Colgate-Palmolive (CL) shares advanced 3.1% on Friday after the consumer goods giant posted first-quarter sales and adjusted earnings that surpassed Wall Street expectations, fueled by robust international demand. However, the company flagged a significant headwind, warning of approximately $300 million in additional raw-material and logistics expenses this year due to the ongoing Middle East conflict.
The New York-based maker of toothpaste, soap, and pet food reported net sales of $5.324 billion for the quarter ended March 31, an 8.4% increase from the prior-year period. Organic sales, which exclude the effects of currency fluctuations, acquisitions, and divestitures, rose 2.9%. Adjusted earnings per share (EPS) came in at 97 cents, up 7% year-over-year and 2 cents above the consensus estimate of 95 cents, according to LSEG data. On a GAAP basis, EPS fell 6% to 80 cents.
“We had a strong start to 2026, with growth across all categories and in four out of five divisions,” said Noel Wallace, chairman and CEO. “At the same time, we remain mindful of volatile macroeconomic conditions and slower category growth that will shape the environment for the remainder of the year.”
Regionally, the performance was mixed. North America continued to lag, with net sales declining 1.8% and organic sales down 2.2%, driven by a 3.2% drop in volume. In contrast, Latin America saw net sales surge 14.8%, while the Europe, Middle East and Africa (EMEA) region posted an 11.9% increase. Asia Pacific climbed 8.9%, and Hill’s Pet Nutrition contributed a 6.7% gain. The international strength helped offset the domestic weakness, but the company cautioned that rising costs could pressure margins further.
Gross profit margin for the quarter stood at 60.6%, slipping 20 basis points from a year ago. Management attributed the decline to higher raw material costs, tariffs, and currency movements, which together shaved 350 basis points off the gross margin. Some of that impact was mitigated by price increases and cost-cutting measures. The company now expects full-year gross profit margin to decline, reversing its earlier forecast for an improvement.
Colgate left its 2026 guidance unchanged, projecting net sales growth of 2% to 6% and organic sales growth of 1% to 4%. However, the company expanded its Strategic Growth and Productivity Program, a multi-year initiative aimed at trimming expenses and overhauling operations. The estimated pre-tax charges for the program were raised to between $350 million and $550 million, up from the previous range of $200 million to $300 million, with the bulk expected to be incurred by the end of 2028.
The warning about additional costs is not unique to Colgate. Procter & Gamble (PG) and Unilever (UL) have also highlighted rising expenses tied to Middle East turmoil and supply chain disruptions. Commodity prices are surging, and with consumers increasingly seeking bargains, it is becoming more difficult for consumer-goods firms to pass on higher prices through price increases. Colgate specifically cited the threat of additional tariffs and rising material costs as potential risks that could further squeeze margins.
Investors focused on the earnings beat and the strong international momentum, but the underlying challenge remains: can Colgate protect its margins without pushing more U.S. customers toward lower-priced competitors? With North American volumes already declining, the room for further price hikes appears limited. The company will need to balance cost discipline with competitive pricing to sustain growth in the quarters ahead.
