Colgate-Palmolive Q2 Earnings Call Highlights

Key Points

• Colgate-Palmolive delivered broad-based Q2 growth, with organic sales increasing across most divisions, gross margin expanding 100 basis points and free cash flow rising 18%. The company returned $1.4 billion to shareholders and increased advertising investment.
• North America remains a weak spot because of softer categories, retailer inventory reductions and heightened competition. Management plans to expand brand support, emphasize premium innovation and selectively address pricing and promotional gaps to drive second-half improvement.
• Emerging markets and Hill’s pet nutrition provided important momentum. Hill’s gained share in a roughly flat pet-food market, while Latin America, India and China posted organic growth; the company is also expanding fresh pet food and scaling AI across pricing, marketing and productivity.

Colgate-Palmolive NYSE: CL said its second-quarter 2026 results reflected broad-based organic sales growth, gross-margin expansion and higher advertising spending, while executives outlined steps to improve performance in North America amid softer category trends and elevated competition.

Chairman, President and Chief Executive Officer Noel Wallace said organic sales grew in four of the company’s five divisions and in three of its four categories. Growth was led by emerging markets, including India, Brazil, Mexico and China, while Europe and the Hill’s pet nutrition business also contributed.

“We’re pleased to have delivered another quarter of strong top and bottom-line growth, particularly in the context of continued global volatility,” Wallace said. The company’s free cash flow increased 18% through the second quarter, and it returned $1.4 billion to shareholders, according to Wallace.

The company also said John Faucher, executive vice president of M&A and special projects, will retire at the end of September. Wallace said the call was Faucher’s 40th quarterly earnings call with Colgate-Palmolive.

Margins Supported by Pricing, Mix and Productivity

Colgate-Palmolive reported gross-margin expansion of 100 basis points in the quarter, including a modest benefit from tariff refunds. Wallace said most of the improvement came from the company’s core operations, including pricing, revenue growth management, productivity initiatives and product mix.

Chief Financial Officer Stan Sutula said material costs were slightly below the company’s expectations during the quarter, as higher raw-material costs were partially offset by tariff refunds. He said the company does not expect meaningful additional refunds.

Management said it now expects gross margin to be roughly flat for the full year, an improvement from its prior expectation for a decline. Sutula cautioned that raw-material costs and tariffs are expected to be higher in the second half than in the second quarter, although comparisons will be easier year over year. He said oil prices around $90 could make fourth-quarter costs somewhat lower than the company had previously assumed.

Wallace said the company has been incorporating expected cost increases into its profit-and-loss planning and is using pricing, revenue growth management and promotional artificial-intelligence tools to protect profitability. The company increased advertising by double digits during the quarter and plans to maintain elevated investment behind its brands.

“We believe our efforts in revenue growth management, promo AI, and funding the growth give us the ability to invest in advertising to build our brands while driving profit and EPS growth,” Wallace said.

North America Improvement Plan

Wallace said the company was not satisfied with its U.S. performance. He attributed part of the weakness to category softness in May, heightened competition and inventory reductions by certain retailers. While category conditions improved in June and remained steadier in July, Wallace said they were still below historical levels.

Management said retailer inventory reductions caused shipments to trail consumption in North America, and Wallace said the company has not assumed that retailers will rebuild inventories during the second half.

Colgate-Palmolive plans to increase distribution and support for recent launches, including Optic White Pro Series with ActivShine technology and Fabuloso products in new formats. The company also plans to take “surgical” actions in specific categories and retail channels where it identified price and promotional gaps versus competitors.

• Increase brand support across core U.S. businesses.
• Expand premium innovation in 2026 and 2027.
• Address selected price and promotion gaps without broadly escalating promotional activity.
• Focus on improving market share and delivering sequential improvement in the second half.

Wallace said the company is particularly focused on premium opportunities, where it believes it is under-indexed in North America. He pointed to the company’s experience in Asia and Europe, where stronger innovation, premium offerings, go-to-market changes and online expansion have supported improvement.

Hill’s Gains Share in a Soft Pet Market

Hill’s continued to outperform the broader pet-food category, according to Wallace. Excluding discontinued private-label business, Hill’s organic sales rose 4%, compared with a category that Wallace characterized as roughly flat, particularly in the U.S.

Private-label discontinuations reduced Hill’s volume by 200 basis points. Excluding those discontinuations, volume was approximately flat during the quarter, while the therapeutic business delivered growth in both volume and pricing, supporting mix and gross-margin improvement.

Wallace said Hill’s gained traction in cat food, wet food and small-pet offerings, while Science Diet dog food was weaker as consumers shifted toward smaller pets and ownership of larger pets declined. International Hill’s sales rose at a solid mid-single-digit rate, he said.

The company is also rolling out fresh pet food in the U.S. following its Prime acquisition. Wallace described the rollout as deliberate and said the company’s initial objective is to establish the brand’s scientific credentials and professional support rather than pursue significant early volume.

The offering includes three single-protein diets, with the company emphasizing their intended benefits for digestion, coat condition and overall pet health. Distribution will be phased through professional, pet-specialty and neighborhood veterinary channels rather than launched simultaneously across all retailers.

Emerging Markets, China and AI Initiatives

Latin America delivered approximately 5% organic growth, with pricing up 2.8% and volume up 2.6%, Wallace said. Brazil grew at a high-single-digit rate and Mexico grew at a mid-single-digit rate. Management said Colgate Total market shares have been rebuilding, particularly in Brazil, following prior reformulation-related issues.

In India, the company reported double-digit growth, supported by both indirect trade and modern trade. Wallace said the company is pursuing premiumization while also maintaining price-pack architectures designed to attract consumers entering its categories.

Greater China rose at a mid-single-digit rate, while the Colgate China business delivered mid-single-digit growth and Hawley & Hazel, which includes the Darlie brand, posted low-single-digit organic growth. Wallace said China remains a challenging market due to declining brick-and-mortar sales, rapid e-commerce shifts and aggressive competition, but he highlighted the market’s role in developing digital talent and social-first innovation.

Wallace also said Colgate-Palmolive is scaling AI across pricing, productivity, innovation, marketing and data analytics. The company has trained much of its workforce on AI tools, including about 70% of vice presidents in advanced AI training, according to Wallace. He said the company is moving from AI pilots toward broader implementation, including promotional optimization, content creation and more automated internal processes.

About Colgate-Palmolive (NYSE:CL)

Colgate-Palmolive Company is a global consumer products company with a long history in household and personal care categories. The business traces its roots to the early 19th century and has evolved into a multinational manufacturer and marketer of everyday consumer goods focused on health, hygiene and home care.

The company's core activities center on oral care, personal care, home care and pet nutrition. Its product portfolio includes toothpaste, toothbrushes and mouthwash in oral care; soaps, body washes and deodorants in personal care; dishwashing liquids, surface cleaners and other household products in home care; and scientifically formulated pet foods under its pet nutrition business.

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