Colgate-Palmolive Company (CL) Q3 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to today's Colgate-Palmolive 2026 third quarter conference call. This call is being recorded and is being simulcast live at www.colgatepalmolive.com. Now for opening remarks, I would like to turn this call over to Executive Vice President, Investor Relations, Claire Ross. Please go ahead.

Good morning, and welcome to our Third Quarter 2026 Earnings Release Conference Call. This is Claire Ross, Executive Vice President, Investor Relations. Today's conference call will include forward-looking statements. Actual results could differ materially from these statements. Forward-looking statements inherently involve risks and uncertainties and are made on the basis of our views and assumptions at this time. Please refer to the third quarter earnings press release and our most recent filings with the SEC, including our 2025 annual report on Form 10-K and our subsequent SEC filings, all available on our website, for a discussion of the factors that could cause actual results to differ materially from these statements. These remarks also include a discussion of non-GAAP financial measures, which exclude certain items from reported results, including these identified in tables four, six, seven, eight, and nine on the third quarter earnings press release. A full reconciliation to the corresponding GAAP financial measures and related definitions are included in the earnings press release. Joining me on the call this morning are Noel Wallace, Chairman, President, and Chief Executive Officer, and Stan Sutula, Chief Financial Officer. Noel will provide you with his thoughts on our results and our 2026 outlook. We will then open it up for Q&A.

Thanks, Claire, and good morning, everyone. A few thoughts. We are clearly pleased to have delivered another quarter of solid top and bottom line growth, particularly in the context of the continued global volatility we are seeing. Our strong results were broad-based, with organic sales growth in all four of our categories and four of our five divisions. We delivered solid gross margin expansion in a challenging cost environment. Base business EPS came in ahead of our expectations, even as we continue to increase our advertising. We are driving operating leverage through our productivity programs, including funding-the-growth and the Strategic Growth and Productivity Program, which drove lower costs. Our balance sheet and cash flow performed through the third quarter was also very strong, with free cash flow up 7%, and we have returned $2.2 billion to shareholders year-to-date. Our strong on-the-ground execution, coupled with our continued investment in our AI capabilities, helped drive our performance. As was the case last quarter, sales growth was led by emerging markets, which were up mid-single digits, driven by India, Brazil, and China. We also had strong contributions from our European markets, where science-based premium innovation and our omni-channel demand generation model have led to record market shares. Our Hill's business had a very strong quarter across both therapeutic and wellness businesses. We are pleased with our global momentum, but remain focused on executing our U.S. turnaround. As mentioned in the prepared remarks, we have seen market share improvements in toothpaste, but remain focused on driving the long-term reset, which starts with scaling premium innovation while reinforcing our core brands. We plan to increase both the pace and impact of innovation, with a pipeline focused on premium opportunities that can grow at scale. We are also strengthening our marketing model and support behind our core equities, with a sharper focus on high-priority channels, including digital, social, and emerging agentic commerce. Faster innovation, better use of AI and data, and more consistent execution will underpin that work. On a global basis, we continue to invest in our revenue growth management strategies, as well as our omni-channel demand generation. We are scaling our AI capabilities globally with PromoAI now in many key markets, as well as with our proprietary AI innovation platform that has made our new product ideation process significantly faster than before. This leaves us well-positioned to deliver perceivable superior products to accelerate category growth and drive continued market share improvement. We believe our efforts in RGM, AI, and our funding-the-growth initiatives give us the flexibility needed to invest appropriately in advertising to build our brands while driving profit and compounding EPS growth, even in a period of significant cost inflation, which we expect to remain elevated in the near term. We are also focused on delivering against our SGPP program, which is helping us build a simpler, more agile organization. The goal is not simply to manage through volatility. It is to emerge with a stronger business and an even more resilient business moving forward. We are pleased with our year-to-date results, and while there are still some uncertainties ahead, we are optimistic that the strength of our global model will set us up for long-term success. With that, let me take your questions.

