Is Colgate's Cost Discipline Enough in a Softer Demand Cycle?

Colgate-Palmolive Company’s CL productivity initiatives played a significant role in helping offset elevated raw material and packaging cost pressures in the third quarter of 2025. While higher input costs continued to weigh on gross margins, the company’s growth-funding efforts provided a meaningful offset, highlighting the importance of internal efficiency. In addition, the integration of AI and predictive analytics within the program is aimed at automating processes such as demand planning, supporting lower working capital requirements and stronger cash generation.

Colgate’s Strategic Growth and Productivity Program is becoming a key driver of margin performance as the company navigates cost inflation and uneven category trends. Management emphasized that the initiative is designed to transform the organization into a faster, more efficient, and better-aligned operation in line with its long-term strategic priorities. Importantly, the program also enhances P&L flexibility, helping offset headwinds from raw material inflation, tariffs and foreign exchange volatility.

The company is generating increased leverage across the P&L by continuing to optimize its supply chain. These improvements are delivering efficiency gains and cost benefits, allowing the business to improve financial performance despite overall volumes remaining softer. Management noted that it underpins a new operating model designed to support Colgate’s longer-term strategy, including greater use of data, analytics and digital tools, improved marketing effectiveness and increased supply chain agility.

Colgate is leaning on disciplined cost control and productivity gains to defend margins, but the key question is whether efficiency alone can offset softer demand and persistent input cost pressures. Overall, Colgate has been clear that this is not a short-term solution. The company expects productivity benefits to accrue over time, particularly as savings are reinvested to drive growth.

Zacks Rundown for CL

Colgate’s shares have lost 7.8% in the past six months compared with the industry’s decline of 10.5%. CL currently carries a Zacks Rank #3 (Hold).

From a valuation standpoint, CL trades at a forward price-to-earnings ratio of 21.24, higher than the industry’s average of 17.88X.

The Zacks Consensus Estimate for CL’s current and next fiscal-year earnings implies year-over-year declines of 1.7% and 5.2%, respectively.

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This article originally published on Zacks Investment Research (zacks.com).

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