CL
Earnings call · Sep 2025 (Q3 FY25)

COLGATE PALMOLIVE Q3 FY25 earnings call CL

Oct 31, 2025 Source

Executive summary

Colgate-Palmolive Q3 FY25 — Strategic Acceleration Amidst Global Headwinds

Colgate-Palmolive navigated a challenging Q3 FY25 marked by global category slowdowns and cost inflation, delivering dollar-based EPS growth and strong cash flow. The company is accelerating its 2030 Strategy, leveraging the Strategic Growth and Productivity Program (SGPP) and significant AI investments to drive innovation, efficiency, and market share gains, particularly in emerging markets and Hill's Pet Nutrition, while proactively addressing regional challenges.

Highlights

4

  • Hill's Pet Nutrition delivered 2.5% organic growth (ex-private label) in Q3 FY25, demonstrating broad-based strength across categories and gaining market share in strategic segments.

  • Colgate Total's global relaunch is driving organic sales growth and premiumization, with market shares in Latin America beginning to improve after a formula adjustment.

  • The company achieved positive pricing across all divisions in Q3 FY25, effectively offsetting commodity inflation and foreign exchange impacts.

  • Colgate-Palmolive continued to deliver dollar-based EPS growth and strong cash flow despite a challenging operating environment.

Concerns

5

  • Global category growth slowed to approximately 2% in Q3 FY25 (down from 4-5% in 2024), with volumes flat and pricing at 2%, reflecting continuous consumer uncertainty.

  • Latin America's organic growth was 1.7% in Q3 FY25, negatively impacted by 150 basis points from the Colgate Total replacement and sluggish volumes due to prolonged pricing.

  • Gross profit margin was down year-over-year in Q3 FY25, primarily due to greater-than-anticipated raw material inflation (especially fats and oils), lower volumes, tariffs, and transactional FX.

  • China's performance was mixed, with Colgate up mid-single digits but Darlie experiencing weakness in premium e-commerce, taking longer than anticipated to see changes.

  • India's organic sales were down mid-single digits in Q3 FY25, attributed to the GST tax change and sluggish urban demand.

Guidance & targets

CategoryTargetConfidence
Full-year Organic Sales Growth
roughly in line with year-to-date (~1.2%)
high materiality
High
Full-year Net Sales Growth
up low single digits
high materiality
High
Full-year FX Impact on Net Sales
flat to low single-digit negative
medium materiality
Medium
Full-year Gross Margin
roughly in line with year-to-date (60.1%)
high materiality
High
Full-year Advertising Spend
roughly in line with full year of last year
medium materiality
High
Full-year Dollar-based EPS Growth
maintained
high materiality
High
Strategic Growth and Productivity Program Charges
$200 million to $300 million
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Latin America
Organic growth of 1.7% includes a 150 basis point negative impact from the Colgate Total replacement. Mexico and Brazil performed well, both up around 4% organically. Pricing is improving but at the expense of volume, particularly in Andina and Central America where price competition is more acute. Volume shares for total Oral Care were flat, slightly down in value due to the Total replacement, but are now starting to come back.
Colgate Total replacement impact: -150 bps on organic growth
—1.7%——
China
A mixed bag. Colgate continues to do well, with mid-single-digit growth driven by e-commerce and innovation. However, Darlie continued to see some weakness, particularly in premium e-commerce, and changes are taking longer than anticipated.
Colgate organic growth: mid-single digits
————
India
Organic sales were down mid-single digits. Underlying demand in urban areas is sluggish, while rural areas are holding up. The GST tax change (from 18% to 5% on oral care/toothpaste) led to price reductions and trade inventory disruptions, but is expected to be a net positive long-term for consumption. Expects better performance in Q4 and a return to growth in 2026.
—down mid-single digits——
Hill's Pet Nutrition
Delivered 2.5% organic growth ex-private label despite a soft category. Therapeutic business (Prescription Diet) is a strong growth driver with market share gains. Saw a 300 bps impact from private label exit. Gaining share across channels, supported by science-based innovation and improved supply chain execution (e.g., Tonganoxi ramp-up). Prime acquisition in Australia performing ahead of expectations.
Organic growth ex-private label: 2.5%Private label impact on organic growth: -300 bpsDog dry category: downCat wet category: upU.S. growth: slowed a bit (due to lower e-commerce inventory, Canadian sentiment)Market share: gaining across almost every strategic growth segmentTherapeutic (Prescription Diet) business: doing exceptionally well with market share growth
—2.5%—strong margin performance

Operational metrics

Gross Profit Margin
down year-over-year YoY
Q3 FY25

Gross profit margin was down year-over-year in Q3 FY25, primarily due to increased raw material costs, lower volumes, tariffs, and transactional FX, as well as the Colgate Total formula change in Latin America.

Advertising Spend
roughly flat YoY
FY25

Advertising spend for the full year is expected to be roughly flat as a percentage of sales compared to last year's record levels, with some adjustments in markets and delayed launches.