We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please limit yourself to one question. If you have further questions, you may re-enter the question queue. Once again, if you would like to ask a question, please press star then one. Our first question will come from Peter Galbo of Bank of America. Please go ahead.

Hey, good morning. Thanks for taking the question. Noel, I noticed just in the prepared remarks, there was very little, if at all, commentary on 2027, and I know you're probably going through the planning process of that now. But maybe you could just give us some of the knowables for next year and some of the early puts and takes, particularly on the cost side. Clearly, you're delivering organic sales in line with plan, but I think there's just some concern around what the elevated cost environment might mean for next year. Just any early thoughts would be appreciated. Thanks very much.

Yeah, thanks, Peter. Clearly, since we're in 2026, we won't be sharing guidance on 2027 until the first quarter of next year. But clearly, the business model we're executing right now is helping to offset a very stubborn cost environment that we're experiencing around the world. As we said, as I said in my prepared remarks, we expect the cost environment to continue through the fourth quarter and into the early part of next year. We're focused on the levers we can control and executing our strategy in an environment where costs are clearly elevated. As we mentioned, tariffs would peak in the fourth quarter. FX is moving a little bit against us, but we have the levers and the flexibility, and we believe the growth opportunities to continue to accelerate as we see the opportunities come to bear. We'll provide guidance on 2027 in the first quarter of next year. Right now, we're focused on what we can control and delivering against that as well as we can.

The next question comes from Dara Mohsenian of Morgan Stanley. Please go ahead.

Hey, good morning.

Morning, Dara.

Morning, Dara.

Just wanted to continue along that line of questioning. Can you give us a bit more specifics on what drove the gross margin upside in the quarter and the confidence on raising full-year gross margin guidance? Strong internal performance, that is a bit incongruous with a worse-than-expected external cost environment. Just wondering what really drove that internally and what was better than expected. Then, Noel, you mentioned some of the offsets you are focused on going forward. Maybe you can just touch on high level, the pricing lever, number one. Then second, on ad spend, you have had a 40% increase over a four-year period, with Q4 left to go, but it looks like about 40%. Huge increase over time. Can you just talk about the ROI behind that, and if you are comfortable you are getting a strong ROI, and maybe if that is changing at all with some of these AI tech tools?

Thanks, Dara. I will let Stan talk in a minute about the cost environment, how we are dealing with that. A lot of the key initiatives that we have talked about, whether it is funding-the-growth, SG&A, have been a key driver of us helping to offset that. Let me talk to something that has been pretty consistent in our narrative over the last couple quarters, and that is our ability to get ahead of costing with pricing. If you go back to the first quarter of this year, we generated 220 basis points of pricing, 160 in the second quarter, and 200 more or less in the third quarter. Clearly, we are getting pricing into the P&L as quickly as we can. Our general managers are using that to obviously drive some margin and help offset the uncertainty and the continued volatility we are seeing around cost. It is imperative that we get that pricing into the P&L upfront, as we see a continued challenging cost environment as well as potentially a challenging foreign exchange environment. The second aspect of that is, certainly outside the U.S., we have been extremely successful in premiumizing our portfolio and driving more premium innovation, whether that is at Hill's with a very strong therapeutic business this quarter, whether that is through some of the Optic White success and the total relaunch we have had around the world. That premium innovation is clearly driving a nice upside in margin. The third is clearly the strong volume that we are consistently delivering through the P&L and the leverage we are getting at our manufacturing facilities with that volume. That is certainly helping to offset that. With that, let me let Stan talk a little bit about the cost environment, what we are seeing, and how we are dealing with it with a couple initiatives we have in place.

