Snapshot
Mccormick & Co Inc reported $1.85B of revenue in Q4 2025, up 2.9% year over year, with diluted EPS of $0.84 and an operating margin of 16.8%.
- Revenue
- $1.85B
- YoY growth
- +2.9%
- Diluted EPS
- $0.84
- Operating margin
- 16.8%
What management said
- •We delivered differentiated, volume-led organic growth and share gains, powered by sustained momentum from investing in our brands, expanding distribution, and driving innovation across our business.
- •As a result, we realized operating income, growth, and margin expansion for the full year, all while continuing to invest to drive future growth.
- •In the fourth quarter, total organic sales increased by 2%, supported by growth in both consumer and flavor solutions.
- •In global consumer, organic sales growth was driven by volume, which grew for the seventh consecutive quarter, as well as price contributions.
- •In the Americas region, we delivered volume growth, even as pricing actions took effect, with elasticities coming in broadly in line with our expectations.
- •In Asia Pacific, organic growth was supported by strong and continued momentum in Australia and our China retail business.
- •Importantly, we achieved the gradual full-year recovery in China consumer for the year as planned.
- •These headwinds were mostly offset, with growth from high-growth innovators, private label customers, and QSRs across the Americas and Asia Pacific.
- •Turning to profitability, fourth quarter gross margin was pressured by higher-than-expected inflation across our diverse basket of commodities, and we recognized more tariff costs than previously planned.
- •In addition, as expected, we continue to invest in the business, advancing our supply chain capabilities, innovation, and growth platforms.
- •Across the global consumer segment, we have held or improved share across many core categories in key markets for the last six quarters.
- •McCormick-branded volume consumption growth continues to outpace the broader edible category in the U.S.
What went well
- •Total organic sales grew 2% in the fourth quarter, supported by growth in both the consumer and flavor solutions segments.
- •Consumer segment volume grew for the seventh consecutive quarter, with the Americas delivering volume growth even as pricing actions took effect and elasticities came in broadly in line with expectations.
- •Flavor solutions adjusted operating income rose 7% in the quarter (6% in constant currency) and grew 9% for the full year (11% in constant currency), with full-year operating margin expanding 90 basis points.
- •Fourth quarter adjusted earnings per share increased 7% to $0.86, driven by higher adjusted operating income, lower interest expense from debt paydown, and a favorable tax rate.
- •The company generated strong operating cash flow of $962 million for the year, reduced its leverage ratio to below 2.7 times, and the board authorized a 7% dividend increase, marking 40 consecutive years of increases.
- •Management held or improved share across many core categories in key markets for six straight quarters, with the renovated McCormick Gourmet relaunch driving velocities that exceeded expectations.
What went wrong
- •Fourth quarter adjusted gross margin declined 120 basis points due to higher-than-expected commodity inflation, more recognized tariff costs than planned, and capacity investment costs; full-year gross margin fell 60 basis points.
- •Flavor solutions volumes declined for the global segment, hurt by a reset of customer inventory levels in Latin America and softness in large CPG and branded food service customer volumes.
- •Full-year adjusted operating income and EPS finished at the low end of the outlook, with consumer segment operating income declining 1% for the year on higher commodity costs and tariffs.
- •Competitive activity in the U.S. Mexican flavor category tempered recipe mix share performance, and French's mustard trailed a declining U.S. mustard category on promotion timing.
