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    MKC
    Earnings call· May 2026(Q2 FY26)

    MCCORMICK & CO Q2 FY26 earnings call MKC

    Jun 25, 2026 Source

    Executive summary

    McCormick & Company, Incorporated Q2 FY26 — Strong Flavor Solutions Momentum and Margin Expansion

    McCormick delivered a strong Q2 FY26, driven by robust sales and expanded margins, largely benefiting from the McCormick de Mexico acquisition and strong Flavor Solutions performance. While the Global Consumer segment faced volume pressures from increased price sensitivity, the company is implementing targeted actions to improve trends. Management remains confident in its full-year outlook and is making significant progress on the Unilever Foods integration, which is expected to enhance future growth and profitability.

    Highlights

    6

    • Total sales grew by 14% in constant currency, including a 12% acquisition contribution from McCormick de Mexico.

    • Organic sales grew 2%, driven by strong Flavor Solutions performance.

    • Gross profit margin expanded 270 basis points, with underlying gross profit margin expanding 130 basis points.

    • Adjusted operating income increased 30% (27% in constant currency).

    • Adjusted earnings per share was $0.80, an increase of 16% year-over-year.

    • Cash flow from operations for the first half was $431 million, significantly up from $161 million in the prior year.

    Concerns

    5

    • Global Consumer volumes were impacted by shifting demand patterns and increased price gaps in the Americas.

    • U.S. spices and seasonings consumption lagged the category due to increased price sensitivity and competition.

    • Flavor Solutions QSR volumes in EMEA and Asia Pacific were pressured by softer foot traffic.

    • Cost inflation is tracking towards the high end of the mid-single-digit guide, approximately 6%, due to the Middle East conflict.

    • Selling, general and administrative expenses increased, leading to a 90 basis point unfavorable impact as a percentage of sales.

    Guidance & targets

    19
    CategoryTargetConfidence
    Consumer volume trends
    Sequential improvement in Q3, volume growth in Q4
    medium materiality
    High
    Flavor Solutions momentum
    Sustain momentum from Q2
    medium materiality
    High
    Adjusted EPS accretion from Unilever Foods transaction
    Mid- to high single-digit
    high materiality
    High
    Adjusted EPS accretion from Unilever Foods transaction
    Mid- to high teens
    high materiality
    High
    Secondary listing location announcement
    By the end of July
    medium materiality
    High
    Unilever Foods integration details
    Share further detail on operating model, cost synergies, growth plans, and TSA scope
    high materiality
    High
    Debt paydown
    Continue to make progress paying down debt
    medium materiality
    High
    Operating margins (Unilever Foods combined)
    21%
    high materiality
    High
    Free cash flow conversion (Unilever Foods combined)
    100% from net income before any synergies
    high materiality
    High
    Debt paydown capacity (post-Unilever Foods)
    $1.5 billion to $2 billion
    high materiality
    High
    Leverage ratio target
    2 to 3x
    high materiality
    High
    Consumer business volume
    Improve
    medium materiality
    High
    Flavor Solutions volume momentum
    Continue and drive total volume growth for the year
    medium materiality
    High
    Pricing contribution to organic sales growth
    Contribute more this year compared to prior year
    medium materiality
    High
    Additional tariff refund
    $3 million
    low materiality
    High
    Gross margin expansion
    100 to 120 basis points
    high materiality
    High
    Adjusted operating income growth
    High single to low double digits year-over-year
    medium materiality
    High
    Adjusted EPS impact (Q3)
    Impacted by SG&A expenses and lapping of favorable tax rate
    medium materiality
    High
    2026 outlook
    Deliver on our 2026 outlook
    high materiality
    High