Thanks, Noel. Let us start with the gross profit here. We are pleased with the gross profit performance on a year-to-date basis. As we look at that year-to-date performance, I think it is indicative of the comments Noel just made, but in particular, the expansion, if you kind of go down through the drivers, obviously material cost is a headwind. Material prices were roughly 300 basis points of a headwind in line with our expectations, but it remains a volatile environment around commodities, particularly around oil-based commodities. Helping to offset that was our productivity. So, funding-the-growth drove over 290 basis points of offset to the material inflation, and that is really the hard work of all of the Colgate people around the world driving that performance. Pricing, as Noel just talked about, contributed 80 basis points of favorable, driven by RGM, and we had slight favorable from mix of about 20 basis points. As you kind of look, we guided for margin to be up on a year-on-year basis, up from roughly flat previously, and that is really driven by the performance we have, the confidence in our productivity as we exit the year, even though commodities are elevated. Our commodities right now are largely locked in for Q4, so as we look at the overall balance, we think we can expand our gross profit margin for the year. Let me peel that back a little bit on raw materials. Raw materials and freight and logistics, I will lump that in, continues to operate in a really volatile environment. While we raised our guidance, raw and pack costs remained a significant headwind in Q3, particularly resins and petrochemicals, as well as pulp and paper. Our productivity, and that is funding-the-growth and SGPP, helped us to mitigate that within the quarter. We expect that underlying cost commodity pressure to remain elevated in Q4 and the near term. Resins and petrochemicals remain high, but our cost projections for the balance of 2026 are largely locked in and included in our guidance. It will be, as you see the commodity volatility, I think a headwind heading into 2027. Freight logistics, we have all seen the escalating fuel costs, and those are having a direct impact on freight costs. As you know, those hit the P&L faster than commodity costs, which flow through inventory. Logistics costs have increased, they remain elevated, and our guidance for Q4 has the highest logistics cost quarter of the year, both in dollars and as a percent of sales. We expect that continued pressure through the end of the year and heading into next year. Overall, it is the balance of our portfolio. It is the balance of offsetting those elevated costs through pricing, productivity, both from funding-the-growth and SGPP, that give us confidence to raise the guidance for the year.

Yeah, thanks, Stan. Just perhaps one additional clarification. We had an insignificant amount of tariff refund come through in the third quarter, so that was not the driver there, and we are not anticipating in the fourth quarter to have any further tariff refunds. Let me come back to your last part of your question, Dara, which was on advertising. Clearly, the strategy that we have been deploying for the last few years is to drive consistent top-line growth with the accelerated advertising spend that we are deploying around the world, and clearly, that model seems to be working for us. We are spending a significant amount of time with understanding ROI, as I have talked about, and we feel very good about the ROIs that we are seeing. Now, the focus moving forward is to continue to accelerate advertising, but we are going to continue to use the tools we have at our disposal to optimize that spending as efficiently as possible. We have got a good handle of what is going on with the advertising line. We feel very good about the spend, and you see that playing out in the market share growth across the world. This quarter, on oral care, toothpaste up, toothbrushes up, mouthwash up. All, we think, consistent with the innovation strategy and the brand building that we have. If we talk about some of the sluggishness that we have seen in categories around the world, it is also important that we continue as leaders in the category to support the growth with value-oriented premiumization to accelerate the advertising, excuse me, the category growth as we move forward.

The next question comes from Peter Grom of UBS. Please go ahead.

Great. Thank you. Good morning, everyone. Hope you are doing well. I wanted to pivot to top line and maybe with an emphasis on Hill's. A very impressive organic sales growth this quarter. Can you maybe just unpack how the quarter came in relative to your expectations, what you are seeing from a category and market share standpoint, and how you see growth evolving from here? Thanks.

