(Reuters) - McCormick (NYSE:MKC) on Tuesday raised its annual profit forecast as it expects higher prices for its spices and condiments to make up for slowing demand and a sluggish recovery in China
The Cholula hot sauce maker has been steadily raising prices to ease the hit from higher input costs stemming from supply chain issues that escalated last year.
However, the company's sales volumes declined 2% in the third quarter as record-high rentals and fuel prices forced consumers to look for cheaper options for items like spices and salad dressings.
Its shares were down 3% in premarket trading.
McCormick now expects annual adjusted earnings per share between $2.62 and $2.67 per share, compared with its previous forecast of $2.60 to $2.65 per share. The company reaffirmed its net sales forecast for the full year.
Gross margins in the reported quarter rose 150 basis points from a year earlier, driven by the company's higher pricing.
The Asia-Pacific region saw a drop in volumes in the consumer segment, which consists of sauces and recipe mixes, with a hit from lower consumption in China.
The company's net sales for the quarter ended August 31 rose 5.6% to $1.68 billion from a year earlier, but missed analysts' average estimate of $1.70 billion, as per LSEG data.
Its adjusted earnings per share of 65 cents for the quarter were in line with Wall Street expectations.