McCormick now expects cost inflation of 6% to 7% for fiscal 2026, up from a mid-single-digit increase, CFO Marcos Gabriel said on the company’s third-quarter earnings call. The spice maker reaffirmed its sales and earnings outlook for the year, including adjusted earnings of $3.05 to $3.13 a share.
The company faces more packaging and freight costs in the fourth quarter, Gabriel told analysts. He attributed the freight increase mainly to fuel and to capacity constraints in the US. “We’re seeing more impacts on freight specifically,” he said. McCormick expects rising commodity and freight costs, along with commercial investments in its Americas consumer business, to compress fourth-quarter gross margin from a year earlier.
Operating margin in the consumer segment was flat in the third quarter. Gabriel said gains from the McCormick de Mexico acquisition and productivity work were offset by inflation, brand marketing, higher logistics costs from the Middle East conflict and tighter freight capacity “resulting from recent changes to US federal regulations.”
McCormick kept its forecast for gross margin to expand 100 to 120 basis points this year and now expects the high end. Tariff refunds account for about 35 basis points of that, Gabriel said. Third-quarter adjusted gross margin rose 180 basis points, with pricing, cost savings and the Mexico acquisition partly offset by higher freight costs.
McCormick is also managing a supply constraint on one type of packaging material in its Americas consumer business. CEO Brendan Foley said it could cut total fourth-quarter volume growth by up to 1 point. The company plans to switch to other packaging formats.
Conagra said last week that its transportation costs are inflating at about double the rate it planned. General Mills CFO Kofi Bruce expects inflation of about 6% in its fiscal fourth quarter and named freight and fuel among its cost pressures. Lamb Weston said this week that its freight, edible oil, packaging and ingredient costs rose substantially.
McCormick expects inflation to continue into fiscal 2027, which begins Dec. 1. It will give a first outlook for that year when it reports fourth-quarter results in January.