    Segment performance

    9
    SegmentRevenueYoYQoQMargin
    Total Company
    Total sales growth driven by acquisition and organic growth, with organic growth primarily from pricing.
    Constant currency sales growth: 14%Acquisition contribution: 12%Organic sales growth: 2%
    		—14%——
    Global Consumer
    Sales growth included acquisition contribution. Operating income and margin expanded due to acquisition accretion and tariff refund, partially offset by inflation and logistics costs.
    Constant currency sales increase: 20%Organic sales increase: 1%Adjusted operating income increase: 33% (31% constant currency)Adjusted operating margin expansion: 140 bps
    		—20%—33%
    Global Consumer - Americas
    Volumes impacted by shifting demand patterns and increased price gaps. Expect volumes to improve in Q3 and grow in Q4.
    Organic sales: FlatPricing contribution: 3%Volume: Decline (offset pricing)
    		—0%——
    Global Consumer - EMEA
    Sustained volume growth for the 10th consecutive quarter, driven by targeted pricing actions due to commodity costs.
    Organic sales growth: 3%Volume increase: 2%Pricing contribution: 1%
    		—3%——
    Global Consumer - Asia Pacific
    Growth reflects continued gradual recovery in China and strong performance in Australia.
    Organic sales increase: 3%Volume: Primary driverRecovery in ChinaStrong results outside of China, primarily Australia
    		—3%——
    Global Flavor Solutions
    Strong organic growth driven equally by volume and price, with significant operating income and margin expansion due to volume-driven top line and focus on profitability.
    Constant currency sales growth: 6%Acquisition contribution: 3%Organic growth: 3%Organic growth drivers: Equally by volume and priceAdjusted operating income increase: 26% (22% constant currency)Adjusted operating margin expansion: 210 bps
    		—6%—26%
    Global Flavor Solutions - Americas
    Volumes driven by strong performance across Flavors portfolio (CPGs, innovators) and robust growth in branded foodservice.
    Organic sales increase: 4%Price contribution: 2%Volume growth: 2%
    		—4%——
    Global Flavor Solutions - EMEA
    Impacted by soft QSR customer volumes due to decline in foot traffic, particularly in the U.K.
    Organic sales: FlatVolume: Lower
    		—0%——
    Global Flavor Solutions - Asia Pacific
    Volume growth in China was tempered by softer QSR volumes in Australia.
    Organic sales: FlatVolume growth: 1%Price: Offset volume growthStrength in ChinaSofter QSR volumes in Australia
    		—0%——

    Operational metrics

    10
    Adjusted EPS
    $0.80+16% YoY
    Q2 FY26

    Driven primarily by increased adjusted operating income, partially offset by noncontrolling minority interest.

    Tariff refund contribution to EPS
    $0.07
    Q2 FY26

    Contribution to adjusted EPS.

    Adjusted operating income growth
    30%
    Q2 FY26

    Driven by strong top line and gross margin expansion, partially offset by higher SG&A.

    Adjusted effective tax rate
    22.5%vs 24.1% prior year
    Q2 FY26

    Driven by a greater level of favorable tax items in the current period.

    Capital expenditures
    $75M
    H1 FY26

    Used to expand capacity, advance digital transformation, and optimize cost structure.

    Cash returned to shareholders (dividends)
    $258M
    H1 FY26

    Through dividends.

    Leverage ratio
    2.9xdelevering from Q1
    Q2 FY26 end

    Reflecting delevering from the first quarter following the close of McCormick de Mexico.

    Cost inflation
    6%tracking towards high end of mid-single-digit guide
    FY26

    Primarily due to the Middle East conflict.

    Tariff refund received
    $28M
    Q2 FY26

    Reversed tariffs absorbed in prior periods.

    SG&A as percentage of sales
    Unfavorable by 90 bpscompared to prior year
    Q2 FY26

    Driven by consolidating McCormick de Mexico and increased investments in technology and marketing.

    Industry KPIs

    9
    MetricValueDetails
    Gross margin270 bpsbps
    Brand platform growthShare gainsqualitative
    Organic net revenue growth2%%
    Distribution network footprintExpanded total distribution pointsqualitative
    Emerging market revenue growth3%%
    Volume mix vs pricing decompositionPricing 2%, Volume 0%%
    Adjusted EPS operating income guidanceHigh single to low double digits%
    Elasticity consumer response commentaryIncreased price sensitivityqualitative
    Category growth benchmark channel shift dataSpices and seasonings category grewqualitative

    Product announcements

    6
    ProductTypeDetails
    Seasoning blends linelaunch
    Finishing sugars and finishing saltsexpansion
    French's mustardupdate
    Recipe mix portfolio (Ducros brand)expansion
    [ Canvas ] brand recipe mix launcheslaunch
    Cholula sauceslaunch

    Deals & partnerships

    2
    McCormick de Mexicoacquisition

    Transaction completed, contributing to Q2 results. The company is deleveraging following the acquisition.

    Unileveracquisition

    Integration management office established with 20 functional teams and over 200 individuals. Focus on 10 markets representing 75% of combined sales, with direct operational overlap in 6. Expect TSA agreements generally up to 2 years post close. Secondary listing on European exchange expected by end of July. Further details on operating model, cost synergies, growth plans, and TSA scope expected by end of September.

    Risks & headwinds

    6
    Global Consumer volumes impacted by shifting demand patterns and increased price gaps in the Americas.Q2 FY26, expected to improve in Q3 and grow in Q4.

    Volume decline in Americas Consumer organic sales.

    Mitigation: Refined revenue growth management initiatives, expanded distribution, targeted value-focused marketing, and innovation.

    U.S. spices and seasonings consumption lagged category due to increased price sensitivity and competition.Q2 FY26.

    Consumption lagged category within certain segments.

    Mitigation: Disciplined promotional and assortment strategies, refined revenue growth management actions, targeted brand investment, expanded precision marketing, and consumer insight-driven innovation.

