McCormick defies market plunge

No. 1 spice firm sees once-scorned stock rise as dot-coms fall

March 22, 2001|By Kristine Henry | Kristine Henry,SUN STAFF

Despite cold wind and rain, the 863 chairs at McCormick & Co.'s annual shareholder meeting were filled yesterday and dozens more people leaned against the walls to learn more about the fortunes of the world's largest spice company.

That might spell trouble for some companies in this bear market, but for Sparks-based McCormick it just meant louder applause.

Last year, "investors were looking for companies with explosive growth and rapid stock-price appreciation," Robert J. Lawless, chairman, president and chief executive told the crowd at the Hunt Valley Inn.

"Many well-run companies that actually made money were ignored by investors who thought that any dot-com would bring them a pot of gold at the end of the rainbow.

"It's a year later, and, for a number of those companies and many of those investors, that pot they found at the end of the rainbow is empty."

The bubble may have burst for many technology and other companies, but McCormick's shares grew nearly 50 percent during its 2000 fiscal year, rising from $26.44 to $39.30 at the end of February, and reaching above $41 earlier this month.

The company is also coming off a record year, with profits of $138 million on sales of $2.1 billion.

"A year ago you also heard me say something that I repeated to many people throughout the year," Lawless said. "If we continued to do the right things and maintain a high level of performance, our stock price would rise to reflect that performance. The company has delivered on that commitment."

To prove his point, Lawless played a clip from "Good Morning America," which had aired a week earlier, in which investors were advised on how to deal with the softening market. And what was the advice from the head of Ariel Capital Management?

Buy McCormick stock.

"Think about the fact that it doesn't matter if interest rates go up or down, people still buy spices for their food," said Mellody Hobson, president of Ariel, the nation's largest black-owned mutual fund company.

"The largest spice company in the world, [McCormick's] stock is up 55 percent over the last 12 months - again, during a time when the market is down. There's nothing technical about spices."

In fact, many food companies are gaining favor with investors who earlier wouldn't have given them a second glance. The Standard & Poor's index of mid-cap food concerns, of which McCormick is a member, is up 23 percent for the past 52 weeks. The large-cap food index is up 27 percent.

William L. Mills, a shareholder who worked in McCormick's distribution system for 20 years until his retirement in 1987, traveled from his home in Shrewsbury, Pa., to attend the meeting. He said he's been impressed with Lawless and his team.

"I think they're doing great; they finally got the stock going up," said Mills, 75. "It was stale for several years, but now that the rest are going down, McCormick's stock is rising."

In the company's first quarter, which ended Feb. 28, profit was up 9 percent to $26.6 million, or 38 cents a share, and sales increased 15 percent to $533.5 million.

The company's good fortunes also are boosting those of its leaders.

According to the proxy, Lawless earned a salary of $633,000 in 2000, along with performance-based bonuses of nearly $900,000 and stock worth $955,500.

"They're doing very well," said Ann Gurkin, an analyst at Davenport & Co. LLC in Richmond, Va., who gave the stock a "buy" rating. "They are capitalizing on flavor trends - new chips, sodas, meal kits. They are on top of that trend."

McCormick also declared a 20 cent quarterly dividend yesterday - the same amount as in the fourth quarter. Its shares closed at $40.02 yesterday, down 33 cents.

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