Colgate-Palmolive Company Q3 FY2025 earnings call

• Implemented a new innovation model with additional resources and AI to drive science-based innovation across price tiers.
• Focused on omnichannel demand generation, upskilling the commercial organization to be more consumer-centric.
• Scaled capabilities in digital, data, analytics, and AI, accelerating investments in areas like RGM and agentic AI for efficiency and process disruption.
• Utilized the strategic growth and productivity program to fund investments, drive savings, and facilitate organizational change for flexibility and efficiency.
• Hill's pet food showed broad-based strength despite category slowdown, with growth in wet, dry, treats, cat, dog, prescription diet, and science diet segments.

Emerging markets account for nearly 50% of Colgate-Palmolive's exposure. In North America, categories were slightly weaker in Q3 but showed sequential improvement, excluding skin health. Europe had varying performance: Western Europe was strong, while Eastern Europe, particularly Poland, had incremental weakness. Latin America was mixed, with Mexico and Brazil up mid-single digits, but Colombia and Central America softer due to economic and political challenges. In China, Colgate performed well via e-commerce and innovation, with mid-single digit growth, but Darlie faced weakness in premium e-commerce. India was softer but expected to improve, with GST creating short-term headwinds. Hill's pet food had a soft category but saw growth in segments like cat, wet, and small paws, gaining share across channels.

• Full-year organic sales growth is expected to be roughly in line with the year-to-date performance (around 1.2%).
• Q4 is anticipated to improve due to factors like the relaunch of Colgate Total improving, destocking levels leveling out, and private label impact easing.
• Net sales growth is expected to be in the low single-digit range, and EPS guidance is maintained.

• Consumer uncertainty, tariffs, geopolitics, and high cost inflation pressuring sales and profit growth.
• Raw material inflation, particularly in fats and oils, impacting gross margin.
• Trade destocking in certain markets and products.
• Private label impact in the pet food segment.
• FX fluctuations affecting financial results.
• Challenges in specific markets like China (Darlie's premium e-commerce weakness), India (GST headwinds), and Latin America (economic/political volatility affecting consumption).

Q: Dara Mohsenian asked about category softness lingering and Hill's market share performance.

A: Noel Wallace responded that the market is volatile, with August being difficult but September shipments improving slightly. North America consumer remains weak with higher couponing and Hispanic traffic down. Europe has varying performance, and China has mixed results with Colgate doing well but Darlie facing weakness. Hill's category is soft but has growth in faster segments like cat and wet.

Q: Peter Grom inquired about Latin America oral care formula change impact.

A: Noel Wallace explained that Colgate Total relaunch had strong start but formula adjustment due to consumer complaints led to market share impact, with around 150 basis points negative organic in Latin America and 40-50 basis points gross margin hit, but shares are starting to improve.

Q: Filippo Falorni asked about India's GST impact and local competition.

A: Noel Wallace stated India was softer with difficult comparisons, but comps get easier, and there are plans to improve with better innovation and premiumization in urban trade.

Q: Robert Ottenstein followed up on Latin America Colgate Total market share and drugstore channel in U.S.

A: Noel Wallace said Colgate Total market shares are improving, and in the U.S., the drugstore channel is challenged but efforts are underway to drive traffic back using revenue growth management and premium innovation.

Q: Bonnie Herzog asked about implied Q4 organic sales growth.

A: Stan Sutula responded that Q4 is expected to improve due to factors like Colgate Total relaunch improvement, destocking levels leveling out, and private label impact easing, with full-year organic growth roughly in line with year-to-date.