Q3 2024 Colgate Palmolive Co Earnings Call

Good morning, welcome to today's Colgate Palmolive, 'twenty 'twenty four third quarter earnings conference call.

This call is being recorded and is being simulcast live at Www Dot Colgate Palmolive dotcom.

Speaker Change: Now for opening remarks, I'd like to turn this call over to Chief Investor Relations Officer, and senior Vice President M&A John O'shea.

Thanks Patsy.

Speaker Change: And welcome to our third quarter 2024 earnings release Conference call. This is Jonathan.

Speaker Change: Today's conference call will include forward looking statements actual results could differ materially from these statements.

Speaker Change: Please refer to the third quarter 2024 earnings press release and related prepared materials and our most recent filings with the SEC, including our 2023 annual report on Form 10-K, and subsequent SEC filings all available on Colgate's website for a discussion of the factors that could cause <unk>.

Speaker Change: Actual results to differ materially from these statements.

Speaker Change: This conference call will also include a discussion of non-GAAP financial measures, including those identified in tables for 678 and nine of the earnings press release a.

Speaker Change: A full reconciliation to the corresponding GAAP financial measures is included in the third quarter 2024 earnings press release and is available on Colgate's website.

Speaker Change: Joining me on the call. This morning are Noel Wallace, Chairman, President and Chief Executive Officer, and Stan So Tula Chief Financial Officer.

Noel Wallace: No. We will provide you with his thoughts on our results and our 2024 outlook and we will then open it up for Q&A.

Noel Wallace: Thanks, John and good morning, everyone and thanks again for joining us as we report another strong quarter of topline and bottom line performance.

Noel Wallace: Our strategy of delivering more impactful core and premium innovation.

<unk>, our advertising spending and scaling capabilities to drive improved brand health.

Noel Wallace: And higher household penetration is paying off through strong volume led organic sales growth.

Noel Wallace: You've seen this best represented in the fact that we have delivered volume growth in all six divisions for the second straight quarter with 3% growth in developed markets and four 6% growth in emerging markets.

Noel Wallace: It won't be every division every quarter, but we believe our geographic breadth and category mix will enable us to better weather volatility.

Noel Wallace: Over time, whether that's from economic geopolitical or other factors and deliver organic sales growth in line with our long term targets despite difficult comparisons.

Noel Wallace: This will be well considered in our plans and it's why we've been talking about building our business model to deliver sustained profitable growth, even as category growth decelerates as pricing growth receipts, our commitment to reestablishing our gross margin is paying off and gross profit dollar growth, even as we lap more difficult compare.

Noel Wallace: <unk>, we have used this gross margin expansion to continue funding the investment in advertising and capabilities, enabling us to deliver best in class volume growth, which is driving strong organic sales growth and.

Noel Wallace: And we believe the flexibility we have built into our P&L gives us the ability to turn that organic sales growth into consistent compounding earnings per share growth to deliver top tier <unk> over the long term.

Noel Wallace: And with that I'll open it up for questions.

Noel Wallace: Yeah.

Speaker Change: We will now begin the question and answer session.

Speaker Change: You ask a question you May press Star then one on your Touchtone phone.

To withdraw your question. Please press Star then two.

Speaker Change: Please limit yourself to one question.

Speaker Change: If you have further questions you may reenter the question queue.

Once again, if you would like to ask a question. Please press Star then one.

Speaker Change: Yeah.

Speaker Change: The first question today comes from Dara <unk> with Morgan Stanley. Please go ahead.

Speaker Change: Hey, good morning, So I just wanted to drill down into North America.

Speaker Change: And a pricing was down significantly for the second quarter in a row, you had warned us about that last quarter, but.

Just take a step back and help us understand the competitive environment, you're facing and what your strategy is from a pricing standpoint.

Speaker Change: And how much volume payback, you think you're getting given muted result in the quarter, albeit with some timing caveat and just how that business is set up going forward as we look forward to 2025 and beyond.

Speaker Change: And hopefully this isn't cheating, but I want to slip in a second question on pet, which is mostly North America actually but you know the Hill's performance is really striking relative to industry trends.

Can you just talk about the sustainability of low single digit pet pricing going forward, given that difficult industry pricing environment and the market share gains with your volume performance again in light of the difficult industry environment. Thanks.

Speaker Change: Good morning, Dara. Thank you so North America structurally we came in exactly where we more or less expected little a little soft on the volume, which I'll explain in just a moment.

Speaker Change: But what we're seeing is as carrier growth decelerates, a little bit as expected and what we talked about in the second quarter volumes, returning but not necessarily as fast as we would like but I think theres more normalization on the volume line, we expect that to continue to inch up moving forward.

Pricing was in line with Q2 as you just mentioned and as we talked about in the second quarter with similar adjustments should we expect to continue as we move through the balance of this year into the first quarter.

Speaker Change: I talked about volume being a little bit softer than it was as expected. This was as we mentioned in the prepared remarks due to shipment timing.

Speaker Change: On a couple of orders we had the benefit of some promo moves from the third quarter, which will see a little bit more in the fourth quarter and as you've noted that we've with the skin health business now in the North America, We obviously had the impact of lower skin health volumes, principally driven by China.