Yeah, thanks, and good morning, Peter. Hill's had a terrific quarter, probably above our expectations, but that team is pretty consistent in delivering against that, which is great to see. A lot of things happened in the quarter that were quite interesting. Clearly, the top line was good, 6.5% ex-private label. As we talked about, the category is still relatively sluggish. We're not seeing any material moves that we've talked about, at least through the first nine months of the year. Most of that growth is the strategic focus we have on growing segments, particularly cat and wet, and market share growth. It's pleasing to see the fact that in a tough environment with increased competition, we're seeing good market share growth and very much the deliberate efforts we're placing in country category combinations and the segment growth opportunities that we're seeing, we're seeing good return on that investment. Therapeutic, as I mentioned earlier, had an excellent quarter. Prescription Diet dog was up behind mid-single digits. Prescription Diet cat was up double digits. Clearly, the therapeutic side of the business and the advocacy we're driving through the profession is playing out on the prescription side, and that's having a halo effect, obviously, on the rest of the business. The other piece I'd call out is, we've been on this long-term journey to truly optimize our manufacturing and capacity that we have around the world, and the increased capacity we put in the wet is certainly delivering some of the improvements we're seeing there. But overall, with the strong volume growth we had in the quarter and the continued pricing, we saw gross margin up 170 basis points. That's allowing us back to maybe dovetail some of the comments I made to Dara's question, to continue to accelerate the advertising spend on Hill's, because the ROI is absolutely there for us, and we're very happy with the campaign we're deploying, with the innovation that we're bringing across both Prescription Diet as well as the wellness side of the business. Overall, doing quite well. But it's a challenge category, and we need to continue to execute well to drive that consistent growth moving forward.

The next question comes from Lauren Lieberman of Barclays. Please go ahead.

Great. Thanks. Good morning. One thing that jumps out at me this morning was the overhead efficiencies, 90 basis points in SG&A, and that was, it has been growing each quarter of the year, sort of benefit. Just curious, how much of it is from the SGPP versus kind of ongoing productivity initiatives? How has, I guess, what you are doing internally allowed that productivity, the SG&A line, to become a bigger component of the P&L? Should we think of this as a new run rate? What is the forward look on SG&A efficiencies? Thanks.

Yeah, thanks, Lauren. I will take that one. On overhead efficiencies, it is really a combination of underlying productivity, but our Strategic Growth and Productivity Program has certainly been a driver. The teams have done a very nice job to implement that. Remember, when we looked at this, we are going to use the proceeds from that in two forms. We are going to invest back into the business, that is in things like advertising, like skillsets, AI, data, and analytics, and we are going to take some of that to the bottom line. There are still escalations underneath the covers as we are doing merit increases, and those vary around the world. We are investing back in the business, but under the covers, even with that 90-point improvement, there is a lot of activity going on. SGPP, as a reminder, goes out through the end of 2028, so we have more that will be coming, and we have talked about that in the past. There is a nice mix here of underlying productivity plus the SGPP contributing to that. This is part of our business model that we are looking at, trying to drive margin improvement, manage overheads, grow the business to invest back in the underlying business, and deliver compounding profitable growth.

The next question comes from Steve Powers of Deutsche Bank. Please go ahead.

Thank you. Good morning. Latin America remains a very solid growth driver, but as you called out in the prepared remarks, Mexico slowed this quarter, and there have been some external questions on forward momentum in Brazil. Maybe just an update on the puts and takes as you look around the region, and how you feel your business is positioned as we exit 2026 and move into 2027. Thank you.

Yeah, thanks, Steve, and good morning. Yeah, as you said, another solid quarter for Latin America, up 6%, which is pleasing, given some of the economic and political changes that we've seen across the region. But that's a testament to the team that we have in place and their ability to be highly resilient and agile as they adjust to things across the region. I think what's particularly pleasing is to see the strong volume growth in Latin America as well, so up 3.9%, and delivering that with 2% pricing in a tough environment. I'll get to both Brazil and Mexico in order. Brazil, obviously up double digits, another very strong quarter, nice market share acceleration, largely driven by, I think, the strong advertising support, but importantly, the portfolio and focus we're putting on premiumizing oral care, with shares up there, driving execution in some of the faster-growing categories like shower gels and others, and doing a nice job executing broadly across the portfolio. We feel pretty good about where things are going. We'll need to watch the real carefully here, as you've seen it inch up or inch down, so to speak, as the dollar's appreciated against that currency quite considerably over the last week or two post the elections, and we hopefully will see that settle down here soon. Mexico was hit with a difficult consumer backdrop, obviously some uncertainty in the categories of which we compete, but also some very specific retailer challenges that we had in the quarter. We will see some of those challenges start to subside as we exit the fourth quarter, and we feel comfortable that those will be behind us as we move into 2027, but we need to get those behind us. Executionally, we have got a really strong plan for next year, so I feel good about that, and the slowness in the quarter hopefully will be resurrected a bit as we move into the fourth quarter. As I mentioned, we are anticipating another tough quarter in Mexico, but the rest of Latin America doing well. I would also call out Andina and Central America, good regions for us. Both had very positive organic growth and executing very well against that. As I look at some of the categories, we had strong category growth across Latin America in oral care, with double digits up in oral care, with low single to mid-single-digit growth in home care, and a slight decline in personal care. Broad-based, the personal care was driven somewhat by a softer shampoo business in Mexico specifically. Across the board, oral care up very strongly, and home care up as well, so we are really pleased with that. The other thing I would say is shares. Shares were up across on oral care, both for toothpaste, toothbrushes, and mouthwash in the quarter. Again, we think across the board, executing well with the diversity of opportunities we have in Latin America. Brazil will continue to perform well. We need to get Mexico back on track, and that is some challenges that we are facing and dealing with, and the consumer hopefully will be a little bit more resilient as we move into a more settled environment potentially in 2027.

