Colgate-Palmolive (CL) Q3 2026 Earnings: Gross Margin Rises as North America Slips

Colgate-Palmolive's Q3 2026 earnings, released on October 30, 2026 for the quarter ended September 30, came in ahead of prior guidance, while North America weakened further [1][2][3]. Three questions framed the quarter: whether productivity savings could hold gross margin and rising advertising as tariff refunds disappeared before costs peaked; whether the North America decline reflected retailer destocking or share loss; and whether Hill's could restore volume after exiting private label. The gross margin question was confirmed, and the company raised its full-year gross margin outlook from "roughly flat" to "up" [1]. Management itself ruled out destocking in North America, which now looks more like share loss and volume lost after price increases [3]. Hill's organic sales growth accelerated to 5.7% and volume turned positive, although advertising spending cut its operating margin by 20 basis points [2].

Colgate-Palmolive is the global share leader in toothpaste and manual toothbrushes, and it also sells personal care, home care and Hill's pet nutrition products [4]. The company sells high-frequency household products at brand premiums to retailers, veterinarians and eCommerce channels, uses productivity savings and pricing to offset raw material inflation, and reinvests the extra gross profit in advertising. Third-quarter net sales were $5.369 billion, up 4.6%, and organic sales grew 3.6% [1].

Productivity savings held gross margin up while costs stayed high

The third-quarter margin expansion came after tariff refunds had largely disappeared. GAAP gross margin was 60.2%, compared with 59.4% a year earlier, and 60.3% excluding restructuring charges, up 90 basis points [2]. In the second quarter, gross margin rose 140 basis points year over year, partly helped by tariff refunds [5]. Management said tariff refunds were insignificant in the third quarter and that it does not expect further refunds in the fourth quarter [3].

Productivity savings almost fully offset higher raw material costs. The 10-Q attributes the margin change to funding-the-growth savings of 290 basis points, pricing of 80 basis points and mix of 20 basis points, partly offset by raw and packaging material costs of 300 basis points [2].

Most of the extra gross profit went into advertising, and operating margin still rose slightly. Advertising spending was $775 million, up 15%, or 14.4% of net sales versus 13.1% a year earlier [2]. Operating margin excluding restructuring charges was 20.8%, up 20 basis points, and Base Business EPS was $0.97, up 7% [1][2]. The company raised its full-year Base Business EPS growth guidance from mid-single digits to 5% to 7% [1].

This confirmation covers only the third quarter. The CFO said fourth-quarter commodity inflation is likely to be the highest of the year on a year-over-year basis, logistics costs will also peak in that quarter, and costs remain a headwind into 2027 [3].

North America volume kept falling without destocking

Pricing drove most of the narrower organic decline in North America. Third-quarter North America net sales were $905 million, down 1.7%, and organic sales fell 1.6%, better than the 3.0% decline in the second quarter [2]. Volume still fell 3.7%, close to the second quarter's 3.9% decline, while net selling prices rose 2.2% [1]. The decline came from U.S. body wash, underarm protection and toothpaste [2].

Management's explanation has changed since the second quarter. In the second quarter, the CEO said U.S. consumer consumption was running ahead of shipments because retailers were reducing inventory [6]. This quarter, when an analyst asked whether volume reflected destocking or elasticity to new pricing, the CEO said the company did not see any meaningful inventory destocking [3]. The 10-Q shows that year-to-date toothpaste share in North America fell from a year earlier [2]. These facts fit share loss or volume lost to price increases better than destocking, although management did not quantify the split.

North America profitability declined sharply. Third-quarter North America operating profit was $177 million, down 11%, and operating margin was 19.5%, down 210 basis points [2]. Higher raw material costs cut North America gross margin by 520 basis points, far more than the 300 basis points company-wide, and productivity savings of 350 basis points did not cover them; advertising and overhead raised the expense ratio by another 160 basis points [2].

The timeline for a recovery has moved out. The CEO described the U.S. as a turnaround that will take time, built on premium innovation, marketing and changes to the sales organization, and expects it to show up as a better portfolio in 2027 [3].

Conclusion

The quarter strengthens the case that Colgate-Palmolive can convert sales into profit: productivity savings and pricing absorbed higher raw material costs after refunds ended, and operating profit and EPS still grew after the extra gross profit was reinvested in advertising [1][2]. Growth came mainly from emerging markets and Hill's, and North America was the only division where both sales and profit fell [1]. Free cash flow before dividends for the first nine months was $2.513 billion, up 7% [1]. The fourth quarter is the next test: if gross margin still expands year over year in the peak-cost quarter, the confirmation becomes more complete; if North America volume keeps falling near 4% while pricing stays positive, the case that price increases are costing volume gets stronger [3].

Sources

[1] CL 8-K filed 2026-10-30 · 3Q26 earnings release, 2026-10-30, Colgate-Palmolive, 8-K earnings release, https://www.sec.gov/Archives/edgar/data/21665/000002166526000047/q32026pressreleasetables.htm

[2] CL 10-Q filed 2026-10-30 · 3Q26, 2026-10-30, Colgate-Palmolive, 10-Q quarterly report, https://www.sec.gov/Archives/edgar/data/21665/000002166526000048/cl-20260930.htm

[3] CL Q3 2026 earnings call 2026-10-30, 2026-10-30, Colgate-Palmolive, earnings call, https://investor.colgatepalmolive.com/events-and-presentations

[4] CL 10-K filed 2026-02-23 · business description and category mix, 2026-02-23, Colgate-Palmolive, 10-K, https://www.sec.gov/Archives/edgar/data/21665/000002166526000006/cl-20251231.htm

[5] CL 10-Q filed 2026-07-31 · 2Q26 gross margin bridge, 2026-07-31, Colgate-Palmolive, 10-Q, https://www.sec.gov/Archives/edgar/data/21665/000002166526000042/cl-20260630.htm

[6] CL Q2 2026 earnings call 2026-07-31 · CEO on U.S. shipments, consumption and price gaps, 2026-07-31, Colgate-Palmolive, earnings-call, https://www.investing.com/news/transcripts/earnings-call-transcript-colgatepalmolive-tops-q2-2026-eps-view-as-sales-meet-forecasts-93CH-4828573