Speaker Change: A little bit of reduction do do some ecommerce business that didn't come through in the quarter, but overall more or less where we expected.

Speaker Change: The team is very focused on obviously is setting ourselves up for a really strong 25, a strong innovation growth.

Speaker Change: Plan that we have in place and we will see obviously the volume start to inch back as we've seen in the categories start to normalize more but overall you know the good news is we've been able to switch to whether some of the softness in North America with really strong broad based growth across the business you talked about hills coming in exceptionally strong it was a strong performance for Hilton.

Speaker Change: Quarter strong volume, which was really encouraging given the impact of lower private label. So you take the private label up we were up mid single digits on volume and a really strong margin performance on the business and we've been consistent with what we've articulated in the past, which is that we want to continue to reinvest that margin into driving <unk>.

Speaker Change: <unk> growth in this exactly what we're doing a little bit of pricing that came through in the quarter and we will think well we've got the ability as AG prices move around to take some pricing given the strength again of the brand in the market, we're gaining market share. We're the fastest growing brand global brand in pet specialty and neighborhood pet stores should we feel.

Speaker Change: Good about where we are we're continuing to expand that business into segments that we werent aggressively competing in below specifically wet. So overall, we feel very good about where the Hill's business is and our ability to continue to drive strong sustained growth behind strong advertising levels.

Speaker Change: Yeah.

Speaker Change: The next question comes from Felipe.

Speaker Change: Please go ahead.

Speaker Change: Hey, good morning, everyone.

Speaker Change: So I wanted to ask you. Some initial perspective as you start thinking about next year I know youre not going to give guidance today, but you mentioned you feel confident in your ability to be in the long term algorithm on a multi year basis. So as you think about cycling those tough comparisons what are.

Speaker Change: Areas of the business that you expect could accelerate is it more innovation from contribution from innovation and be better volume in developed markets or maybe the Purcell business, just any perspective on how you're thinking about.

Speaker Change: And those comps and areas of the business getting that could accelerate thank you.

Speaker Change: Yes. Thanks Filippo for the question, we've been talking for I think the better part of three years now.

Speaker Change: And how important it is to invest in the long term capabilities that we think are going to be essential to drive sustained growth.

Speaker Change: And I really attribute that ability to do that to the flexibility that we built into the P&L.

Speaker Change: So what we're focused on right now is elevating and accelerating innovation, particularly H two and H. Three we think we have a continued very strong new product grid moving into 'twenty five 'twenty six we built gross margin flexibility into the P&L that allows us to invest back behind the business that advertising level, we will.

Continue to do that that's the way you improved brand health and drive long term sustainable share growth you've seen the share growth really inflect over the last couple of years as you've seen global shares, particularly in toothpaste and toothbrushes continue to move upwards. That's a reflection of the innovation and the sustained growth that we have sustained advertising.

Speaker Change: And growth that we have in the P&L. So a lot of the same filippo continuing to invest back behind the business drive household penetration, where we're getting much better with the analytical work that we're doing to understand where those growth opportunities are building per capita consumption in those markets, where we see real opportunities driving our brand through advocacy so.

Speaker Change: All of the things that we've been talking about clearly will play out in 'twenty five and into 'twenty six.

Speaker Change: The next question comes from Robert Moskow with TD Cowen. Please go ahead.

Speaker Change: Hi, Thank you.

I don't know about Europe are obviously, a very strong quarter.

Speaker Change: And a lot of your peers have been delivering strong results in Europe as well.

Robert Moskow: But what are your peers said not to expect this on an ongoing basis.

Speaker Change: So I wanted to know if you.

Speaker Change: You know what what's driving it what were your market shares like in Europe during the quarter and what.

Speaker Change: So what do you expect going forward.

Speaker Change: Yes, Thanks, Robert again, a great quarter for Europe, My congratulations to the team out there, which is doing exceptional job really focusing on the fundamentals. We've we've clearly put significant investment back into Europe, which we're seeing really play out and that sustained top line growth volume growth with <unk>.

Speaker Change: <unk>.

Speaker Change: Getting a little bit of pricing pricing, while we're not immune to the challenges of pricing in Europe, but the good news as we move into 2005 with much stronger market shares good penetration across our categories and a very strong level of advertising. It's improved brand health. So again very consistent with the theme that we've been <unk>.

Speaker Change: In about reinvest behind those growth opportunities are all care shares are at record high levels. Now we continue to see growth opportunities there, particularly building penetration amongst very specific targets the advertising levels across the business not just in oral care are coming back and so we're seeing more broad based growth across the European business.

Speaker Change: But we're not immune to some of the softness and challenges that always seem to plague the European market long term, but the good news the brick business is in very good shape gross margins are at very high levels advertising strong and market shares have inflected very positively.

Speaker Change: The next question comes from Bonnie Herzog with Goldman Sachs. Please go ahead Brian.

Speaker Change: Thank you and good morning.

Hi.

Bonnie Herzog: Morning, I wanted to ask about your emerging markets.

Bonnie Herzog: Organic sales growth has been strong in these markets, but most of it's been driven by pricing.

Speaker Change: Hi, Sharon.

Speaker Change: I guess, that's a result.

Translating into significant growth on a net basis, so I guess I'd be curious.

Speaker Change: I understand how you're thinking about these businesses and you know.

