portfolio, which in turn could drive sales and margin growth.
McCormick’s noted that acquisitions benefited its sales growth in fiscal 2016. These acquisitions are expected to contribute meaningfully in fiscal 2017. The company’s acquired brands are growing consistently with an increase in household penetration rate.
- fiscal 2Q17 ended May 31, 2017 ↩