Colgate-Palmolive Company (CL - Free Report) continues to progress well with its savings programs along with a disciplined capital strategy and other initiatives. However, the company has a dismal sales trend.
Savings Programs Bode Well
Colgate remains committed to its savings programs as both Global Growth and Efficiency Program (or 2012 Restructuring Program) as well as Funding the Growth initiatives are delivering impressive results.
Furthermore, the company stated that the additional savings opportunities identified under the program in the second quarter of 2017 provide visibility to reach the upper end of its previously announced cost and savings guidance range. Consequently, the company expects both GAAP and adjusted gross margin to expand in 2017.
Markedly, this four-year Global Growth and Efficiency Program focuses on reducing structural costs in order to improve gross and operating profit, standardizing processes to improve the decision-making procedure and enhance its market share position worldwide.
Meanwhile, through funding growth initiative the company aims at opening new environmentally sustainable distribution centers to offer better service to its customers while reducing fuel and transportation costs. These programs are anticipated to contribute significantly toward the improvement of gross and operating margins over the long term.
Colgate commands a market-leading position in the oral care and personal care product categories. In fact, innovation and in-store implementation have been the guiding principles of the company’s growth strategy over the years, thus enabling it to capture market share across all regions and categories. Management further expects to grow market share in 2017 via a series of innovative product launches lined up for the year.
Going forward, the company remains focused on four fundamentals to boost profits including, increased spending on more impactful advertisements, innovation across portfolio of businesses, higher spends on high growth e-commerce business and aggressively maximizing productivity.
Additionally, Colgate has always followed a disciplined capital allocation strategy. This strategy focuses on making investments to develop business while using the excess cash to enhance shareholder returns through dividend payouts and share buybacks owing to its strong cash generation ability.
Stellar Earnings Trend
Colgate, which shares space with Church & Dwight Co., Inc. (CHD - Free Report) , The Clorox Company (CLX - Free Report) , The Procter & Gamble Company (PG - Free Report) has been infamous among investors with its meet or beat earnings track record. Notably, the company has posted in-line earnings in four of the last seven quarters while it surpassed estimates in the remaining three.
Colgate has a dismal sales trend as its top line has lagged estimates in 16 of the trailing 17 quarters. In fact, the company’s second-quarter results marked its fifth straight sales miss. Sales in the quarter were hurt by the persistence of softness in North America and challenges in Asia-Pacific. Furthermore, low global unit volumes and negative currency fluctuations were deterrents.
Management anticipates the backdrop to remain challenging due to uncertain global markets and slowing category growth worldwide in the near term.
While the soft sales trends indicate weakness, we remain confident of the company’s growth prospects, given its innovation track record and ongoing initiatives. We believe the company’s actions will help counter the dismal sales trends.
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