Financial Performance

Colgate Shares Drop 5% as Sales Disappoint

"The impression of stagnation ... has dogged Colgate and other consumer goods producers in the past year.”
Matthew HellerJanuary 26, 2018

Colgate-Palmolive shares tumbled on Friday after the consumer products giant reported another tough quarter, with sales coming in below analysts’ estimates and profit declining by nearly half.

Colgate has been spending more on advertising and cutting prices to stimulate demand. But for the fourth quarter, sales rose 4.5% to $3.9 billion, missing the average analyst estimate of $3.92 billion.

Organic sales growth of above 2% was below Wells Fargo’s consensus of 3% to 3.4%.

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Net income nearly halved to $323 million, or 37 cents per share, largely due to a $275 million charge from changes to the U.S. tax code. Profit, excluding charges, was 75 cents per share, in line with analysts’ estimates.

Colgate said it expects sales growth in 2018 but as Reuters reports, “the forecast did nothing to shake the impression of stagnation that has dogged Colgate and other consumer goods producers in the past year.”

In trading Friday, the company’s shares dropped 5.4% to $73.10, setting them up for their worst day in more than seven years. “Overall we view Colgate’s results as disappointing, with the company missing on organic growth for the fifth quarter in a row,” Deutsche Bank analyst Steve Powers said.

In most markets, Colgate had lowered prices as much as 2% to drive sales and volume. Its worldwide advertising spending rose 24% to $369 million in the fourth quarter, the company said.

But the increased ad spend has weighed on operating profit, which was down nearly 3% overall and in all of Colgate’s global geographical segments with the exception of Europe. Gross margins fell to 59.8% from 60.4% a year earlier amid higher costs for raw materials and packaging.

“As we look ahead to 2018, while uncertainty in global markets and category growth worldwide remain challenging, we are maintaining our heightened focus on brand building and increased productivity,” Colgate CEO Ian Cook said in a news release.