McCormick & Company, Incorporated (NYSE:MKC) executives said the company delivered “volume-led” organic growth and share gains in fiscal 2025, while managing rising inflation and tariff-related costs that weighed on gross margin in the second half of the year. On the company’s fourth-quarter earnings call, Chairman, President and CEO Brendan Foley and CFO Marcos Gabriel also outlined a 2026 outlook that incorporates contributions from the acquisition of a controlling interest in McCormick de Mexico, alongside expectations for margin recovery and continued investment in brand marketing and digital initiatives.
Fourth-quarter results: organic sales up 2%, margin pressured by inflation and tariffs
McCormick reported fourth-quarter organic sales growth of 2%, with both its consumer and flavor solutions segments contributing. Foley said consumer organic sales growth was driven by volume—marking the seventh consecutive quarter of volume growth—along with pricing. In flavor solutions, the company posted organic growth despite a decline in volumes driven in part by customer inventory resets in Latin America.
SG&A improved, however. Gabriel said SG&A as a percentage of sales decreased 120 basis points from the prior-year quarter, reflecting lower employee-related benefit expenses and CCI-driven savings, partially offset by higher investments in brand marketing and technology.
Segment performance: consumer volume growth continues; flavor solutions mixed by region
In the global consumer segment, fourth-quarter organic sales increased 3%, driven by both price and volume. Gabriel broke out regional performance as follows:
- Americas: Consumer organic sales increased 3%, with 1% volume growth and 2% pricing. Pricing reflected inflation-related actions implemented in September, with elasticities “broadly in line” with expectations, according to management.
- EMEA: Consumer organic sales grew 3%, with 1% volume growth and 2% pricing from targeted actions tied to commodity costs. Management noted the region achieved volume growth for the eighth consecutive quarter.
- Asia-Pacific: Consumer organic sales increased 2%, driven primarily by volume growth. Management said growth in China was in line with expectations and cited strength outside China, particularly in Australia.
In flavor solutions, fourth-quarter organic sales rose 1%, reflecting 2% pricing partially offset by an approximately 1% volume decline. Regionally:
- Americas: Organic sales increased 1% with 3% price contribution and a 2% volume decline. Volumes were impacted by inventory resets in Latin America, which management expects to be “behind us” in 2026.
- EMEA: Organic sales decreased 3%, including 2% from price and 1% lower volume, reflecting softness at large CPG customers. Gabriel said volumes were stable versus recent trends.
- Asia-Pacific: Organic sales increased 3%, with 5% volume growth driven by QSR promotions and limited-time offers, partially offset by 2% price.
2025 full-year recap: operating income up, gross margin down; dividend increased
Foley said McCormick achieved “operating income growth and margin expansion for the full year” despite increased inflation, commodity volatility and tariff impacts that pressured profitability. Gabriel reported that for fiscal 2025 the company grew adjusted operating income by 2% (3% in constant currency) and expanded adjusted operating margins by 10 basis points, while full-year gross margin declined 60 basis points.
On the bottom line, McCormick posted fiscal 2025 adjusted earnings per share of $3.00, up 2% year over year. Fourth-quarter adjusted EPS was $0.86, up 7%, which Gabriel attributed to higher adjusted operating income, improved interest expense from debt paydown and a favorable tax rate.
The company also highlighted cash flow and capital allocation. Gabriel said cash from operations totaled $962 million for 2025, with $483 million returned to shareholders through dividends and $222 million spent on capital expenditures. McCormick reduced its leverage ratio to below 2.7x, citing strong cash flow and improved working capital initiatives.
Management also noted two shareholder-related items: the acquisition of a controlling interest in McCormick de Mexico and a dividend increase. Foley said the company’s board authorized a 7% increase in the quarterly dividend at the end of 2025, marking the company’s 102nd year of continuous dividend payments and 40 consecutive years of annual increases.
Tariffs and inflation: exposure reduced, but elevated costs remain
McCormick executives discussed the evolving tariff environment, noting improvement but continued pressure on costs. Gabriel said the company’s gross annualized tariff exposure has been reduced by approximately 50% since the prior call, to about $70 million from $140 million. He said the incremental year-over-year cost impact of tariffs is expected to be about $50 million in 2026.
To address those costs, Gabriel said the company plans to mitigate “the vast majority” of tariff impact through productivity savings across the P&L, alternative sourcing, supply chain initiatives and “surgical pricing.” He added that the reduction in tariff rates is not expected to benefit the bottom line, as some mitigation efforts have been adjusted and the company is choosing to continue investing in the business.
On inflation, management said the company is entering 2026 with a high cost base. Gabriel said the fourth quarter represented the highest quarter of inflation flowing through the P&L, including broader commodity costs, tariffs and packaging. The company expects mid-single-digit inflation in 2026, with potential improvement later in the year.
2026 outlook: organic growth of 1% to 3%, margin expansion expected, ERP spend shifted forward
For 2026, McCormick guided for organic net sales growth of 1% to 3%, driven by sustained volume growth and a higher contribution from pricing across both segments compared with 2025. The company also expects the McCormick de Mexico transaction to contribute 11% to 13% to the top line, resulting in total constant currency sales growth of 12% to 16%.
Gabriel said gross margin is expected to expand for the full year, reflecting recovery from 2025 compression and supported by product mix, CCI cost savings and margin accretion from McCormick de Mexico, partially offset by anticipated inflation. SG&A benefits from cost savings are expected to be offset by increased investments, including higher brand marketing spend and digital investments.
McCormick projected adjusted operating income growth of 15% to 19% in constant currency. The company’s adjusted effective tax rate is expected to be approximately 24% in 2026, compared with 22% in 2025, reflecting discrete items that are not expected to repeat and a higher tax rate in Mexico. The company also expects higher net interest expense in 2026 tied to funding the McCormick de Mexico transaction, and it anticipates an expense from unconsolidated operations due to the elimination of the minority interest in McCormick de Mexico net income attributable to Grupo Herdez.
Adjusted EPS is projected to range from $3.05 to $3.13. Gabriel said first-quarter operating profit growth will not reflect a full quarter of McCormick de Mexico, and he indicated earnings should build as the year progresses.
On technology spending, executives said the company remains in a phased rollout of its ERP implementation. Gabriel said McCormick decided to consolidate the number of waves in the upcoming deployment phase to minimize execution risk, which shifts more expenses into 2026 while keeping overall program costs unchanged. He said costs should moderate in 2027 and further into 2028.
McCormick also announced board changes: Maritza Montiel and Tony Vernon will retire as directors at the annual meeting in April, and the company is adding Rick Dierker (President and CEO of Church & Dwight) and Gavin Hattersley (former President and CEO of Molson Coors) to the board.
About McCormick & Company, Incorporated (NYSE:MKC)
McCormick & Company, Incorporated (NYSE: MKC) is a global leader in spices, seasonings and flavor solutions. Headquartered in Hunt Valley, Maryland, the company traces its origins to the late 19th century and has grown into a major manufacturer and marketer of branded and private‑label flavor products for consumer, industrial and foodservice markets.
McCormick’s product portfolio includes pure spices and herbs, blended seasonings, marinades, rubs, sauces, extracts and specialty flavorings, along with ingredient systems and custom flavor development for manufacturers and foodservice operators.