Global Category Growth
roughly 2% vs. 4% to 5% exit run in 2024
Q3 FY25

Global categories are now growing roughly 2% on a global basis in Q3 FY25, a slowdown from the 4% to 5% exit run in 2024, with volumes flat and pricing contributing 2%.

Colgate Total Gross Margin Impact
40 to 50
Q3 FY25

The formula adjustment and replacement of Colgate Total variants in Latin America resulted in a 40 to 50 basis point impact on total gross margin.

Private Label Exit Impact
70
FY25

The exit of the private label business at Hill's is expected to have a 70 basis point impact on full-year organic sales growth.

FX Impact
flat to low single-digit negative
FY25

At current spot rates, the full-year FX impact on net sales is expected to be flat to low single-digit negative, though Q4 is anticipated to be more favorable than Q3.

FX Impact
more favorable than Q3
Q4 FY25

Foreign exchange impact is expected to be more favorable in Q4 FY25 compared to Q3 FY25.

FX Impact
moved favorably
Recent

Latin American currencies have recently moved favorably, providing a benefit to the business.

Promotional Activity
slight uptick
Q3 FY25

There has been a slight uptick in promotional weights in the U.S., including more couponing and volume on deal, but not returning to pre-COVID levels.

Premium/Super-Premium Segment Growth
growing very, very nicely
Q3 FY25

In the U.S., the premium and super-premium segments are growing very nicely, while the value-oriented and mid-price segments are suffering.

Private Label Exit Impact
300 YoY
Q3 FY25

The exit of the private label business at Hill's had a 300 basis point impact on organic growth in Q3 FY25.

Industry KPIs

MetricValueDetails
Organic sales growth1.2% %
Household penetration—
Regional emerging market growthmid-single digits %
Advertising marketing investmentroughly flat % of sales
Commodity input cost sensitivitygreater-than-anticipated raw materials inflation
Category level organic sales growth2.5% %
Innovation new product contribution—
Category growth benchmark market share—
Core underlying EPS and operating margindollar-based EPS growth

Product announcements

ProductTypeDetails
Colgate Totalupdate
Hill's Pet Nutrition innovationsupdate
Holly & Hazel premium innovationlaunch

Deals & partnerships

Prime fresh pet food business

The acquisition of Prime in Australia continues to perform ahead of expectations, providing valuable learning about the fresh pet food market.

Capital programs

Strategic Growth and Productivity Program (SGPP) underway $200 million to $300 million
Period spend: first charges to start to roll through in the fourth quarter

Benefit:fund incremental investments, deliver savings, facilitate organizational changes, increase speed and efficiency, drive flexibility and personalization in the supply chain

The program is consistent with prior announcements, with estimated charges of $200 million to $300 million and concluding by the end of 2028. It is designed to enable incremental investments and deliver savings, making the organization more flexible and efficient, rather than just slashing costs. First charges are anticipated in Q4 FY25.

Risks & headwinds

Consumer uncertainty and global category slowdown Short term, expected to continue

Global categories growing roughly 2% in Q3 FY25 (vs. 4-5% in 2024), with volumes flat and pricing 2%.

Mitigation:Accelerating 2030 Strategy, new innovation model, omnichannel demand generation, RGM, AI, SGPP to stimulate growth.

Raw material inflation Q3 FY25, expected to ease year-on-year in Q4 FY25.

Greater-than-anticipated raw materials inflation, particularly fats and oils, impacting gross profit margin.

Mitigation:Pricing actions, productivity savings, and leveraging flexibility in the P&L.

Tariffs and transactional FX Q3 FY25, slightly greater tariff impact in Q4 FY25, FX more favorable in Q4 FY25.

Impact on gross profit margin from tariffs and transactional FX.

Mitigation:Pricing actions and P&L flexibility.

Colgate Total formula issue in Latin America Early FY25, Q3 FY25 impact, shares recovering.

150 bps negative impact on LatAm organic growth and 40-50 bps gross margin hit in Q3 FY25.

Mitigation:Reformulated product, proactive replacement of impacted variants, strong marketing plan for Q4 FY25.

Weakness in Darlie premium e-commerce in China Q3 FY25, ongoing.

Not quantified, but described as 'weakness' and 'taking a little longer than we anticipated to see the changes'.

Mitigation:Aggressive steps on innovation and e-commerce, building brand more effectively online, significant premium innovation coming in Q4 FY25.

India GST tax change and urban demand sluggishness Q3 FY25, expected to improve in Q4 FY25 and return to growth in 2026.

Organic sales down mid-single digits in Q3 FY25.

Mitigation:Managed trade inventories, long-term positive for consumption, focus on core innovations and premiumization in urban areas.

Impact from exiting private label business at Hill's Q3 FY25, Q4 FY25, into H1 FY26.