The next question comes from Filippo Falorni of Citi. Please go ahead.

Hi. Good morning, everyone.

Morning, Filippo.

Morning, Filippo.

Morning. I wanted to ask on the U.S. business. You mentioned in the prepared remarks that you are seeing some early signs of improvement in U.S. toothpaste. Noel, can you expand a bit on what parts of your plan are starting to work, what more you have to do there in terms of seeing further improvement? And just bigger picture, what you are seeing from a category standpoint in the U.S. Obviously, there has been a lot of focus on price and promotional activities. Do you see an environment of potentially seeing more pricing in your categories as we enter into next year, given the cost pressure that we talked already about early in the call? Thank you.

Yeah. Thanks, Filippo. Let me take the last part of your question first, because it's more holistically across the world. The one thing to bear in mind is the escalating cost environment that we're seeing impacts everyone, right? My expectation is that you'll have to see some pricing, as you've heard from others, go back into the business, and that will be executed differently by different brands and different competitors. There'll have to be some pricing to offset some of the raw material and logistics headwinds that everyone is faced with. We are pleased, obviously, that we got pricing pretty broad-based in the quarter, as we've done in the second and first in the business, which, as I mentioned earlier, is critically important to maintain that gross margin and spending. A little bit more specifically on North America, our focus is on repowering our marketing model, really across the board, particularly focused on premium innovation. At the same time, we've got big core equities that we need to continue to support. We're going to be increasing over the next couple quarters the pace and impact of our innovation, and with a pipeline more specifically focused on premium opportunities, which is where the growth in the categories is coming from. We're going to step up omni-demand, which has been a big focus structurally, and I'll talk about that maybe in just a second. Supporting our core equities with omni-channel demand generation, supporting the new premium innovation we're bringing into the market, and making sure that we're more deliberate and intentional about the priority growth channels that we're seeing across the U.S., whether that's digital, agentic, and an emerging social commerce business as well. Capabilities will be critical to invest in the capabilities in that organization, and we're very much in the process of seeing that now, very much work in process. That is the innovation resources to deliver breadth and quality moving forward. We're stepping up our AI and data deployment with a series of multiple verticals in different parts of the organization, stronger execution fundamentals across different channels. Importantly, let me spend a minute talking about our go-to-market structure, which is clearly an area of opportunity for us in North America. Structurally, we built our go-to-market for a world of channels, and what we're seeing today is a world that runs on connections. Connections with data, connections with retailers, connections with different platforms that ultimately get to the consumer. We're restructuring to win that connection so we get more premium innovation that earns its full value with the consumer. That premium innovation, in terms of how we're structuring our commercial teams on the ground, is continuing to be optimized because we think we can execute more effectively moving forward, particularly with the increased advertising we're putting into that region. You mentioned categories. Categories maybe improved a bit as we exited the quarter, but still relatively sluggish. But overall, they're more or less where they've been through the first half of the year, and anticipate that as we get a strong innovation cycle in 2027 coming in, that we'll see those categories and through some a little bit more pricing start to inflect more positively moving forward.

