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What to Expect from Colgate-Palmolive’s 2Q17 Earnings

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Part 3
What to Expect from Colgate-Palmolive’s 2Q17 Earnings PART 3 OF 6

Will Colgate-Palmolive’s Sales Improve in Developed Markets?

North America likely to remain a challenge

Colgate-Palmolive (CL) is expected to report sluggish sales in its developed markets, including North America and Europe (excluding central Europe). Lower volumes and adverse currency fluctuations will continue to affect sales in these regions. During the last reported quarter, Colgate-Palmolive’s organic sales fell 2.5% in developed regions, while its net sales fell 4.0%. A greater-than-expected decline in volumes in the United States (SPY) (SPX-INDEX) and the strong dollar remained a drag.

Will Colgate-Palmolive’s Sales Improve in Developed Markets?

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As the above graph shows, the company’s North American region continues to see deterioration in organic sales. Sales have been negatively impacted by retailers cutting back on inventories in the wake of a slowdown in category growth, portfolio restructuring initiatives, and lower pricing. Because of sluggish demand, management projects sales to improve at the lower end of its 1.0%–2.0% guidance range for 2017.

In comparison, peers Kimberly-Clark (KMB) and Procter & Gamble (PG) are also projected to mark soft sales in the North American region. However, Clorox (CLX) and Church & Dwight (CHD) are expected to report strong sales in the domestic market due to their strong portfolio of brands.

Europe to disappoint

Colgate-Palmolive’s organic sales have fallen in Europe in the past two quarters; lower pricing and a decline in volumes have taken their toll on performance. Although the company’s volumes have improved sequentially, adverse currency movement remained a drag. Going forward, the company is expected to report soft sales in this region for 2017 since a marginal improvement in volumes is expected to be offset by lower pricing and currency headwinds.

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