Colgate-Palmolive Co. Q3 FY2024 earnings call

• Strong top-line and bottom-line performance with volume-led organic sales growth in all six divisions for two quarters.
• Strategy of impactful innovation, increased advertising, and scaling capabilities paying off.
• North America had shipment timing and skin health impacts but Hill's was strong with mid-single digit volume growth and margin performance.
• Europe had strong volume growth, high market shares, and strong advertising improving brand health.
• Emerging markets had strong organic sales growth, with some markets like Brazil, India, and Mexico performing well.
• Stan Sutula noted gross profit margin was better than expected, with raw material inflation and benefit from volume and productivity.

Colgate-Palmolive saw volume growth in all six divisions for the second consecutive quarter, with 3% growth in developed markets and 4.6% growth in emerging markets. In North America, while there were shipment timing issues and some softness, Hill's performed exceptionally strong with mid-single digit volume growth and strong margin performance. Europe had terrific volume growth, strong market shares, and high gross margins. Emerging markets had strong organic sales growth, though some was driven by pricing to offset FX pressures.

No specific quarter-by-quarter guidance provided, but mentioned being positioned for consistent growth despite economic, geopolitical, and market challenges. The company feels it is well-positioned to deliver organic sales growth in line with long-term targets despite difficult comparisons.

• Volatility from economic, geopolitical, and other factors that could impact performance.
• Softness in certain markets like Europe and challenges in the skin care segment.
• Foreign exchange impacts affecting emerging markets' net growth.

Q: Drill down into North America pricing, volume, and Hill's performance?

A: North America pricing was in line with Q2, volume was slightly softer due to shipment timing and skin health impacts. Hill's had strong volume, mid-single digit growth, and strong margin performance with ability to reinvest in category growth.

Q: Perspective on next year's business acceleration?

A: Focus on elevating and accelerating innovation, particularly H2 and H3, with strong new product grid for '25 and '26, and reinvesting behind the business to drive growth.

Q: Europe's strong results and future outlook?

A: Europe had strong volume growth, high market shares, and strong advertising, but not immune to European market softness, though business is in good shape.

Q: Emerging markets organic sales growth driven by pricing?

A: Emerging market numbers were strong, even ex-Argentina, with positive volume and pricing, and larger markets like Brazil, India, and Mexico performing well.

Q: Gross margin development and reinvestment?

A: Gross profit margin was better than expected, with raw material inflation, benefit from volume and productivity, and pricing contribution expected to mitigate over time, with focus on funding growth and productivity to balance P&L.

Q: Advertising and reinvestment spending philosophy?

A: Focus on strategic spending for best ROI, using analytics and AI to improve digital impact, with geographic assessment of returns and flexibility to move spending for better ROI.

Q: Latin America performance and pricing strategy?

A: Latin America had strong performance against tough comps, with volume increasing for four consecutive quarters, but some choppiness in Mexico post-elections, and ability to take pricing to offset FX impacts.

Q: Affordability and promotional plans?

A: Focus on innovation and premiumization across price tiers, thoughtful promotional cadence and analytics to drive category growth, with normalized promotional rates post-COVID.

Q: Oral Care success drivers and China performance?

A: Oral Care success driven by premiumization, innovation, and brand health, with Colgate Total rolling out in Latin America. China business performed well with premiumization, but Hawley & Hazel has room for growth with revised go-to-market approach.

Q: Exit rate of organic sales growth and Hill's capacity?

A: No specific quarter-by-quarter guidance, but company feels good about underlying health. Hill's capacity allows flexibility in supply chain and expansion into higher growth segments.

Q: Gross profit dollar growth vs gross margin percentage?

A: Both gross margin percent and dollars are important, with focus on driving gross margin dollars to invest in the business, with pricing less of a benefit, volume a help, and productivity a driver moving forward.

Q: North America shipment timing and eCommerce pullback?

A: Some shipments pushed from Q3 to Q4 due to network disruptions, eCommerce pullback on skin health business was inventory adjustments. Macro dynamics in North America are more normalized.

Q: Skin Care trends and strategy?

A: Skin care had sluggishness in some markets, but new talent and centralized strategy to drive global decisions, with long-term growth potential despite short-term issues.

Q: U.S. Oral Care share performance and competitors?

A: U.S. Oral Care shares are roughly flat, with focus on premiumization and innovation, addressing retail environment sluggishness, and strong toothbrush business.

Q: Channel mix change in regions and premiumization?

A: Focus on expanding into new retail formats like club stores and discount formats, working with retailers to drive category growth across all channels, and leveraging new retail environments for premiumization.