Colgate (CL, Financial) announced better-than-expected third-quarter sales, driven by strong demand for high-priced products. The company reported Q3 sales of $5.03 billion, exceeding market expectations of $5 billion. Adjusted earnings per share reached $0.91, beating the anticipated $0.89.
Looking ahead, Colgate expects 2024 net sales to grow by 3% to 5%, up from the previous estimate of 2% to 5%. The adjusted profit growth rate is forecasted to be between 10% and 11%, surpassing the earlier expectation of 8% to 11%.
The rising cost of living has led consumers to prioritize spending on essential items, boosting sales for consumer goods companies like Colgate. Despite multiple price increases, demand for Colgate's oral care and hygiene products continues to rise. The company raised prices by 3.1% in Q3, while organic sales grew by 3.7%.
Colgate's profit margin improved by 260 basis points to 61.1% in Q3 as a result of price hikes, countering rising raw material and packaging costs. In contrast, competitor Kimberly-Clark (KMB) revised its annual sales forecast downward due to consumers opting for cheaper personal care products.
Colgate's CEO, Noel Wallace, emphasized the company's focus on brand development, expecting continued strong advertising investment for the remainder of the year. RBC analyst Nik Modi noted concerns in the pet category given economic pressures, though Colgate's impact is mitigated by its distribution advantage with Hills.
North American sales underperformed, overshadowing overall strong results. North America, which accounts for 20% of Colgate's total sales, saw a 1.9% decline in organic sales and a 9% drop in profits. Conversely, sales in Latin America surged by 14.2%, followed by 10.8% growth in Africa/Eurasia, 6.3% in Europe, and 6.1% in Asia Pacific.
As of this writing, Colgate shares have dipped nearly 3% in early trading.