- •The overall consumer environment remained pressured, with low to middle-income households making more frequent trips while buying fewer units per trip, a trend that accelerated through the fourth quarter.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Organic net sales growth | FY2026 | — | 1% to 3% | New |
| Currency impact on net sales, adjusted operating income and EPS | FY2026 | — | Approximately one-point positive | New |
| Gross margin | FY2026 | — | Recover the 60 bps of margin compression seen in 2025 | New |
| Incremental year-over-year tariff cost impact | FY2026 | — | Approximately $50 million (mostly to be offset) | New |
| Cost inflation | FY2026 | — | Mid-single-digit, continuing at Q4 run rate | New |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Consumer organic sales | +3% | Driven by both price and volume, with volume growth for the seventh consecutive quarter across core categories. |
| Consumer Americas organic sales | +3% | 1% volume growth plus 2% pricing reflecting cost inflation-related pricing implemented in September; elasticities broadly in line with expectations. |
| Consumer EMEA organic sales | +3% | 1% volume increase and 2% pricing from targeted actions on higher commodity costs; eighth consecutive quarter of volume growth. |
| Consumer Asia-Pacific organic sales | +2% | Primarily volume growth, with China in line with expectations and strong results in Australia. |
| Flavor solutions organic sales | +1% | 2% price contribution partially offset by approximately 1% volume decline. |
| Flavor solutions Americas organic sales | +1% | 3% price contribution offset by 2% volume decline tied to Latin America customer inventory reset and soft large CPG and branded food service volumes. |
| Flavor solutions EMEA organic sales | -3% | 2% price more than offset by 1% lower volume reflecting soft CPG customer volumes. |
| Flavor solutions Asia-Pacific organic sales | +3% | 5% volume growth from QSR customer promotions and limited-time offers, partially offset by 2% lower price. |
| Adjusted gross profit margin | -120 bps | Higher commodity costs, tariffs, and capacity investment costs, partially offset by CCI productivity savings. |
| SG&A expense | -120 bps | Lower employee-related benefits and CCI savings, partly offset by higher brand marketing and technology investment. |
| Adjusted operating income | +3% (+2% constant currency) | Improved SG&A partially offset by gross margin pressure and growth investments. |
| Adjusted EPS | +7% | Higher adjusted operating income, improved interest expense from debt paydown, and a favorable tax rate. |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Tariffs and commodity inflation | Gross annualized exposure of $140 million | Exposure cut roughly 50% to about $70 million; mid-single-digit inflation expected to persist into 2026 | steady |
| Volume-led consumer growth | — | Seventh consecutive quarter of consumer volume growth, eighth in EMEA | rising |
| Flavor solutions profitability and recovery | — | Full-year operating margin expanded 90 bps; volumes expected to recover and grow in 2026 | rising |
| ERP implementation and SG&A streamlining | — | Waves being compressed, shifting costs into 2026 to minimize risk, with last go-live in early 2027 | rising |
| China consumer recovery | — | Achieved planned gradual full-year recovery; continued gradual improvement expected in 2026 | rising |
| Reformulation pipeline with CPG and private label | — | Development activity increasing; commercialization weighted to late 2026 and more so 2027 | rising |
Q&A summary
What are the key drivers underpinning the 2026 outlook for continued volume momentum, especially in consumer Americas given decelerating scanner trends?
Foley said consumer drives the mid-to-high end of the range and flavor solutions the low-to-mid end, with pricing contributing more than in 2025 but volume growth expected in both segments. Consumer growth is supported by higher A&P, 2025 innovation, the U.S. McCormick Gourmet relaunch, a blends and seasonings line relaunch, distribution expansion, and high-growth channels; flavor solutions should improve versus a difficult 2025 though with continued lumpiness.
How should we think about gross margin expansion for 2026 relative to 2025, given Q4 came in below expectations, and does recovery mean full recovery?
Gabriel attributed the Q4 miss to indirect tariff-related market inflation that accelerated from Q3 plus recognizing more tariff-laden inventory in the P&L than planned. He said they managed the P&L holistically with SG&A savings offsetting gross margin, and the goal for 2026 is to recover the 60 basis points of margin compression seen in 2025, with only qualitative guidance given due to uncertainty.
Can you clarify the ERP spend, why costs are accelerating into 2026, and whether they remain in the base into 2027?
Foley said they decided to minimize the number of deployment waves as the program is going well. Gabriel explained compressing the waves shortens dual-operation periods, reducing reconciliation and interface risk, which pulls development and preparedness costs into 2026 ahead of the last go-live in early 2027. Total program cost is unchanged; it is a timing shift, with costs moderating in 2027 and further in 2028.
Could the added Q4 inflation be even more of a consideration entering 2026, and any help on the cadence of mid-single-digit inflation?
Gabriel said Q4 was the highest inflation quarter in years, driven by tariffs, broad commodity costs across 17,000 ingredients from 80 countries, and packaging. Despite tariff moderation, mid-single-digit inflation is expected to continue at the Q4 run rate into 2026; any improvement would come later in the year.
When might earnings get back on the long-term algorithm, and are the 2028 investor day goals still realistic?
Foley said the 2028 targets were set before much of the trade uncertainty and the McCormick de Mexico acquisition. He expressed confidence in hitting the top-line targets by 2028 but said current focus is offsetting substantial incremental costs, with more detail on the full set of targets to be provided at CAGNY.
Does the Nielsen tracking data showing weakening U.S. spice and seasonings share reflect what you are seeing, and what about holiday sell-through?
Foley said channel inventory and the comparison of sales to consumption in Q4 were in line with expectations with no anomalies, and holiday performance in the Americas was very good. He noted a brief couple-week market slowdown tied to SNAP funding news before consumption rebounded near the holiday, and expects some price elasticity variability in Q1 as more targeted pricing reaches shelf.