Speaker Change: Really how we should think about the contribution of volume mix going forward.

Speaker Change: Yeah, Thanks, Bonnie listen to emerging market numbers were terrific, even ex Argentina very.

Very positive volume and positive pricing ex Argentina. So we're encouraged.

Speaker Change: Very much so some of our larger markets, particularly in Brazil, India, and Mexico continue to perform very very strongly and if you look long term strategically this is where the growth is going to come from I mean, there continues to be per cap opportunities premium position opportunities in those markets, which we think we're executing very well.

Speaker Change: I'm sure, we'll get into some discussions on Latin America, but they continue to perform exceptionally well. Despite some of the choppiness that we've seen in some of those markets, particularly Mexico and post elections, but overall the emerging market strategy that we have in place continues to deliver so you go across the board Asia strong performance this quarter.

Speaker Change: Particularly China steps, our Colgate, China business performed exceptionally well, India strong Africa Eurasia. Despite some of the volatility of that division is going through again quite strong. So we think the refocus on some of the basic fundamentals that we had to put back into the business on driving household.

Speaker Change: Penetration, making sure we're looking at the premium position opportunities getting gross margin back into the P&L has allowed us to get a lot more flexibility and targeting some of those markets now as you well know there is significant volatility in emerging markets. We've seen some of the exchange rates.

Move negatively over the recent periods and will have to adjust accordingly to that moving forward, but overall, we feel very good about it but we're not immune to some of the economic and political issues that I outlined earlier.

Speaker Change: That impact those markets, but overall the underlying performance is kind of right, where we'd like to see it.

Speaker Change: The next question comes from Kevin Grundy with BNP. Please go ahead.

Kevin Grundy: Great. Thanks, Good morning, everyone and congratulations on a really strong quarter and results year to date.

Kevin Grundy: Dan I was hoping maybe you could pivot to.

Kevin Grundy: Gross margin again.

Kevin Grundy: Strong in the quarter and we're seeing the pricing.

Kevin Grundy: Certain step down here commensurate with lower though cost inflation funding the growth continues to be quite good has been for very long time at the company without giving guidance for next year can you maybe just help us think about the building blocks and how you're thinking about gross margin development.

Kevin Grundy: Over the next 12 months or so and then Relatedly what that May mean that you're thinking about.

Reinvestment further down the P&L. Thank you for that.

Hey, good morning, Kevin Thanks for the question. So gross profit we're very pleased with the gross profit margin here in third quarter and candidly it was better than our expectations up 270 basis points year on year and improved sequentially as we've disclosed before we continue to see raw material inflation and you saw that in our gross margin.

Kevin Grundy: All forward also we're going to wrap around uneven tougher compares here on a year on year basis in Q4. So as we think about the components I think the teams have done a really nice job of looking and driving funding the growth to drive productivity, which will help us on the margin and then.

Kevin Grundy: <unk> openly we also get benefit from volume so as the volumes have been increasing we get the ability to get more overhead absorption and that's always a benefit when we think about the variances now as Noel talked about earlier, we expect that the pricing contribution will mitigate over time, so we're not going to give 25.

Kevin Grundy: Guidance here, but I think if you look at our history, you would see that we drive our funding the growth we have a great program here to drive that productivity over time and that funding the growth combined with revenue growth management will help us balance out that P&L. The model, we continue to expect which would be <unk>.

Kevin Grundy: <unk> margin.

Kevin Grundy: We will drive that profitable growth, we'll invest that back in the business through innovation through advertising to deliver both top and bottom line.

Kevin Grundy: Okay.

Speaker Change: The next question comes from Lauren Lieberman with Barclays. Please go ahead.

Lauren Lieberman: Great. Thanks, so much.

Lauren Lieberman: I was just curious if you could talk a little bit about the philosophy on advertising and reinvestment spending.

Lauren Lieberman: How high can you go there.

Lauren Lieberman: Sure.

Lauren Lieberman: Rate of return.

Lauren Lieberman: Whether it's 25, but let's call it 25 and beyond if you've created the flexibility Dan just spoke to ongoing productivity programs funding that growth.

Lauren Lieberman: Well, how do you think about that spending and making sure it still coming back with that same ROI and it is not diminishing.

Speaker Change: Yes, good morning, Laura and thank you.

<unk> talked about for quite some time and you know the fundamental strategy within the company is obviously building that flexibility. So we can reinvest in building our brands I mean, we've got great penetration opportunities, we've got brand equity and health.

Speaker Change: Opportunities and ultimately that's how you drive sustained growth over the long term is making sure that consumers understand our product benefits and are excited about using our products and so we find as you see through the volume line, particularly we have a lot of internal measurements to assess ROI, but if you take it at the simplest level.

Speaker Change: <unk> to drive volume growth and broad based penetration around the world is the most important benchmark for us to ascertain whether our advertising is working for us or not how high is high we continue to assess this on a geographic on a geographic basis are we getting the returns are we do we need to move money, which is a new for.

Speaker Change: US from one division to another where we're seeing better returns on that I talked about Europe earlier, we're seeing exceptional return on investment with our advertising investments, particularly in oral care. We've obviously had the flexibility to now put some more money into the North America business, which I think will benefit from that but overall, we're getting better at understanding what.

