Hot sauce maker McCormick forecasts weak 2024 on falling sales volumes Reuters via

Hot sauce maker McCormick forecasts weak 2024 on falling sales volumes Reuters via

© Reuters. FILE PHOTO: McCormick & Company spices are seen on display in a store in Manhattan, New York City, U.S., March 29, 2022. REUTERS/Andrew Kelly/File Photo

(Reuters) – McCormick (NYSE:) on Thursday forecast its annual sales and profit below Wall Street estimates, hit by lower sales volumes as consumers traded down to cheaper private label alternatives for spices and seasonings amid a cost-of-living crisis.

The aggressive price increases by the Cholula hot sauce maker have hit consumers’ appetite for its key brands such as Zatarain’s, French’s and Frank’s Redhot.

Its fourth-quarter volumes declined 3% compared with last year.

The company took a “cautious view” in its forecast, citing uncertainty in demand as people increasingly stick to a budget when shopping. It expects volumes to take the hit from its strategy to discontinue its low-margin business in 2024.

Shares of the company were down 2% in premarket trading.

“The main culprit, not surprisingly, is weaker volume trends in both its Consumer and Flavor Solutions segments stemming from a pressured consumer exhibiting more value-seeking behavior,” said Andrew Lazar, an analyst with Barclays.

However, the company’s quarterly gross profit margins expanded by 320 basis points, as a 5% rise in prices helped offset the still-high input costs.

McCormick reported a 3% rise in sales to $1.75 billion for the three months ended Nov. 30, missing analysts’ estimates of 5.8% growth to $1.79 billion, as per LSEG data.

But its adjusted profit per share came in at 85 cents, compared with analysts’ estimates of 79 cents, as per LSEG data.

McCormick projects its 2024 adjusted earnings per share to range between $2.80 and $2.85, compared with estimates of $2.87 per share.

It expects full-year sales to be flat or decline by 2% from a year earlier. Analysts were expecting a growth of 2.6% in annual sales.

“The uncertainty in the consumer environment in 2024 leads to a more cautious view in our outlook,” said CEO Brendan Foley.