McCormick & Company has reported financial results for the first quarter, which ended Feb. 29, 2020. Sales declined 2% in the first quarter from the same period a year ago, and in constant currency, sales declined 1%. Both comparisons include a reduction in sales growth of 3%, compared with the first quarter of 2019, related to the impact of the COVID-19 outbreak in China.

Operating income was $194 million in the first quarter compared with $197 million for Q1 2019. Adjusted operating income was $195 million, a decrease of 2% from 2019’s first-quarter $199 million, and includes a 10% unfavorable impact from lower China operating income related to the impact of COVID-19.

“Our first-quarter results were significantly impacted by the extraordinary disruption in China’s consumption related to the COVID-19 outbreak,” said Lawrence Kurzius, chairman, president, and CEO, in a press release. “Lower operating results from this impact offset the otherwise solid sales, operating income, and earnings per share growth we delivered in the first quarter driven by the successful execution of our strategies and engagement of employees. We are confident our underlying foundation remains strong.”

McCormick previously issued its fiscal 2020 guidance on Jan. 28, 2020, which did not include the impact of COVID-19. Due to the rapidly evolving situation and the high degree of uncertainty relating to the impacts of COVID-19, including on consumer demand across all channels and the global economy, the company is withdrawing its fiscal 2020 guidance.

The company believes there will be a shift in consumer demand due to COVID-19 but can’t predict the duration and extent of the impact. In the consumer segment, the company is expecting an overall increase in consumer demand during periods of pantry stocking, followed by increased cooking at home. In the flavor solutions segment, the company is expecting increased customer demand from packaged food companies and is expecting declines in demand from restaurant and other foodservice customers. While the first quarter China impact of COVID-19 was significant to results, the company believes it can’t extrapolate the overall impact for the rest of the company due to differences related to lockdown durations and pantry stocking as well as the differing percentages of foodservice business and other dynamics in each region.

“The global impact of COVID-19 continues to evolve daily,” said Kurzius. “We are well-positioned given our solid financial results, stable cash generation, and access to liquidity, and have rapidly implemented appropriate mitigation plans. Our immediate priorities include ensuring the health and safety of our employees, maintaining the quality and integrity of our products, and keeping our brands and our customers’ brands in supply. We plan to emerge strong from this event through driving our long-term strategies and reacting with agility to changing consumer behavior and capitalizing on opportunities from our relative strength.”

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