Q3 2024 Earnings Summary
- Strong performance in emerging markets with positive volume growth and pricing, particularly in key markets like Brazil, India, and Mexico; these markets are expected to drive future growth due to per capita and premiumization opportunities.
- Successful innovation and premiumization in Oral Care, driven by new product launches such as Colgate Total relaunch in Latin America and technology improvements in Max Fresh across India and Southeast Asia, leading to market share gains and sustained volume growth.
- Significant investments in advertising and capabilities have led to improved brand health and record-high market shares, notably in Europe, with Oral Care shares at record high levels and strong volume-led top-line growth.
- Colgate-Palmolive is experiencing disruptions and sales challenges in North America, including shipment timing issues due to network disruptions and e-commerce weaknesses in the Skin Health business, with big online retailers pulling back on orders possibly due to inventory adjustments.
- There are signs of "choppiness" and slowdown in key emerging markets like Mexico and Latin America, with Colgate acknowledging economic and political volatility, foreign exchange impacts, and the need to watch these markets carefully. ,
- Concerns about consumer affordability and increased promotional activity suggest potential pressures on margins, particularly in North America, as Colgate navigates higher promotional redemption rates and normalizing coupon usage to maintain or grow market share. ,
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
EPS | Q3 2024 | Focus on driving consistent EPS growth | 0.90Vs. 0.85 in Q3 2023 | Met |
Gross Margin | Q3 2024 | Expect second-half gross margin to be up YoY, similar to Q2 levels | Derived from Revenue of 5,032And COGS of 1,958→ ~61.0% (vs. ~58.6% in Q3 2023 using Revenue 4,915, COGS 2,038) | Met |
Cash Flow | Q3 2024 | Leverage strong cash flow for investments, dividends, and share repurchases | Net change in cash: 124(vs. 4 in Q3 2023); Dividends: 408; Share repurchases: 295 | Met |
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Gross Margin Outlook
Q: How will gross margins develop over next 12 months?
A: Gross profit margin was better than expected, up 270 basis points year-on-year and improved sequentially. We continue to see raw material inflation and tougher comparisons ahead. Teams have driven productivity to help margins, with volume growth aiding overhead absorption. Pricing contribution will mitigate over time, but funding growth combined with revenue growth management will balance the P&L. We focus on both gross margin percentage and dollars to invest back in the business and drive top and bottom-line growth. -
Advertising Investment Strategy
Q: Can you discuss your philosophy on advertising spend and ROI?
A: Our strategy is to build flexibility to reinvest in our brands, driving penetration and brand health. We assess ROI internally and aim to drive volume growth and broad-based penetration. We evaluate spending geographically to maximize returns, moving funds where we see better ROI. We're improving our analytics, including using AI, to enhance digital impact and efficiency. We'll keep investing as long as we see top-line and penetration growth. -
Latin America Outlook
Q: What's the outlook for Latin America, especially Mexico and Brazil?
A: Latin America had a strong quarter despite tougher volume comps. We expected some slowdown in organic sales growth, which is in line with expectations. Volume has increased sequentially for four consecutive quarters. In Mexico, post-election choppiness may be normalization; we'll watch spending carefully. We've relaunched Colgate Total in Latin America to drive premiumization. We believe we can take more pricing if foreign exchange moves against us, but we're not immune to economic challenges. -
Emerging Markets Performance
Q: How are emerging markets contributing to growth?
A: Emerging market numbers were terrific, with positive volume and pricing even excluding Argentina. Our larger markets like Brazil, India, and Mexico are performing strongly. There are continued opportunities for per capita consumption and premiumization. We've refocused on fundamentals like household penetration and improving gross margins. While we're not immune to volatility and negative exchange rates, the underlying performance is where we'd like it. -
Hill's Pet Nutrition Growth
Q: Can you comment on Hill's performance and expansion plans?
A: Hill's had a strong quarter with mid-single-digit volume growth excluding private label impact. We're reinvesting margin into driving category growth. We're gaining market share and are the fastest-growing global brand in pet specialty stores. Increased capacity allows expansion into higher growth segments like wet pet food. The supply chain team is optimizing the network, giving us more flexibility to pursue international growth opportunities in 2025. -
Company's Strong Performance
Q: What factors are driving your strong performance globally?
A: Consistency in focused categories and identifying growth opportunities drive our performance. We're building capabilities in innovation, digital, advertising ROI, and data-driven decision-making. We took deliberate pricing over the last three years to invest behind our brands. Our brand health and equities are in a good place. In Oral Care, focus on premiumization and innovation in whitening adjacencies is paying off. -
North America Outlook
Q: How is North America performing, and what are the challenges?
A: North America came in as expected, with slight softness in volume due to shipment timing and e-commerce impacts. Shipment timing issues will move into Q4 and aren't systemic. E-commerce softness was in Skin Health, with big online retailers pulling back orders, likely inventory adjustments. We're focusing on setting up for a strong 2025 with robust innovation plans. Macro dynamics are stabilizing, with promotional activity normalizing but slightly higher coupon redemption rates. -
Europe Performance
Q: What's driving strong results in Europe, and what do you expect ahead?
A: Europe had a great quarter with terrific volume growth and some pricing gains. Significant investment has led to sustained top-line growth and improved brand health. Oral Care shares are at record high levels. We have stronger market shares and good penetration as we move into 2025. While not immune to market challenges, the business has high gross margins and positive market share trends. -
Skin Care Strategy
Q: Can you expand on your Skin Care performance and strategy?
A: The skin sector has seen sluggishness, especially in Asia and Europe. We're rethinking the business, bringing in outside talent with over 20 years of experience from L'Oréal. The organization is now centralized in the U.S. to drive global decisions and make deliberate investment choices. We cleaned up unsustainable market expansion opportunities. Despite short-term issues, we believe our long-term strategy will return us to sustained growth. -
U.S. Oral Care Performance
Q: What's happening with U.S. Oral Care market share?
A: Overall shares are roughly flat, down 20 basis points on toothpaste and up on toothbrushes. We've seen good performance in untracked channels where we've refocused efforts. We're dialing up our innovation strategy and addressing the premiumization of the business. The toothbrush business continues to perform very well. We have plans for major core relaunches in 2025 to drive stronger success.