The next question comes from Bonnie Herzog of Goldman Sachs. Please go ahead.

All right. Thank you. Good morning, everyone. I had a question on consumption trends across your markets, with gas prices still elevated. Curious to hear from you if you've seen any further deterioration in consumption across your markets, or has it been more of the same? Then, would love to hear which markets are doing well and maybe which ones have been more pressured recently. Then lastly, what is your expectation for category growth for the rest of this year and then for next year? Does the guidance assume sequential improvement in trends over the course of the year? Thanks.

Yeah. Good morning. Thank you, Bonnie. So, there's a lot there. Let me start, I guess, big picture, category growth overall globally. We're seeing growth in the 1.5%-3% globally, with obviously emerging markets driving a faster growth in that 3%-5% range, and the developed markets driving growth in that 1.5%-2% range. So, overall, 1.5%-3% globally, with emergings at the higher end, 3%-5%. And the expectation is that will continue. Now, that being said, there'll be some probably more pricing that needs to be taken globally that will take that up. A lot more premium innovation, because that's where the growth is in the categories across the board, so we'll see that come into it. But we're going to watch that very carefully. Our focus on the increased support and the increased premiumization is intended to obviously grow our retailers' categories. Let me walk around the world. I guess I will start with emerging markets, which are up mid-single digits. Asia had a really good quarter, although I would say the China business continued to be challenged from a category standpoint. It has not really changed from what we have seen over the last 9 months. India, still pretty good. We had obviously another really strong quarter in India with double digits, and that was really driven by a lot of the premium innovation that we are seeing. In terms of our China business, pleased that Greater China was up mid-single digits, and high single digits for the Colgate part of the business, and low single digits for Hawley & Hazel, as we exited the quarter. The category is still somewhat challenged. You are seeing brick and mortar very, very soft, and a significant migration continues to the online part of the business, particularly in more social-driven platforms like Douyin. Latin America, obviously, as I mentioned just earlier, I will not get into more detail there. Another strong quarter. Categories pretty much consistent, maybe inflected a little bit positive towards the end of the quarter, particularly in Brazil, maybe a little softer in Mexico, as I mentioned, but good numbers in Central America and Andina. EMEA on the emerging side, overall, the African markets continue to perform well. We had some blips in the Middle East with some pricing challenges there. But overall, EMEA from an emerging market standpoint is performing quite well from a category standpoint. Flipping over to the developed part of the world, categories, as I mentioned, in that 1.5 to more or less 2.5 growth rate. North America is where we are seeing the most pressure, but a little bit of improvement as we exited the quarter. Europe categories remain roughly flat. No big change there in the second quarter and the third quarter from what we have seen. However, we continue to drive really nice market share on the premium side of the business, particularly in Southern and Northern Europe, where we saw nice growth as well. Hill's, as I mentioned just now, the category remains somewhat subdued, but we are seeing nice growth in certain segments. So, in segments particularly where we are under-indexed, like cat, like wet, and we are generating very nice growth against that. That is more or less how I characterize the consumption around the world, and clearly, I think we will see that continued trend in the fourth quarter, and we will talk about 2027 when we get there.

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

Great. Thanks. One more follow-up on Hill's, given the strong volume-led acceleration. Can you talk about the sustainability of that and whether you are seeing more distribution with recent innovations? You call that therapeutic and cats. Obviously, those are still the biggest growth drivers, but are the growth drivers widening, or is that still the lion's share of the growth? Then just on margins, a bit surprising that you saw a decline given the sales upside. I know it is a small decline, but given the sales upside, obviously overall strength of margins for Colgate as a whole, can you talk about the drivers there and whether it is investment levels behind new innovation or marketing, or what needs to happen to get better operating leverage on pretty strong top-line results? Thank you.