Speaker Change: Working for us and particularly as we look at some of the work we're doing around analytics and using AI to really improve our digital impact that's going to have a better ROI for us moving forward I would very much like to find even more efficiency in the advertising P&L that will be a primary focus for us as we move into 25%.

Speaker Change: <unk> six is really beefing up the analytical capabilities, we have around our media buys and making sure that we're really understanding what's working for us on a much more fluid basis than we've had before so we can make decisions on an intelligent basis as quickly as possible. So overall, we're pleased with the advertising investment we've been at.

Speaker Change: I will now support more of our brands broadly across the business that is certainly helping drive overall health and most importantly, again, we're seeing good penetration numbers and good premium position opportunities through some of our innovation. So overall, we feel good about that we're going to continue to invest as long as we see the top line and.

Speaker Change: Moving.

Speaker Change: The next question comes from Neil <unk> with.

Speaker Change: Jeffrey Please go ahead.

Speaker Change: I would like to follow up on that a little bit I think it was interesting what you said.

Speaker Change: Or at some of the things that are working can you maybe just talk about some of the changes that you've made maybe isn't being tactical on the advertising versus longer term brand building. If you could just maybe get into some of the tweaks because when we see such a good result, especially in some markets where.

Speaker Change: CPG peers have struggled with is it feels like there's a lot more going on and if you could just give a little more detail what's behind that I think it would be helpful.

Speaker Change: Yes, sure Collin. Thank you listen over the last three or four years, our team here in New York working really closely with our operating heads has spent a significant amount of time in the strategy of the company and would that really entails is making sure that we are collectively working together on price.

Speaker Change: <unk>, where we see the biggest growth opportunities historically.

Speaker Change: I'd say, we were a bit democratic and our spending we're now much more strategic.

Speaker Change: And we are able to pinpoint where we're getting the best ROI, where we see the best growth opportunities.

Speaker Change: And the division presidents arent afraid to move money around within their divisions and across divisions to ensure that we're putting our money in areas, where we're going to get the best return for that and that clearly demonstrated through the volume growth that we're seeing across all six divisions I think it really comes down to not only just oral care in pet health and skin health, but.

Speaker Change: Now looking at opportunities both in the personal care businesses, the classical personal care businesses body wash had a great performance in Europe. This quarter, they're supporting some relaunches with great innovation and advertising Likewise, we're seeing some great opportunities in home care across Latin America, which had a nice home care results in the quarter. So.

Speaker Change: It's broad based support and it's making sure strategically that we're very thoughtful about where we're putting the money in terms of geographic the second aspect of that is exactly how we spend our money.

Speaker Change: Media environments become far more complex there are various platforms to choose from we're being very selective and focused on how we spend that money, it's easy to get enamored with a lot of shiny objects out there in terms of media opportunities, but we're focused on where we can build reach in and build the frequency accordingly to build brand health and the <unk>.

Speaker Change: Digital teams here in New York, helping to share best practices around the world and getting that ROI up specifically in the digital area across different mediums has really paid out nicely for us.

Speaker Change: The next question comes from Chris Carey with Wells Fargo. Please go ahead.

Chris Carey: Hi, Good morning can you expand a bit on what you're seeing in Latin America, you made a comment about Mexico election, but in the prepared remarks. There was also a car.

Chris Carey: Comment about stabilizing and still positive so just what's the direction of travel in Latin America, specifically, Mexico, and perhaps Brazil, and then just connected to that you.

Chris Carey: You talked about some currency volatility and needing to respond in different ways. How do you think about pricing in this market specifically.

Speaker Change: The macros are stable.

Speaker Change: Stable, but maybe not as strong as they were a year ago, just any thoughts on how you'd approach strategy in these markets over the next 12 months. Thanks.

Speaker Change: Chris. Thank you. Good morning, So again as you mentioned really strong performance in Latin America, and notably against tougher volume comps. We did expect some slowdown in organic sales growth and that's what we're seeing but very much in line with our expectations. So feel very good about that and the underlying health of the business is specifically market share.

Latin America had a terrific quarter pleasingly, if you look at that business on a two year stacked basis volume has increased sequentially for four consecutive quarters. So despite the fact that there's a lot of volatility we're seeing volume come back into the category and you'll remember that we took significant pricing in those geographies over the <unk>.

Speaker Change: Last two years, so to see volume come back as quickly as it did and sustained is important now post elections, we have seen some choppiness in Mexico, particularly around the category.

Speaker Change: Maybe more of a normalization, we're going to have to watch that carefully and make sure that we're thinking about our spending accordingly in that market, but we've got a really strong innovation plan you saw in the prepared remarks, we've relaunched Colgate total which is a very significant business across Latin America, and affords us a very important opportunity to continue to drive.

Premium amortization, but behind what we think is the best formula we've ever put it in the market on Colgate total and one that we are very excited about seeing the results of that across Latin America, but again pricing up ex Argentina. So if foreign exchange continues to move against US the strength of the brands and the support that we put behind.

Speaker Change: That business, we think we can we can take more pricing in those markets to help offset that but we're not immune to some of the sluggishness in the foreign exchange the hits those markets as you well know.

Speaker Change: I talked about Mexico at Barclays and overall I think we continue to have a very strong performance there, but the sluggishness that we're seeing across some of the categories.

