McCormick Posts 17% Sales Jump, Presses Ahead With Unilever Foods Deal

McCormick & Company reported third-quarter results Thursday showing a 17.4 percent jump in net sales, but earnings per share that fell more than half from a year earlier after the flavor maker booked a non-cash impairment charge and continued costs tied to its pending combination with Unilever's foods business, according to the company's earnings release filed with the Securities and Exchange Commission.

For the quarter ended Aug. 31, net sales rose to roughly $2.02 billion, lifted largely by the consolidation of McCormick de Mexico following a controlling-stake acquisition that closed Jan. 2. Organic sales growth — stripping out acquisitions and currency — came in at 1.9 percent. GAAP operating income fell to $217 million from $289 million a year earlier, and diluted earnings per share dropped to $0.36 from $0.84, a decline the company attributed to $44.9 million in special charges, including a $43.1 million non-cash impairment tied to shutting down a development-stage pepper-sourcing project in Malaysia. Stripping out those charges, adjusted earnings per share of $0.86 were roughly flat with the prior year, and adjusted operating income rose 22 percent to $358.5 million, filed as part of the same 8-K filing.

By segment, the larger Consumer division — McCormick's retail spice, seasoning and condiment business — posted net sales of $1.215 billion, up 25 percent, with the Mexico deal accounting for roughly 23 points of that growth and organic sales up about 1 percent. Adjusted operating income in Consumer climbed 24 percent to $241 million. The smaller, industrial-facing Flavor Solutions segment, which supplies restaurant chains and packaged-food makers, posted net sales of $809 million, up 8 percent, with 3 percent organic growth, and adjusted operating income rose 18 percent to $117 million, per the same filing.

Unilever Integration "On Track"

Chairman, President and CEO Brendan Foley said the results "demonstrate the resilience and differentiated performance of our flavor-focused business model," and reiterated that McCormick remains "confident in the strategic benefits" of its planned combination with Unilever's foods business, first disclosed in a filing dated March 31, 2026. The company said it has established a future leadership team and operating model and mobilized integration planning teams ahead of the deal's eventual close, though it did not disclose a new closing date in Thursday's release.

That combination, as outlined when it was announced, would value Unilever's foods business at an enterprise value of roughly $44.8 billion and McCormick itself at about $21.0 billion — both near 13.8 times fiscal 2025 EBITDA, according to deal terms reported by Yahoo Finance. Under the structure, Unilever and its shareholders would hold 55.1 percent of the combined company's fully diluted equity and McCormick shareholders 35.0 percent, with Unilever itself retaining 9.9 percent; Unilever would receive $29.1 billion in stock plus $15.7 billion in cash. The resulting company would carry roughly $20 billion in combined 2025 revenue and brands spanning Knorr, Hellmann's, McCormick, French's and Frank's RedHot, with management targeting $600 million in annual cost synergies within three years, about two-thirds of it by year two.

McCormick, maker of spice brands sold in grocery aisles across the country alongside its industrial Flavor Solutions business, said on its corporate site that gross profit margin expanded 190 basis points on cost-savings initiatives, even as it absorbed higher commodity and freight costs.

Guidance Reaffirmed

The company reaffirmed its full fiscal-2026 outlook, calling for reported net sales growth of 13 to 17 percent and adjusted earnings per share of $3.05 to $3.13 for the year. McCormick said it expects a tax-rate headwind — roughly 24.0 percent versus 21.5 percent in fiscal 2025 — and higher interest expense tied to the Mexico transaction, partly offset by continued productivity savings under its "Comprehensive Continuous Improvement" program. Heading into the report, analysts had penciled in adjusted EPS of roughly 76 cents on revenue near $1.98 billion, per a pre-earnings roundup from iTiger, which also noted JPMorgan held an Overweight rating while trimming its price target to $62 and TD Cowen downgraded the stock to Hold even as UBS nudged its target higher. McCormick's actual adjusted EPS of $0.86 and sales of about $2.02 billion topped both pre-earnings estimates.