Colgate-Palmolive raises prices again and says the consumer is 'resilient'

By Ciara Linnane

Colgate posted stronger-than-expected third-quarter earnings as it raised prices an average 9.5%

Consumer-goods giant Colgate-Palmolive Co. posted better-than-expected third-quarter earnings early Friday, as it again raised prices by an average of 9.5% globally.

The parent to home, personal, oral and pet-care products has repeatedly raised prices over the last year to combat inflationary pressures, boosting its profit margins. Procter & Gamble (PG), which makes Crest toothpaste, also raised prices to boost margins in its earnings posted last week.

On a call with analysts, Chief Executive Noel Wallace said the company is still expecting several hundred million dollars of gross cost inflation for 2023, with some of the underlying trends shifting.

Agriculture prices have not eased, mostly impacting the company's Hill's pet food business.

"Offsetting that, some commodities such as resins and oils, have actually softened a bit, but when we look at the total, that basket is roughly still in-line, and while it hasn't gotten worse, it hasn't gotten a lot better," he said, according to a FactSet transcript.

The wild card is energy, which has been volatile this year. And some raw materials the company uses are specialty commodities like flavors and fragrances, which tend to see less volatility, he said.

"The consumer is still resilient," he said.

Colgate (CL) posted net income of $708 million, or 86 cents a share, for the quarter, up from $618 million, or 74 cents a share, in the year-earlier period. Adjusted per-share earnings also came to 86 cents, ahead of the 80 cent FactSet consensus.

Sales rose to $4.915 billion from $4.455 billion a year ago, above the $4.814 billion FactSet consensus.

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The company said its base business gross profit margin rose 140 basis points to 58.6%, and was up 190 bps, excluding a negative 50 bps impact from private label sales stemming from the previously disclosed acquisitions of its pet food business.

Colgate's leading position in toothpaste continued with a global market share of 41% in the year to date. In the manual toothbrush market, it retained a share of 31.5% in the year to date.

"This was our third quarter of sequential improvement in gross profit margin and our second quarter in a row delivering double-digit operating profit growth along with a double-digit increase in advertising spending," Wallace said in a statement.

See now: Want companies to lower their prices? Stop buying stuff from them.

By geography, sales rose 3.5% in North America, where it raised prices by 7.5%. Volumes fell 4%, however. In Latin America, sales rose 20%, after it raised prices by 9.5%. Volume rose 5.5%.

In Europe, sales were up 14.5% as it raised prices by 11%. Volumes in Europe fell 4%. In Asia Pacific, sales fell 4% after it raised prices by 5.5%. Volume fell by 7%.

In Africa/Eurasia, sales fell 7.5% after it raised prices by 11.5%. Volume fell by 4%.

Sales in the company's Hill's division rose 21.5% after it raised prices by 12%. Volume rose 9%.

The company said it now expects full-year sales to grow 6% to 8%, compared with prior guidance of 5% to 8%. It expects adjusted EPS growth in the high-single digits, up from prior guidance of the high end of mid-single digits.

The stock rose 1.3%, but is down 6% in the year to date, while the S&P 500 has gained 7.8%.

Read now: Procter & Gamble's earnings include a familiar refrain. The strong dollar is creating big headwinds.

-Ciara Linnane

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10-27-23 1028ET

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