As we ended the quarter, we need to watch that carefully and I think again the team is very well positioned to execute based on what we see so overall, good Brazil, a terrific quarter for Brazil.

Speaker Change: Despite obviously, some a little bit of uncertainty in those markets that continues to plague them, but I feel good about what we're seeing coming out of Brazil across the rest of the region performance continues to be quite strong and this is a team that knows how to execute in volatile environments knows how to continue to drive penetration and premium position.

Speaker Change: So I feel pretty confident that while despite the lack of aggressive pricing given the inflationary pressures, we will still get some foreign exchange up pricing in the business over the subsequent quarters.

The next question comes from Olivia Tong with Raymond James. Please go ahead.

Olivia Tong: Good morning. Thank you I wanted to ask you broadly about affordability given the macro environment, particularly in North America, but I think this is relevant to all markets.

Olivia Tong: As consumers continue to scrutinize their spending can you talk about some of the initiatives that you have.

Olivia Tong: That helped with respect to either promotional plans or at mid tier price points with product.

Olivia Tong: Just sort of thinking about the broader picture and how consumers are thinking about their total basket spend and actions that you're taking.

Olivia Tong: To maintain if not grow share in that backdrop.

Speaker Change: Thanks, Hey, good morning Olivia.

Speaker Change: So again, let me come back to strategy, our strategy has been to accelerate our innovation, particularly on the premium side of the business providing value add benefits to the big core businesses that we have around the world.

Speaker Change: Supporting that with advertising and ultimately getting the brand penetration and share growth our volume share has performed well in the quarter in general across the world are likewise, our value shares. We saw obviously toothpaste performed quite well in that regard so overall again.

Speaker Change: Tumor may be a little bit challenged, particularly in North America, it's making sure that we continue to dial up our innovation and provide real added value for across the multiple price tiers in which we compete.

The other aspect of that is making sure that you are very thoughtfully thinking about your promotional cadence and how you promote.

Speaker Change: You're a digital coupon strategy.

Paper coupon strategy.

Speaker Change: Our promotions on pack promotions or price pack architectures all of those are critically important in making sure that we have the analytics to really determine what's going to drive category growth for our retailers and continued to drive performance for our business I was just reviewing the other day some incredible work that we're doing with some of the.

Speaker Change: <unk>.

Speaker Change: The retailers in the U S with real AI and analytics around our promotions and seeing great results for that so I think the point is yes, the competitive environment is a little bit more competitive coupon redemption rates are up.

Speaker Change: Promotions seem to be more or less in line, which I would say normalized is still not back to the pre COVID-19 levels, which is good but more or less normalized and ultimately is making sure that we're spending our money as thoughtfully as we possibly can to get the best ROI, but I would say a more normalized consumer.

Speaker Change: Slightly higher promotional our redemption rates behind coupons, but across the world, It's pretty consistent in terms of where we were.

Speaker Change: Post COVID-19.

Speaker Change: The next question comes from Robert <unk> with Evercore ISI. Please go ahead.

Robert Moskow: Great. Thank you very much terrific results no. So if you stand back and listened to at least three or four the questions. I think the underlying question is why are you guys doing so well in so many places.

Speaker Change: And it's.

Speaker Change: And I think.

Is it just that hey, youre spending more money you can spend more money you've got the data so you're spending in the right places and that's kind of a very broad sort of answer, but what I would like to do is drill down a little bit more on that point and see and maybe just talk about oral care.

Speaker Change: How much of your success is driven by technology by the widening of initiatives and then marketing that or other specialties, just trying to get a sense of things that can drive sustainable.

Speaker Change: <unk> market share gains that go beyond just spending more money in marketing and I know thats going on but I just wanted to give you the chance to talk about that a little bit more.

Speaker Change: And then also if if if.

Speaker Change: We have the time.

Speaker Change: Looking at what you're doing in China, which is just you're just being much more successful than anybody else at this point.

Speaker Change: And how that model applies to that very tough market. Thank you.

Speaker Change: Great. Good morning, Rob. Thanks, Thanks for the question.

Speaker Change: So again it comes back I think with just the consistency of performance and our focus categories around the world and our ability to really dial in on where we see the growth opportunities. We have spent a lot of time talking about building capabilities and I really want to emphasize that because you don't necessarily see the immediate.

Speaker Change: Impact in the quarter, but those capabilities are all intended on building long term sustainable health behind our innovate behind our business. So it's innovation it's digital.

Speaker Change: Our advertising return on investment, it's our data acquisition and using data to drive better decision, making.

It's making sure that our innovation across H, two and H three is where it needs to be making sure. The core is where it needs to be making sure that we're addressing new channel behaviors, but it's all the basics that we've been talking about and making sure then that we invest accordingly, and we had to get the middle of the P&L the address to do that so.

Speaker Change: We deliberately took a lot of pricing over the last three years to get our categories, where they needed to get to and then ultimately that is paid out in allowing us to really invest consistently behind our brands and we measure internally our brand health the health of our equities than they are in a really good place and that's what we want to continue to build.

Speaker Change: Now, we're not immune to what everyone's talking about clearly we're going to see some divisions take a step back, but the breadth of our business and our geographic footprint. We believe allows us to weather. Some of these the volatility that you are seeing in referring to better than most and we want to continue to do that but we can't be complacent.