300 bps impact on Q3 FY25 organic growth, 70 bps impact on full-year FY25 organic growth.

Mitigation:Strategic decision to focus on branded growth opportunities, impact will diminish as the business is fully exited.

US drugstore channel challenges Ongoing.

Described as 'very weak' and 'challenged'.

Mitigation:Re-engaging with drugstores on driving traffic, bringing high-end therapeutic premium innovation, working on revenue growth management initiatives.

What to watch in Q4 FY25

India Organic Sales Growth

Q4 FY25 and 2026
Current down mid-single digits
Target returning to growth

Why it matters

India is a key emerging market with long-term growth potential, and recovery from GST disruption is important for overall regional performance.

Underlying demand in India, mostly in the urban part tends to be a bit sluggish. Rural seems to be holding up okay. We had very difficult comparisons, as you well know. Pleasingly, comps get easier, and we feel we've got really good plans moving forward, and we expect better performance in the fourth quarter and returning obviously to growth in 2026.

Q&A highlights

What is the outlook for category softness in 2026, how quickly will Colgate's strategic levers impact organic sales, and what is the update on Hill's performance and pet category trends?

Noel acknowledged the expectation of continued market sluggishness but emphasized that Colgate is proactively implementing its 2030 Strategy and SGPP to stimulate growth regardless of the environment. He provided a detailed regional breakdown of performance and highlighted Hill's strong underlying performance and market share gains in key segments despite a soft pet category.

“our anticipation is, yes, things will get better. But I want to reiterate, if things don't get better, we are preparing our plans and our strategy to address what we need to do to grow faster in this current environment.”

asked by Dara Mohsenian · answered by Noel Wallace

3 min read 7 chapters

Detailed narrative

Global Operating Environment & Strategic Response

Colgate-Palmolive is navigating a volatile global operating environment characterized by consumer uncertainty, tariffs, geopolitics, and high cost inflation, which are pressuring sales and profit growth across the consumer sector. Global category growth slowed to approximately 2% in Q3 FY25, with volumes flat and pricing at 2%, compared to 4-5% in 2024. Despite these headwinds, the company is proactively accelerating its 2030 Strategy, focusing on driving growth and efficiency, and is prepared for continued market sluggishness.

2030 Strategy & Strategic Growth and Productivity Program (SGPP)

The company's 2030 Strategy aims to accelerate change and drive outperformance. A key enabler is the Strategic Growth and Productivity Program (SGPP), which will fund incremental investments, deliver savings, and facilitate organizational changes to enhance flexibility, simplify processes, and increase speed and efficiency. This program is expected to incur $200 million to $300 million in charges through the end of 2028, with initial charges anticipated in Q4 FY25.

Innovation and Omnichannel Focus

Colgate is implementing a new innovation model with additional resources dedicated to delivering more impactful, science-based innovation across all price tiers. This includes leveraging AI to generate consumer-centric concepts faster. The company is also focused on omnichannel demand generation, upskilling its commercial organization to be more consumer-centric, and accelerating investments in digital, data, analytics, and AI to drive efficiency and brand penetration.

Hill's Pet Nutrition Performance

Hill's Pet Nutrition delivered 2.5% organic growth in Q3 FY25, excluding the impact of private label exits, despite a soft pet category. The therapeutic Prescription Diet business performed exceptionally well, driving market share growth and improving margins. Hill's is gaining share across various strategic growth segments, including cat and wet food, supported by science-based innovation and improved supply chain execution, particularly with the ramp-up of the Tonganoxi facility.

Colgate Total Relaunch and Latin America Dynamics

The global relaunch of Colgate Total is successfully driving organic sales growth and premiumization. In Latin America, a formula adjustment was made for a specific flavor variant due to consumer complaints, resulting in a 150 basis point negative impact on regional organic growth and a 40-50 basis point hit to gross margin in Q3 FY25. However, market shares are now recovering, and the company is implementing a strong marketing plan for Q4 to support the rebound.

AI as a Strategic Enabler

Colgate views AI as a central strategic enabler for its 2030 Strategy, investing significantly in both horizontal and agentic AI. Applications include transforming marketing and digital strategies through generative AI for enhanced consumer engagement, accelerating innovation by generating and validating consumer-centric concepts, and improving internal productivity in areas like demand planning. The company is also exploring agentic commerce opportunities with major retailers.

Geographic Performance Highlights

North America showed sequential improvement (ex-skin), though consumer sentiment remains weak. Europe experienced less pricing, with strong performance in Western Europe offsetting weakness in Eastern Europe. Latin America was mixed, with Mexico and Brazil growing around 4%, while Colombia and Central America faced economic and political volatility. China saw mid-single-digit growth for Colgate but weakness for Darlie in premium e-commerce. India's organic sales were down mid-single digits due to GST tax changes and urban demand sluggishness, but improvement is expected.

AI-generated summary of the company's earnings call. Not investment advice.