Colgate-palmolive Company ((CL)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Colgate-Palmolive struck a cautiously optimistic tone in its latest earnings call, highlighting solid sales momentum, strong contributions from its Hill’s pet nutrition business, and robust emerging-market growth, even as management flagged significant cost inflation and margin pressure. Executives stressed that while demand trends and productivity initiatives are encouraging, elevated commodities, logistics and tariffs will weigh on profitability in the near term.
Top- and Bottom-Line Growth
Colgate reported strong top- and bottom-line growth in the first quarter of 2026, delivering gains in gross profit, operating profit, earnings per share and free cash flow. Management emphasized that these results were achieved while simultaneously stepping up investments in brands and capabilities, underscoring confidence in the company’s long-term growth algorithm.
Organic Sales Acceleration
Organic sales growth accelerated sequentially from the fourth quarter, offering evidence that demand trends are improving despite uneven category conditions in some markets. The company reaffirmed its full-year organic sales outlook of 1% to 4%, signaling that recent momentum is broadly tracking internal expectations.
Volume and Pricing Strength
Excluding the deliberate exit from private-label pet food, Colgate delivered growth in both volume and pricing across all four product categories and in four of its five geographic divisions. Hill’s volume, excluding the private-label business, increased by roughly 1%, reflecting the brand’s resilience and the effectiveness of innovation-led pricing actions.
Emerging Markets Lead Performance
Emerging markets remained the growth engine, with particularly strong contributions from Asia Pacific and Latin America. China and India were cited as major drivers in Asia Pacific, while Mexico and Brazil underpinned mid-single-digit growth in Latin America, highlighting the region’s importance to Colgate’s global portfolio.
Hill’s Strong Performance
Hill’s posted solid organic growth of 4.8% when private-label sales are excluded, with the U.S. business growing around 5%. Management pointed to robust trends in both Prescription Diet and Science Diet, as well as market-share gains across many retail and veterinary channels, reinforcing Hill’s role as a key profit and growth contributor.
Strategic Productivity Program Expansion
Colgate updated its strategic growth and productivity program, targeting savings of $200 million to $300 million over the life of the initiative, with most benefits expected in 2027 and 2028. The program remains on track to be completed by the end of 2028 and is designed to fund growth investments while offsetting structural cost pressures.
Continued Investment in Growth Capabilities
The company is ramping up spending on advertising, omnichannel demand generation, innovation and data-driven capabilities, including artificial intelligence. Management noted that returns on advertising are improving and stressed that future pricing will increasingly be tied to innovation, supporting premiumization and brand strength.
Incremental Cost Inflation Headwind
Since its fourth-quarter update, Colgate has identified roughly $300 million of additional raw-material and logistics cost pressure for 2026. About two-thirds of this headwind stems from raw materials and one-third from logistics, prompting a more cautious stance on margins even as revenue guidance remains intact.
Higher Commodity and Logistics Costs
The company is modeling oil at about $110 per barrel for the rest of the year, a key driver of higher input costs across its supply chain. Spending on oil-derived inputs such as resins, petrochemicals and fats and oils is expected to increase by more than 20% year over year, while logistics costs are projected to rise nearly 10%.
Gross Margin Pressure and Guidance Revision
Reflecting these inflationary pressures, management now expects gross margin to decline year over year, reversing its previous view of improvement. This reset builds commodity and logistics inflation into guidance and underscores the need for revenue growth management, pricing and productivity to protect profitability.
North America Underperformance
North America remained a soft spot in the quarter, with volume and mix underperforming relative to other regions. Executives described a multi-step turnaround effort, noting that shelf resets and delayed new-product shipments weighed on volumes, but suggested that these issues should ease as the year progresses.
Private Label Pet Food Impact
The exit from private-label pet food created a 260-basis-point drag on company performance in the quarter. Management expects a reduced headwind of 20 to 30 basis points in the second quarter and anticipates that the impact will largely roll off in the back half of the year, simplifying comparisons and clarifying the underlying Hill’s trajectory.
Category and Market Uncertainty
Colgate cautioned that category sluggishness persists in some markets, particularly parts of China, alongside broader macroeconomic uncertainty. The dry dog segment in pet food remains weak, and management highlighted risks from oil prices, interest rates and shifting consumer behavior that could influence demand patterns.
Tariff-Related Margin Pressure in North America
North America gross margins were disproportionately affected by tariffs, which were minimal in the prior-year quarter, compounding higher raw-material costs. Management expects the year-on-year tariff comparison to normalize over time, but acknowledged that this is another near-term drag on margins in a key profit region.
Forward Guidance and Outlook
Colgate reaffirmed its 2026 outlook for organic sales growth of 1% to 4% and low- to mid-single-digit EPS growth, even after incorporating roughly $300 million of incremental cost inflation. The company reiterated its productivity savings target of $200 million to $300 million by 2028 and expects the private-label pet exit to remain a modest headwind in the second quarter before fading in the back half of the year.
Colgate-Palmolive’s latest earnings call paints a picture of a company balancing healthy demand and disciplined investment against a tough cost backdrop. For investors, the story hinges on whether emerging-market strength, Hill’s momentum and the expanded productivity program can offset inflation, tariffs and North American softness while keeping the long-term growth narrative intact.