Yeah. Good morning, Olivia. Thank you. So again, the strategy that we are executing against Hill's, perhaps very redundantly boring because it is working for us, and we clearly see growth opportunities in the growing segments, and we are executing against those really well. So the wet business was up really, really nicely. The cat business was up really, really nicely, both across Prescription Diet and Science Diet. Just to give you a couple facts there. Science Diet cat on the wellness side was up high single digits. Science Diet, Prescription Diet was up double digits. So clearly, we are growing in the growth segments. Likewise, very similar trends on Science Diet wet as well as Prescription Diet wet. So we are focused on those opportunities where we see real upside, despite the fact that some of the other parts of the business, particularly dog dry, is relatively flat to down, and we are seeing that migration to smaller pets, and we are capitalizing on the strategies to do that. Our online business continues to perform very well, and we still continue to be able to execute against those initiatives there. The other aspect moving forward, we have not necessarily talked about it, is Fresh. Now, Fresh was insignificant in the quarter. As I have talked about in previous meetings, we announced the launch of our Single Protein diets in late June, with three diets, chicken and brown rice, beef and carrot, and lamb and pumpkin, making everyone hungry here, I am sure. But the key is that we are in a very deliberate and methodical rollout of that. We are doing it very carefully. We're trying to ensure that the quality that we bring to the vets and the reputation that we have behind the Hill's brand name is executed and consistent with where we want that business to be long-term. We're looking to drive this business in a way that we create long-term sustainable growth for the business. It's a disciplined rollout, and we'll see that continue to roll out as we move through the balance of this year and into 2027. I would say that the Prime launch in Australia, the Prime business in Australia, that team continues to execute exceptionally well with that business, and we're transferring those learnings over to us. On the margin side, I'll let Stan give you a couple more details on that.

Yeah. So, not clear if your question is on Hill's operating margin, which is down just slightly. That really represents these investments, the investments into advertising, growing the brand, the margin, and launching of Fresh, because on an operating basis for the total company, the EBIT margins are actually up slightly year-on-year. Again, we always look to balance the investment portfolio. So, our capital allocation remains the same. We're going to invest back in the business. It ties into why we launched the SGPP program, to invest back in the business as well as take to the bottom line. You're going to see us make those investments in innovation, in functional capability, and Noel talked several times about how we're applying AI, and then in some day-to-day operational efficiencies in our manufacturing, in our advertising, and in new categories like Fresh launch in the U.S. So, we always balance those out, and again, we delivered bottom line EPS growth faster than top line organic.

The next question comes from Chris Carey of Wells Fargo Securities. Please go ahead.

Hi. Good morning, everyone. Just one follow-up on North America that I just wanted to ask a question about APAC. In North America, was there any destocking in the quarter, or is this some elasticity to new pricing? I think just the price versus volume dynamic was a bit different than what we had expected coming in, so I would just love any context for that and how you see that trending from here, and whether there was any noise in Q3. The question on APAC, it has been a more challenging segment to model over some recent years, but clearly, really nice momentum this year. What about what is going on is durable versus coming off a tough year last year? Maybe just give us a sense of if the business has turned a corner with both Colgate China and H&H back to growth. Thanks so much.

