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What Affected McCormick’s Sales in Q1 2019?

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Sales missed estimate

McCormick (MKC) posted weaker-than-expected sales for the first quarter of fiscal 2019. McCormick’s net sales of $1.23 billion fell slightly short of analysts’ estimate of $1.24 billion as currency volatility negatively affected its sales growth rate. However, its net sales improved 1.3% YoY (year-over-year), reflecting growth in its organic sales.

The company’s low sales growth rate reflected tough YoY comparisons. McCormick’s net sales growth in the first quarter of the previous year gained significantly from its acquisition of RB Foods.

McCormick’s top line benefited from improved volumes and mix, which registered an increase of 4.0% during the reported quarter. Its pricing improved marginally, but currency volatility adversely affected its net sales growth by 2.8%.

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The top lines of food companies are taking a hit from adverse currency fluctuations and softness in their base businesses. However, net sales growth accelerated for General Mills (GIS), Conagra Brands (CAG), the Campbell Soup Company (CPB), and the J.M. Smucker Company (SJM) thanks to the incremental benefits from their recent acquisitions.

Outlook

McCormick’s top line is expected to mark 1%–3% growth in fiscal 2019 driven by sustained momentum in its base business. New product launches, expanded distribution, and brand marketing are expected to support the company’s sales growth rate. However, currency fluctuations and tough YoY comparisons are likely to limit its sales growth rate.

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