Colgate-Palmolive Company (CL) Earnings

Management highlights

• Strong start to the year with top and bottom line growth, organic sales growth accelerated, especially in Asia Pacific. • Emphasized strength of 2030 strategic plan, flexibility in P&L to deliver short-term results and build long-term. • Investments in advertising through omni-channel demand generation model to keep brands top of mind. • Built capabilities in innovation, data, analytics, digital, AI and will continue to invest. • Announced update to strategic growth and productivity program with annualized savings target of 200 to 300 million, majority in 2027 and 2028, savings to fund 2030 strategy and drive EPS growth. • Reducing organizational complexity to build more agile company. • Holly and Hazel business making improvements in execution, accelerating innovation. • Latin America executing well with strong omni-demand generation, AI use, RGM and in-store execution. • North America has strategies in place for reset including brand interventions, innovation, RGM, better execution and promotion strategy.

Guidance

• Maintained organic sales growth guidance in the one to four range. • Built into guidance the impact of significant raw material and packaging costs, expecting gross margin to be more pressured for the year. • Assumed oil at roughly $110 on average for the remainder of the year, with additional raw materials and logistics impact of roughly $300 million (two-thirds raw materials, one-third logistics). • Committed to offsetting cost pressures through RGM productivity across P&L, pricing through innovation, and productivity programs outside of SGPP. • Confident in current EPS range of low to mid-single digits.

Segment performance

Organic sales growth accelerated from the fourth quarter, driven by improved volume performance, particularly in Asia Pacific. Excluding the impact of private label pet food exit, grew both volume and pricing in all four categories and four of five divisions. Sales growth led by emerging markets. In Asia Pacific, growth strong with China and India being key drivers. Latin America executed well with mid-single-digit growth, Mexico and Brazil driving. Hills business had solid organic growth, excluding private label, with volume up 1%, some segments like prescription diet growing, but dry dog category slipping. North America margins pressured by tariffs and higher raw material costs, but year-on-year impact expected to lessen as tariffs normalize and productivity drives margin improvement.

Risks & headwinds

• Uncertainty in the rest of 2026 regarding oil prices, interest rates, and consumer response. • Cost inflation, including significant increases in raw material and packaging costs impacting gross margin. • Competitive environment in certain markets, such as North America auto care business with competitors using couponing. • Impact of tariffs on North America's gross profit margin, lapping a high margin quarter last year with no incremental tariffs. • Potential impact of inflation on consumer behavior and spending in emerging markets and other regions.

Analyst Q&A

• Q: Dara Mosenian with Morgan Stanley asked about volume mix, particularly in emerging markets and North America, sustainability of volume strength, and plans for North America improvement.

  A: Noel Wallace responded on volume growth acceleration, emerging markets' growth drivers and Holly and Hazel's progress, and North America's strategies including brand interventions, innovation, etc.

• Q: Filippo Falorni with Citi asked about cost inflation embedded in guidance, oil assumptions, and offsets.

  A: Noel and Stan Sutula discussed assumptions on oil at around 110, additional raw materials and logistics impact of $300 million, and RGM productivity as offset.

• Q: Bonnie Herzog with Goldman Sachs asked about gross margin headwinds, incremental pricing, and EPS flexibility.

  A: Noel and Stan discussed gross margin pressure due to cost inflation, pricing through innovation, and confidence in EPS range.

• Q: Peter Galbo with Bank of America asked about APAC growth, particularly India, and GST impact.

  A: Noel talked about Asia Pacific's strong growth, India's role, Holly and Hazel's innovation and execution.

• Q: Peter Grom with UBS asked about Latin America's category growth, market share, and momentum continuation.

  A: Noel discussed Latin America's strong execution, innovation, and confidence in continued growth.

• Q: Andrea Teixeira with J.P. Morgan asked about U.S. auto care business competitiveness and market share improvement.

  A: Noel mentioned sequential improvement planned, innovation execution, and competitive environment.

• Q: Chris Carey with Wells Fargo Securities asked about pricing in emerging markets and North America margin context.

  A: Noel talked about watching consumer, pricing through innovation, and North America's margin pressures and drivers.

• Q: Robert Moscow with T.D. Cowan asked about SGPP program expansion.

  A: Noel and Stan discussed program expansion due to strong execution and identified additional opportunities.

• Q: Olivia Tong with Raymond James asked about brand spend strategy and promotional environment.

  A: Noel discussed brand spend strategy focused on innovation, omni-demand generation, and ROI in digital advertising.

• Q: Robert Ottenstein with Evercore ISI asked about Hills business.

  A: Noel talked about Hills' solid growth, segments, innovation, and supply chain performance.

• Q: Michael Avery with Piper Sandler asked about Hills consumer and risk from higher gas prices.

  A: Noel discussed Hills' focus on super premium, real value-added innovation, and watching inflation impact on consumer.