As Americans gear up for July 4 celebrations, McCormick CEO Brendan Foley says shoppers are embracing what he calls the “leftover economy” — but there’s more to the story.
“There’s more going on than just consumers focusing on leftovers. We see a big convergence right now. Consumers seeking value but also health and wellness. And it’s really creating a lot of growth opportunity for McCormick,” Foley said on Yahoo Finance’s Opening Bid.
Foley noted that consumers are turning to larger-size flavor products and buying more meat and produce to cook meals at home.
“They’re making more trips to the grocery store, maybe putting a few items fewer in the basket. But largely they’re still exploring with flavor, and they still need flavor,” he said.
With inflation and tariffs pushing prices higher across categories from apparel to food, packaged goods companies like McCormick continue to face challenges in sustaining growth.
For the second fiscal quarter, McCormick (MKC) reported a 1% year-over-year increase in sales. Adjusted earnings per share held steady but topped Wall Street estimates by $0.04.
The company’s consumer segment sales climbed 2.9%, driven by strong demand for products like hot sauce and mustard. However, its Flavor Solutions segment, which sells to restaurants and foodservice providers, declined 1.3% from the prior year.
“Broad weak CPG and QSR trends remain a watch-out in the Flavor Solutions business, but despite the softer environment, margin progression remains on track,” wrote Stifel analyst Matthew Smith in a note, maintaining a Hold rating on McCormick shares.
For the full year, McCormick projects sales will range from flat to up 2%, with adjusted operating profit expected to rise 3% to 5% as the company continues to raise prices.
Meanwhile, consumer caution is weighing on other food companies. General Mills (GIS) warned this week that tighter household budgets are slowing sales of snacks and cereals. The company missed profit expectations and delivered a muted earnings call.
Investors have pulled back from many large food stocks, citing persistent macroeconomic pressures and relatively high valuations — often tolerated only during slow-growth periods due to their defensive nature.
McCormick shares are up 1.7% year to date, underperforming the S&P 500’s (^GSPC) 4.5% gain. Other major food names are faring worse: Campbell Soup (CPB) is down 26%, Kraft Heinz (KHC) has fallen 16%, and PepsiCo (PEP) remains near a 52-week low after a 15% drop this year.
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