The rise in popularity of home cooking that occurred early in the coronavirus pandemic has been sustained, according to McCormick & Company CEO Lawrence Kurzius.
“This has really become a trend that’s becoming a habit,” Kurzius said in an interview Tuesday on CNBC’s “Mad Money.”
Shares of the spice maker fell 2.7% on Tuesday to $189.89 apiece, following the company’s before-the-bell earnings report. McCormick reported sales of $1.43 billion, topping Wall Street expectations of $1.39 billion. Per-share earnings came in at $1.53, slightly better than the $1.52 analysts had been looking for.
Third-quarter sales were up 8% compared with the same period last year. That mirrors the 8% year-over-year increase it reported for the second quarter, which ended May 31 and encompassed the initial wave of stay-at-home orders that swept the U.S.
In Tuesday’s earnings release, McCormick reported sales in its consumer segment were up 15% as pandemic economic restrictions were eased in the U.S. and other parts of the world. In the second quarter, the maker of Old Bay Seasoning, French’s mustard and Frank’s Red Hot saw consumer sales growth of 26%.
Kurzius, who has served in various roles for McCormick since joining in 2003, said he sees additional encouraging signs.
“Our household penetration is up 8%. That’s millions of households, and the repeat rate is up 7%. That means consumers are using our products and coming back for more,” he told CNBC’s Jim Cramer. “We’ve gained market share in most of our categories, and this isn’t just a U.S. phenomena. This is happening around the world. It’s going to drive growth for a long time to come.”
For evidence, Kurzius pointed to China, which he said is the company’s largest market outside the U.S. He explained that China, where the coronavirus first emerged late last year, is at least “several months” ahead of America on its pandemic recovery timeline. “Yet we’re still seeing sustained consumer demand in China as well,” he said.
The restaurant industry has been hit hard during the pandemic, with various restrictions on operations put in place by state and local governments designed to slow the spread of Covid-19. McCormick has exposure to the industry through its flavor solutions segment, which saw a 3% decrease in sales in the third quarter compared with the same period a year ago.
Even so, Kurzius said that represented “a strong bounce back” from the declines experienced earlier in the pandemic. In the second quarter, when many restaurants may have been shut down or only open for takeout or delivery, McCormick’s food solutions sales plummeted 18% year-over-year.
“Quick service restaurants, restaurants that are oriented to the takeaway and drive-thru and eat out, as opposed to dine-in, they’ve really recovered very well,” Kurzius said. “Our quick-service restaurant customers are back in growth in some parts of the world and recovering very strongly.”
On the other hand, Kurzius said “white tablecloth” establishments and other individual restaurants located in places with economic restrictions face “a tough road ahead.”
As of Tuesday’s close, McCormick shares are down almost 10% from their Sept. 3 high of $211.07. However, it’s been a tough month for Wall Street overall, and McCormick’s stock remains up more than 60% since its coronavirus-era bottom in late March.
On Tuesday, the Baltimore-based company announced a 2-for-1 stock split, its first since April 2002. McCormick said it expects its stock to start trading on a split-adjusted basis Dec. 1.
