Colgate sales weak, shares fall more than 6%
By Ben Klayman
DETROIT: Colgate-Palmolive Co posted weaker-than expected second-quarter sales and said it would take a bigger hit from Venezuela's currency devaluation, sending its shares down more than 6% in early trading today.
Consumer-goods makers like Colgate have focused on rolling out new products and boosting promotions to entice value-seeking shoppers. Global ad spending at the toothpaste and household products maker rose 1% in the quarter to US$395 million (RM1.3 billion).Morgan Stanley analyst Dara Mohsenian said in a research note that sales in the company's ongoing businesses, also known as organic sales, fell far short of expectations and competitive pressure from rivals like Procter & Gamble Co are not likely to ease.
"We would not be buyers on weakness (in the stock) given our concern that competitive pressure is likely to persist, going forward," said Mohsenian, who has an "equal weight" rating on the stock.
Colgate's net income in the second quarter rose to US$603 million, or US$1.17 a share, from US$562 million, or US$1.07 a share, a year earlier.
Analysts polled by Thomson Reuters I/B/E/S had expected a profit of US$1.16 per share.
Sales rose 2% to US$3.81 billion, below the US$3.94 billion analysts had expected.
Currency devaluation
Organic sales, excluding foreign exchange, acquisitions and divestitures, increased 3.5%. That was far below the consensus 7% gain expected and the company's implied 6% to 8% guidance, Mohsenian said.
Volume of goods sold was up 3% and global pricing rose 0.5%.
The company also said the full-year hit of a currency devaluation in Venezuela would be 10 to 15 US cents a share, up from its previous estimate of 6 to 10 US cents. In April, Colgate's profit fell as it took a hefty charge to account for hyperinflation in that country.
The company reiterated that it expects double-digit earnings-per-share growth this year. Analysts were expecting US$4.83 a share, up from US$4.37 last year.
Colgate, about one-fifth the size of P&G, said it expects its gross profit margin to be "up nicely" for the year. At 58.8% in the second quarter, it was even with last year.
Colgate shares fell US$5.75, or 6.8%, to US$78.10 in morning trading on the New York Stock Exchange. P&G shares slipped 0.7%.
- Reuters