Speaker Change: We need to build more capabilities and sharpen those as we move forward, we need to continue to address the opportunities we see in certain geographies, where we think there is real growth for us there, but again its deliberate and thoughtful approach to this business, we're going to be consistent we're not going to necessarily try to hit home runs a lot of singles or to take a sports analogy.

But making sure that we do that in a way that drives broad base growth over time, so again, a lot of the strategy, Rob, particularly on oral care.

Speaker Change: To your question, we think the focus on premium position the great new product innovations that we brought on whitening Adjacencies. We now have Colgate total rolling out in Latin America with some significant new innovation behind the core you heard about some of the great technology that we're bringing into Max fresh across India and some of the southeast.

Speaker Change: Asia markets that we'll continue to rollout so again, the stepped up innovation and resources that we're putting behind that will ultimately play out on China specifically.

Speaker Change: It should be said that we had some pretty easy comps, but that being said our China business continues to perform really really well I'll talk to the Colgate first and then the holiday and Hazel business. The Colgate business continues to do very well up high single digits, driven primarily by premium position.

Speaker Change: Innovation across the calendar moving forward, we're improving our brand health behind some of the investments that I referred to and overall, we're getting a good mix of volume and pricing against tougher comps on the Colgate Holly in Haynesville. As you know has come out of quite a few quarters of of challenge growth, we're starting to see that come back nicely.

Speaker Change: Lee.

Speaker Change: Which is good but not where we need to be yet. So we still have room for opportunity. We are looking at our go to market approach on Holly and Heizo moving forward that team is really deliberately thinking about how we wanted to be structured over the next couple of years to ensure that we can continue to invest in a very competitive market and drive sustained volume and <unk>.

Speaker Change: <unk> growth for the business, but overall I'm pleased with the China performance, but we're not immune to the slowdown slowdown that we're seeing across our business, but we think the consistent performance behind our innovation and supporting those business will drive sustained growth moving forward.

Speaker Change: The next question comes from Andrea Teixeira with Jpmorgan. Please go ahead.

Hi, Good morning. My question is what was the exit rate for organic sales growth in the quarter.

Andrea Teixeira: What is embedded in your guidance for Q4, because even if the guidance range is a wide range I know from your tone on this call it seems that youre close to.

To keep the pace up 6% globally. So in other words, if your current trends continue is that the way we should be thinking that that's top of the range would it be that you know.

Andrea Teixeira: That at around 6%.

And if I can squeeze on kind of indication on Hughes can you comment now on the potential for more international expansion with more capacity into 2020.

Speaker Change: Great. Good morning. Thank you listen we don't we don't guide by quarter, So I didn't want to get into the specifics but.

Speaker Change: I do think we feel pretty good about the underlying health of where the quarter came in so overall, we're good and as I said in my upfront comments, we think we're positioned for consistent growth.

We're not again as I mentioned.

Speaker Change: Immune to some of the issues that many of the CPG companies have talked about throughout the earnings the earnings season, but thats reflected in our guidance and I think you'll see that in our numbers and the guidance speaks for itself in terms of where we think we'll be obviously, we've seen a little slowdown a little move in foreign exchange.

We will see ultimately where the categories unfold as we exit the year, but overall, we feel like red.

Speaker Change: Pretty good position on hills capacity that is continuing to obviously allow a lot of good things on the Hill's business is allowing us to build more flex in the middle of the P&L, we continue to find ways to truly optimize that supply chain and build and build more positive variances through those factories seconds.

Speaker Change: It's allowing us to obviously expand into higher growth segments in the West segment, which we saw a nice growth in the wet business in the quarter and continuing to drive overall share in that segment. So it's given us a lot more flexibility there is more work to be done we.

Speaker Change: We will continue to obviously be very very diligent about how we think about allocating volumes across the world and addressing some of the growth opportunities that we see particularly internationally, but overall <unk>.

Speaker Change: Terrific quarter and the supply chain team at Hill's is doing just an exceptional job.

Speaker Change: Integrating the new facilities and finding ways to really optimize the network.

Speaker Change: The next question comes from Bryan Spillane with Bank of America. Please go ahead.

Bryan Spillane: Thanks, operator, good morning, everyone.

Bryan Spillane: I have just maybe one point of clarification and then a question in the clarifying.

Bryan Spillane: I think earlier.

Bryan Spillane: Excuse me you talked a little bit about gross profit dollars.

Bryan Spillane: And gross dollar profit growth and I think it's maybe created a little bit of a question about whether there is a signal here that.

Bryan Spillane: The focus maybe more shifting to gross profit dollar growth versus gross margin percentages and I know you've had a view on that in the past if you could just sort of clarify that.

Speaker Change: Is there any sort of message that you're trying to send her.

Speaker Change: We still need gross margin expansion.

Speaker Change: Yes, let me, let me throw it to stand Brian and good morning.

Speaker Change: Message whatsoever here.

Speaker Change: As we I think we've been quite consistent we understand the importance of gross margin.

Speaker Change: Gross margin percent and gross margin dollars encouragingly in the quarter, we saw both.

Speaker Change: That's important for us, but again as we strategically look at the growth opportunities, whether it's innovation geographically.

