By Anuja Bharat Mistry
(Reuters) -Colgate-Palmolive cut its annual sales forecast on Friday, in a sign that rising economic uncertainty is reducing consumer spending on higher-priced items, even in essential categories such as oral and personal care.
The maker of Colgate toothpaste and Palmolive soap has been raising prices in most markets to counter the impact of U.S. tariffs, pushing shoppers towards cheaper alternatives.
While prices rose 2.3% during the third quarter, volumes fell 1.9%, compared to a year ago.
“Consumers still remain relatively weak across North America,” said CEO Noel Wallace during the post-earnings call, adding that discount seeking is up, Hispanic traffic remains down and the U.S. household products category performance in September was softer than expected and weaker than prior months.
The company said it has also been taking a hit in Canada from the “Buy Canadian” movement, along with weaker demand in other regions, including Colombia, Central America as well as India.
Colgate said it continues to expect an impact of about $75 million from tariff-related costs.
The company imports raw materials such as vitamins and amino acids and makes toothpaste for the U.S. market in Mexico.
To fend off stiff competition from cheaper private-label brands, Colgate has ramped up its advertising and marketing efforts.
The company’s quarterly adjusted gross profit margin decreased 190 basis points to 59.4% due to a hit from soaring costs related to raw and packaging materials.
Peer Procter & Gamble reported an upbeat quarter as consumers continued to pay higher prices for its beauty and hair-care products.
Colgate now expects annual organic sales growth to be 1% to 2%, after estimating it to be at the low end of a 2% to 4% rise.
Shares of the company were marginally down in morning trading.
“Given the stock underperformance, we think investors were already bracing for a reduction in guidance,” said Andrea Teixeira, analyst with J.P.Morgan.
It posted quarterly net sales of $5.13 billion, in line with analysts’ estimates, as per data compiled by LSEG.
Quarterly adjusted profit of 91 cents per share was above estimates of 89 cents per share.
(Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Vijay Kishore)
