McCormick Q3 2026 Sales Rise 17% on Mexico Acquisition

McCormick & Company reported double-digit fiscal third-quarter sales and adjusted operating profit growth, driven largely by the consolidation of McCormick de Mexico, while organic sales rose 1.9% as pricing offset a slight volume decline. The spice and flavorings company said margin expansion and productivity supported profit growth and continued investment, and it remained confident in its fiscal 2026 outlook.

Net sales for the quarter were $2.02 billion, up 17.4% from a year earlier and 16.5% in constant currency. Acquisitions contributed 14.6 percentage points to constant-currency growth, primarily reflecting the January 2026 purchase of an additional 25% interest in McCormick de Mexico and the resulting consolidation of that business. Organic sales, which exclude acquisitions, divestitures and currency effects, increased 1.9%, comprising 2.2% growth from pricing and a 0.3% decline in volume and product mix.

Adjusted gross profit rose 23% to $794.9 million, with the adjusted gross margin expanding 180 basis points to 39.3%. Adjusted operating income increased 22.1% to $358.5 million, or 20.9% in constant currency, while the adjusted operating margin widened 70 basis points to 17.7%.

Adjusted net income increased 1.1% to $231.7 million. Adjusted earnings per share were $0.86, compared with $0.85 in the prior-year quarter. The benefit from higher adjusted operating income was largely offset by the effects of unconsolidated and noncontrolling interests, taxes and other items.

Consumer Sales Lifted by Mexico Consolidation

Consumer segment sales increased 24.9% to $1.22 billion, or 24.3% in constant currency. The McCormick de Mexico transaction contributed 23.2 percentage points, while organic sales rose 1.1% as 2.2% pricing growth outweighed a 1.1% volume decline.

In the Americas, organic sales declined 0.3%, with a 2.5% volume decrease mostly offset by pricing. McCormick cited soft U.S. consumption in selected categories, pressure in parts of the recipe-mix portfolio and a short-term packaging supply constraint. The company also reported improving trends in U.S. herbs, spices and seasonings and share gains across selected markets and categories.

Consumer organic sales increased 5% in Europe, the Middle East and Africa, supported by both volume and pricing. Asia-Pacific organic sales advanced 4.4%, led by volume growth and a gradual recovery in China. McCormick also reported strong retail results in China and volume-led growth at McCormick de Mexico.

Consumer adjusted operating income rose 24.4% to $241.1 million, or 23.8% in constant currency. The segment’s adjusted operating margin was 19.8%, down 10 basis points from the prior-year period.

Flavor Solutions Growth Led by Pricing and Asia-Pacific

Flavor Solutions sales increased 7.7% to $809.4 million, or 6.4% in constant currency. Organic sales grew 3%, reflecting a 2.2% pricing contribution and 0.8% volume growth, while acquisitions added 3.4 percentage points.

Americas organic sales rose 2.7%, as pricing offset a slight volume decline. McCormick said demand from consumer packaged goods and quick-service restaurant customers was softer, although branded foodservice maintained momentum and gained share.

EMEA organic sales increased 1.2%, with pricing offsetting pressure on quick-service restaurant volumes. Asia-Pacific delivered 8.3% organic growth, driven by new-product timing and limited-time offers with quick-service restaurant customers.

Flavor Solutions adjusted operating income rose 17.6% to $117.4 million, or 15.4% in constant currency. Its adjusted operating margin expanded 120 basis points to 14.5%.

Fiscal 2026 Outlook Maintained

McCormick expects fiscal 2026 reported net sales growth of 13% to 17%, or 12% to 16% in constant currency. The McCormick de Mexico acquisition is expected to contribute 11 to 13 percentage points, while organic sales are projected to grow 1% to 3%.

Adjusted operating income is expected to increase 16% to 20% on a reported basis and 15% to 19% in constant currency. The company projects a 100- to 120-basis-point increase in adjusted gross margin and adjusted earnings per share of $3.05 to $3.13, representing reported growth of 2% to 5% and constant-currency growth of 1% to 4%.

McCormick now expects cost inflation of 6% to 7%, compared with its previous outlook for a mid-single-digit increase. It plans a low- to mid-teens increase in brand marketing and expects an adjusted tax rate of approximately 24%.

Management expects Americas consumer consumption and volume to improve in the near term, while momentum in EMEA and Asia-Pacific continues. For Flavor Solutions, the company expects quick-service restaurant pressures in the Americas and EMEA to persist, but said its customer innovation pipeline remains strong and branded foodservice momentum should continue.

Year-to-date operating cash flow was $599 million, benefiting from higher profitability and improved working capital. McCormick returned $387 million to shareholders through dividends and spent $131 million on capital expenditures. The company said it had reduced its leverage ratio as planned since the first quarter and was positioned to lower it further ahead of the proposed Unilever Foods combination.

McCormick also reported progress in planning for that transaction, including selection of the future leadership team and operating model, activation of integration teams and submission of regulatory filings. The company expressed confidence in a timely closing. It anticipates post-closing margin expansion and reinvestment, full conversion of net income to free cash flow, and $1.5 billion to $2 billion of cash available for debt repayment during the first two years.

The outlook remains subject to demand variability, inflation and tariff-related costs, supply-chain constraints, foreign-exchange movements and geopolitical disruption. The proposed Unilever Foods combination also carries regulatory, financing, separation and integration risks, as well as the possibility of higher transaction costs, additional debt and delays in realizing expected benefits.