    Flavor Solutions EMEA and Asia Pacific QSR volumes pressured by softer foot traffic.Q2 FY26, expected volume trends to improve in Asia Pacific for the remainder of the year.

    Lower volume in EMEA, flat organic sales in Asia Pacific (offset by price).

    Mitigation: New products and limited time offers (Asia Pacific).

    Geopolitical volatility, elevated fuel costs, and persistent inflation weighing on consumer confidence, leading to a pronounced move towards value.Q2 FY26.

    Not explicitly quantified, but described as a 'key shift this quarter'.

    Mitigation: Optimizing price pack architecture to enhance value perception and improve accessibility at shelf, value-focused marketing.

    Higher inflationary pressures due to the Middle East conflict.Remainder of the year.

    Cost inflation tracking towards 6% (high end of mid-single-digit guide).

    Mitigation: The $31 million total expected tariff refund will largely help offset these heightened inflationary pressures.

    Increased SG&A expenses due to ERP-related technology investments, incentive compensation build-back, and significant increase in brand marketing investments.Q2 FY26, expected to impact Q3 adjusted operating income.

    SG&A as a percentage of sales was unfavorable by 90 basis points compared to the prior year.

    Mitigation: These are strategic investments for future growth and efficiency.

    Q&A highlights

    8

    How is the current weakness in U.S. spices and seasonings, particularly regarding price gaps, different from previous challenges, and how does past experience inform the current strategy?

    The approach is broadly similar to past strategies, but current pressure is more specific to certain segments, and consumer pressure is higher due to sustained inflation. The digital landscape offers more targeted marketing capabilities, and the company's speed and agility in response are key, with early positive results observed.

    “Our approach is broadly very similar to what we did over the last 2 to 3 years. And so I think the broad theme of the sort of the headline answer to your question would be that. We're taking very much the same type of approaches that we did before.”

    asked by Andrew Lazar · answered by Brendan Foley

    2 min read6 chapters

    Detailed Narrative

    01

    Q2 Performance Highlights

    McCormick delivered robust sales growth, expanded underlying margins, and increased earnings in the second quarter of fiscal year 2026. This strong performance was significantly supported by the McCormick de Mexico acquisition. Organic growth was primarily driven by accelerated momentum in the Flavor Solutions segment, which saw growth across its flavors and branded foodservice customer base, highlighting the benefits of the company's diversified flavor-focused portfolio.

    02

    Consumer Segment Challenges and Actions

    The Global Consumer segment experienced volume declines, particularly in the Americas, due to shifting demand patterns and increased price gaps. Consumption in U.S. spices and seasonings lagged the category, reflecting higher consumer price sensitivity and increased competition from both private label and branded products. In response, McCormick is implementing targeted actions, including refined revenue growth management, expanded distribution, value-focused marketing, and innovation, expecting sequential volume improvement in Q3 and volume growth in Q4.

    03

    Flavor Solutions Momentum and Innovation

    The Flavor Solutions segment exceeded expectations with strong volume growth, especially in the Americas. This was fueled by innovation plans commercializing across large CPGs, private label, and high-growth innovators, as well as robust growth in branded foodservice. The company is capitalizing on tailwinds in beverage innovation, protein, and better-for-you growth premiumization, with a majority of briefs tied to health and wellness innovation and reformulation projects increasing, particularly with large CPG customers.

    04

    Unilever Foods Integration Progress

    McCormick has made strong progress on the integration planning for the Unilever Foods transaction, establishing a dedicated integration management office and 20 functional teams involving over 200 individuals. The company remains confident in its previously announced targets of mid- to high single-digit adjusted EPS accretion within the first 12 months post-close and mid- to high teens accretion in year 3. Key milestones include announcing a secondary European listing by end of July and sharing further details on the operating model and synergies by end of September.

    05

    Gross Margin Expansion and Cost Headwinds

    Gross profit margin expanded by 270 basis points in Q2, with an underlying expansion of 130 basis points, driven by the McCormick de Mexico acquisition, a tariff refund, surgical pricing, and CCI savings. These gains were partially offset by increased commodity costs. The Middle East conflict is contributing to higher inflationary pressures, pushing full-year cost inflation towards 6%, which the $31 million expected tariff refund will largely help offset.

    06

    Cash Flow and Capital Allocation

    McCormick generated strong cash flow from operations of $431 million in the first half of FY26, a significant increase from the prior year, driven by higher profitability and improved working capital. The company continues its commitment to deleveraging, with a leverage ratio of approximately 2.9x at quarter-end. Post-Unilever Foods close, McCormick anticipates having $1.5 billion to $2 billion available to pay down debt within the first two years, targeting a long-term leverage ratio of 2 to 3x.

    AI-generated summary of the company’s earnings call. Not investment advice.