Colgate Falls as It Forecasts Weaker Margins, EPS at Lower End

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Colgate Falls as It Forecasts Weaker Margins, EPS at Lower End
Credit: © Reuters.

By Dhirendra Tripathi – Colgate-Palmolive stock (NYSE: CL ) dipped 0.4% on Friday as the company joined the long list of companies warning of a “difficult cost environment” continuing for the next several quarters.

After facing “significant increases in raw material and logistics costs” in the third quarter, the company said it expects its annual adjusted gross profit margin to decline amid higher spending on advertising for its toothbrushes and hand washes. Gross profit margin was 61.1% in 2020 and 59.4% in the latest quarter.

It said profit per share is now expected to come in at the lower end of its mid to high-single-digit range. Besides this, the company stuck to its guidance of 3% to 5% growth in its organic sales. Net sales for the year are seen up 4% to 7%.

From Amazon (NASDAQ: AMZN ) to Apple (NASDAQ: AAPL ) to Starbucks (NASDAQ: SBUX ), retailers, manufacturers and service providers of all hues have warned of high raw material prices and supply chain bottlenecks hurting their profitability in the coming quarters. This has come even as economies have boomed while the pandemic has kept production at factories hampered and ships stuck at ports for days.

Colgate’s net sales in the third quarter rose 6.5% from the same period last year, to $4.41 billion. Organic sales rose 4.5%.

Adjusted profit margin rose by 2 cents to 81 cents. Both sales and profit were higher than estimates.

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