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GuruFocus has detected 5 Warning Signs with McCormick & Co Inc $MKC.
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McCormick & Co Inc (NYSE:MKC)
Gross Profit
$1,840 Mil (TTM As of Feb. 2017)

McCormick & Co Inc's gross profit for the three months ended in Feb. 2017 was $413 Mil. McCormick & Co Inc's gross profit for the trailing twelve months (TTM) ended in Feb. 2017 was $1,840 Mil.

Gross Margin is calculated as gross profit divided by its revenue. McCormick & Co Inc's gross profit for the three months ended in Feb. 2017 was $413 Mil. McCormick & Co Inc's revenue for the three months ended in Feb. 2017 was $1,044 Mil. Therefore, McCormick & Co Inc's Gross Margin for the quarter that ended in Feb. 2017 was 39.57%.

McCormick & Co Inc had a gross margin of 39.57% for the quarter that ended in Feb. 2017 => Competition eroding margins

During the past 13 years, the highest Gross Margin of McCormick & Co Inc was 42.49%. The lowest was 40.30%. And the median was 40.83%.


Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

McCormick & Co Inc's Gross Profit for the fiscal year that ended in Nov. 2016 is calculated as

Gross Profit (A: Nov. 2016 )=Revenue - Cost of Goods Sold
=4411.5 - 2579.8
=1,832

McCormick & Co Inc's Gross Profit for the quarter that ended in Feb. 2017 is calculated as

Gross Profit (Q: Feb. 2017 )=Revenue - Cost of Goods Sold
=1043.7 - 630.7
=413

McCormick & Co Inc Gross Profit for the trailing twelve months (TTM) ended in Feb. 2017 was 432.8 (May. 2016 ) + 453.9 (Aug. 2016 ) + 540 (Nov. 2016 ) + 413 (Feb. 2017 ) = $1,840 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

McCormick & Co Inc's Gross Margin for the quarter that ended in Feb. 2017 is calculated as

Gross Margin (Q: Feb. 2017 )=Gross Profit (Q: Feb. 2017 ) / Revenue (Q: Feb. 2017 )
=(Revenue - Cost of Goods Sold) / Revenue
=413 / 1043.7
=39.57 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.


Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

McCormick & Co Inc had a gross margin of 39.57% for the quarter that ended in Feb. 2017 => Competition eroding margins


Related Terms

Cost of Goods Sold, Gross Margin, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

McCormick & Co Inc Annual Data

Nov07Nov08Nov09Nov10Nov11Nov12Nov13Nov14Nov15Nov16
Gross_Profit 1,1921,2881,3271,4181,5231,6181,6661,7301,7371,832

McCormick & Co Inc Quarterly Data

Nov14Feb15May15Aug15Nov15Feb16May16Aug16Nov16Feb17
Gross_Profit 506390404422522405433454540413
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