Speaker Change: We're thoughtfully thinking through exactly how the impacts on gross margin will be but ultimately what we're looking for is our ability to continue to drive gross margin dollars to invest in the business and it's hard to get there without gross margin percent were not just going to chase volume to drive dollars is what I'm, saying it has to be a very deliberate choice, but let me give it to stand he can prove.

Speaker Change: A little bit more color yeah, Brian So first of all it is obviously a combination of the two and if you think about the business. We have been you saw a great margin improvement in a number of the businesses, particularly in hills and as we look the only part we are trying to point, we're trying to make is that how we deliver that margin improvement in those in that dollar growth is going to shift.

Speaker Change: So pricing will be less of a benefit volume has been.

Speaker Change: Help here going in and productivity will continue to be a driver as we look at that but obviously as we look at both margin and dollars. It's a combination of both and that is part of our overall business model on how we drive the investment back into the business and deliver top and bottom line growth, Brian If I if I can just add.

Speaker Change: One point that standpoint, with the Bottomline growth pieces key right, we need Etfs growth in dollars right because that's what creates long term <unk> at the top end of our peer group. So we talk about organic sales growth that we're focused on driving dollar based sales growth, we talked about driving gross margin percentage, but.

Speaker Change: We also know we need to drive those gross profit dollars to drive EPS growth and drop dollars to drive <unk>. So it's a very thoughtful way to look at it.

Speaker Change: Dan said, you need both to drive that bottom line growth.

Speaker Change: The next question comes from Andrew Wolf with Piper Sandler. Please go ahead.

Speaker Change: Hey, good morning, Thanks for taking the question.

I'd like to get a little bit more clarity on some of the dynamics that were going on in North America in the quarter and it sounds like some segments are question Q3 to Q4 can you just clarify what that detail and then the pullback in the e-commerce and what that led them to be able to and then how should we be thinking about some of the macro dynamics.

Speaker Change:

Speaker Change: In Q4, especially in the U S.

Speaker Change: Retailers are talking about pulling back inventory orders. Thank you.

Speaker Change: Yes, Colin Thank you again, we talked about three specific things. Obviously, there is some shipment timing that moved from third to the fourth quarter that was just due to some disruptions in our network and ultimately getting that order out in time, but ultimately it will move into the fourth quarter, but nothing systemic there that we feel would be.

Speaker Change: Recurring the E Commerce issue was specifically on the skin health business, we've seen a little obviously, there's some softness coming out of out of Asia, specifically, China, but this one was more specific to the U S market, where we saw.

Speaker Change: Some of our big online retailers pulled back a little bit on <unk>.

Speaker Change: Orders at the end of the quarter, we think those were inventory adjustments more than anything but in any case, where we need to watch that carefully and see if that's going to be sustained or not moving forward.

Speaker Change: And overall the macro dynamics in the North America, I would say more stabilization, we haven't seen anything deeply unusual on the promotion side I think the percentage sold on promotion is more or less pretty consistent it's still not back to where it was as high as it was pre COVID-19. So overall I would say more normalization as I did mentioned.

Speaker Change: Little higher redemption rates coming through on couponing, and a little bit more.

Speaker Change: Broad based activity in terms of the number of promotions, but overall depth and proportionate to what we've seen in the past seems pretty normalized right now.

Speaker Change: The next question comes from Steve Powers with Deutsche Bank. Please go ahead.

Steve Powers: Okay. Thanks, and good morning, I wanted to ask on skincare.

Steve Powers: I guess first just mechanically and following up to degree on North America.

Steve Powers: Are you able to quantify how much of a drag the restatement was on growth in that segment. This quarter can you sample that was.

Steve Powers: But then more generally I guess.

Steve Powers: You've talked a little bit about it but maybe could you expand on what youre seeing in skincare trends across key markets, because im assuming theres a good deal of variability and do any of the reporting.

Steve Powers: Structure changes that you've made this year carry with them.

Steve Powers: <unk> strategy with respect to how you approach skin care skin health opportunities longer term. Thank you.

Speaker Change: Yeah, Thanks, Steve So overall.

Yeah.

Speaker Change: Let me just generalize North America was with the order changes and the skin. If you take skin out was closer to flat.

Speaker Change: For the quarter, but I'm not going to quantify any more specifics than that.

Speaker Change: But specifically around the skin sector I think you've heard from others. There's been some sluggishness, particularly in Asia Likewise in Europe and to a certain extent in the U S. As well. So we're not necessarily are immune to that but we have been doing very specifically is we are thinking about that business quite differently. We brought in.

Some outside talent somebody with over 20 years' experience at L'oreal.

Speaker Change: Getting very clear and articulate about what we where we want to compete and how we want to compete in that space. We feel very good about that organization now being much more centralized here in the U S. In order to drive global decisions from this from the center and making very deliberate choices on how we invest and where we invest we.

Speaker Change: Had to clean up some of the market expansion opportunities there that we didn't think were sustainable for the business.

Speaker Change: But overall, the economics and long term health aspects of where we see that business growing continue to be very favorable and we're encouraged obviously by the long term strategy. We've got some short term issues with <unk> Asia and some of the softness that we're seeing in some of the European markets to address but overall again.

