Colgate Palmolive (CL): Price Balancing and Monster Market Share

Posted on Aug 4 2015 - 11:25am by Sharpe Trade

When I listen to the conference call of a company, I take some notes. And therefore … I thought that to help out new folks as they navigate conference calls, I would start posting my notes, as I’ve taken them. Perhaps, we can make this a continual feature here at Sharpe Trade with the income stocks that we have mentioned in the Sharpe Income project.

A few days back, it was the Colgate Palmolive (CL) call, that you can find here.

Colgate Palmolive (CL) – Daily Chart

08_04_15_SharpeTrade_CL_DailyChart

So what’s ‘the low-down’ for this quarter?

A few notes from my desk as I listened to the conference call

07_30_15_Colgate_CL_Earnings Notes

It is obvious, that Colgate (CL) as a company, has monster market share for their business, around the world.  Much of the prepared remarks revolved around the fact that there was volume organic growth sales, but also, acceleration of growth in this quarter.  And actually, even with the monster market share that Colgate Palmolive (CL) enjoys, they gained in market share around the world.

However, as important as market share is … this does not necessarily dictate that a company must enjoy profits, if they enjoy great market share.

A company may dominate in their business in a country, but if they face rising material costs, and a tough economy?  Then they may not make as much money as they possibly could.  

Which is pretty much the state of Colgate (CL) at the moment.  They did indeed increase in market share and sales around the world.  But this was in the face of … once again … a difficult currency environment with the strong U.S. Dollar.  Since Colgate (CL) operates in many markets, the strong U.S. Dollar creates a compression currency blow-back and inflation problem in said countries.  They do not plan on moving their advertising ratio lower in the face of a difficult macro-economic environment.  A comment regarding “last man standing” among their competitors was used briefly.  To deal with the pressures, Colgate (CL) plans on focusing on price, rather than volume in the future.  

If I was forced to put this quarter into a few sentence?

As with other companies we have covered, Colgate Palmolive (CL) faces a very difficult macro-economic environment, being led by a strong U.S. Dollar.  Their advantage, is their market share and size, which they are using to their advantage.  They are also enjoying better efficiencies as they operate their business, resulting in improving operating margins.  Rather than focusing on volumes in the future, they will focus on the price of their products ….

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