Speaker Change: We feel the strategy, we're putting in place will get us back to the sustained growth that we expect.

The next question comes from Mark <unk> with Stifel. Please go ahead.

Speaker Change: Thanks and morning, everybody.

Speaker Change: I wanted to go back to Q U S World here.

Speaker Change: Kind of.

Speaker Change: More of a deep question there so.

Speaker Change: You can look at the market footprint for a long period of time, there was four or five quarter, where we're at with that growth.

Speaker Change: 'twenty two 'twenty, three but largely it's been.

Speaker Change: A.

Speaker Change: Tolerating or share loss situation going back quite a long time I guess the question.

Speaker Change: What contributed to that period of outperformance.

Speaker Change: <unk>.

Speaker Change: Back to share.

Speaker Change: Losses, and maybe if you had a deep dive on what do you think competitors are doing well, where they are gaining share where do you think colgate could do a better job from a share perspective.

Speaker Change: How do you broadly think about it because I know, there's a lot of them.

Speaker Change: Bought innovation around this total relaunch is to refocus on whitening.

Speaker Change: The general trajectory remain kind of where it is.

Speaker Change: Yes, thanks Mark.

Listen overall shares or roughly flat down 20 basis points on toothpaste and up on toothbrushes.

Speaker Change: Clearly we've seen some some impact of our refocus on some of the untracked channels.

We've had over the last couple of years and seeing good performance in those untracked channels. So overall business is good it's not exactly where we want it right now and we're very focused on getting the innovation strategy dialed up we've got to get the premium <unk> side of that business addressed we've got strong core businesses.

Speaker Change: That we're seeing benefited as you see the consumer to certain extent some of the consumers trading more into the mid tier, but overall, it's getting the premium <unk> side of the business address moving forward and we're very focused on that and the strategy toothbrush business continues to perform very very well so.

Speaker Change: <unk>.

Speaker Change: Putting more investment into that market getting the innovation right executing the fundamentals around distribution and shelf sets all the basics that we think are necessary.

Speaker Change: The plans that we have in 'twenty five with some of the big core Relaunches.

Speaker Change: That we're not Privy to talk about we think we're set up for stronger success moving forward we've seen some.

Speaker Change: Choppiness with some of the retail environment, particularly the drug class of trade, where we had higher shares has struggled to drive traffic and turn in their retail environments or having to shift accordingly, but we still feel the drug channel long term provides a growth opportunity for us, but <unk> seen some sluggishness in that retail environment in the short term.

Speaker Change: Yeah.

Speaker Change: Our last question today comes from Edward Lewis with Redburn Atlantic. Please go ahead.

Edward Lewis: Yes, thanks very much.

Edward Lewis: I guess just looking back when you launch you will sort of new strategy a few years ago, you talked about the <unk>.

Edward Lewis: Oil products with CBC, you're doing a lot around that you talked about adjacent categories and you also talked about adjacent channels. The opportunities now and just look at the results today I mean, we've seen the success for a number of years found e-commerce in China, but how much of the channel mix changed in regions like Latin America, and Asia ex China relative.

Edward Lewis: To where it was before and how much is that helping.

Edward Lewis: As youll see with the premium monetization strategy.

Speaker Change: Yes. Good morning, Thank you.

Speaker Change: Interesting question, it's back on the channel expansion I mean, the initial.

Speaker Change: <unk> on that was predominantly e-commerce, but we address we identified real unique opportunities in the expansion of very innovative discount formats around the world.

Speaker Change: The expansion of the club store format in certain parts of the World Youre seeing club stores.

Speaker Change: Particularly in Asia, and more specifically China grow.

Significant couple of years, so, it's making sure that as we think strategically around where we want to invest we're investing in those retailers that are going to drive long term growth of the business and we've been very quick to adopt new formats and that's been one of the successes. We've had here in North America. When we initially guided to the dollar store.

Speaker Change: <unk> decades ago, and ultimately <unk> got strong shares there, but it's making sure that we are working with our retailers all of our retailers to bring products to drive innovative growth for their sectors and that's the key focus for us category growth across all channels and making sure that as we see new retail environments come on stream.

They were thinking very thoughtfully on how to do that in a way that drives growth for our retailers for the category and for the whole market. So I think it's just being very attuned to what we're seeing in the markets.

Speaker Change: We're seeing a lot of very innovative things happening at the retailer level I think that's to be expected given some of the challenges in the move to ecommerce. So theres big box retailers that are having to change their shopping experience and we're very much working in tandem with them to ensure that we have the products that they need the price pack architectures and configurations.

Speaker Change: They need in order to drive excitement at the shelf.

Speaker Change: Okay with that Q&A portion.

Speaker Change: Thanks to everyone again, a strong quarter, we're having a good year so far.

Speaker Change: Through three quarters net sales were up four 5% organic up eight five with again, a very strong balance between volume at three three and pricing at five two and EPS double digit on a year to date basis, and importantly, getting that flexibility across the income statement and the balance sheet, but this.

Speaker Change: Is the hard work of Colgate people all around the world are aligned to our growth strategy and executing extraordinarily well. So thanks, everyone for the questions today and thanks to all the Colgate people for delivering a strong quarter.

Speaker Change: The conference has now concluded. Thank you for attending today's call you may now disconnect.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: [music].