Yeah. Great, Chris. Thank you. Let me take the inventory. No, we did not see any meaningful inventory destocking in the quarter. Clearly, I think as the categories have somewhat stabilized in the U.S., the retailers are a bit more comfortable, but if they see the category soften, that is typically where you see action being taken from a working capital and from an inventory standpoint. We will watch that very carefully. Yeah. Asia, another good quarter, roughly 5% organic across the Asia Pacific regions and geographies. Growth was led this time, as you saw, again, as we delivered in the second quarter by a very strong India business, which was up, again, double digits. That is pleasingly largely driven by acceleration of our premium business in Asia. We are deliberately focusing on the opportunities to grow that in the modern trade and the e-commerce channels and executing quite well. My congrats to the team there. Hawley & Hazel, another quarter of growth, low single-digit growth in the quarter, largely driven by a good combination of DTC and being able to at least hold the brick-and-mortar business, which, as you heard me mention, is from a category standpoint, is down. They are doing well to explore and optimize some of the new platforms that we are seeing, like Douyin, particularly with some premium innovation. It is a lot more work to do. I would say Hawley & Hazel themselves is not 100% pleased. While we have had three quarters of decent growth, they are still implementing quite a bit of structural change to the business that they believe will set them up for more long-term success, particularly like we are seeing in CP China. CP China, as I mentioned, had high single-digit growth and clearly has figured out how to execute really well against the premium segments in that market. Our online business is terrific. Our retailer brick-and-mortar, particularly club business, is very, very strong there. They have really figured out social incubation, excuse me, and how to translate that into more broad-based growth across the enterprise through their portfolio management and their content creation, using a lot of AI-generated content in that market to make sure that we are personalizing our messages as effectively as possible. Overall good, and India, I think, is hitting stronger now, getting the execution done well in the rural trade, getting the pricing where it needed to be consistent, and now trying to optimize the premium part of the category, which continues to be a nice growth opportunity for the business.

The next question comes from Kaumil Gajrawala of Jefferies. Please go ahead.

Hey, everybody. Good morning. I want to try to maybe just understand the cost curves. It sounds like you're hedged for Q4, but often it's a six-month hedge, nine-month hedge, that sort of thing. When you think about the various initiatives of taking pricing RGM, all the various things to sort of protect margins, are we sort of ahead of what might be an acceleration in the cost pressure based on where you're positioned, and maybe the pricing and stuff has come in early, and that's why margins look pretty good? Do you feel reasonably comfortable that where costs are now is about what it's going to look like for, I guess, the near-term period?

Kaumil, I'll take that one. I don't have a magic crystal ball on cost curves. I mean, we look at the inflation in commodities as they come around, and while we can't directly control those, what we do is try to control how we implement our purchasing, how we optimize our productivity to deal with those. As we've guided for this year, because we're not going to provide guidance on 2027, we have good insight for what was coming in fourth quarter. We've locked wherever possible, so we're comfortable with our guidance and our ability to execute that for Q4. What we see is continued volatility and escalation, and Q4 will be probably the highest level of commodity inflation on a year-on-year basis. That ripples into logistics, as I mentioned before. That one hits the P&L faster. We try to do, and I think as we headed into the year driving our SGPP program, that timing's clearly helpful. That additional productivity has helped us to mitigate this. While we're not going to provide 2027 guidance, I don't see the headwinds on commodities lightening up here as we exit the year, and we have to deal with the movement FX that Noel referenced earlier. We've had FX move just over the past couple of weeks here. That's volatile. We deal with that regularly. But again, we don't have a way to predict exactly where that will go into the future. We focus on what we can control. What we can control is our productivity, our RGM, and executing day-to-day.

The next question comes from Robert Ottenstein of Evercore ISI. Please go ahead.

Great. Thank you very much. A couple of follow-up questions. Noel, a lot of puts and takes on Hill's, mostly positive. But if you step back and look at the traction that you're getting in a lot of the innovations, and particularly the potential for Fresh, in sum, does it feel and it was a great quarter. Does it feel like the business in a tough market is accelerating as the year went forward and can continue to accelerate? That's question number one. The second question is on emerging markets in general, and particularly the ones that we don't talk about. Africa, Southeast Asia, individually, maybe not significant, but in sum, given the growth rates, is interesting. Any thoughts about, one, are you managing those markets differently in the past? Do you see continued strong growth, kind of healthy mid-single digit there, and any kind of comments about strategy in all those markets? Not obviously individually, but how you're managing emerging markets in general outside of the main ones that we talk about all the time. Thank you.

Yeah, thank you, and good morning to you. Let me take the Hill's question first. Clearly, we're not immune to the sluggishness in the category, so we need to make sure we're executing a strategy against where we see the growth opportunities, and we've talked about that quite openly, about where we're seeing growth. We've been investing in Small Paws for the better part of five years. We put a significant amount of capital into understanding the nutritional values and health needs of small pets and using that to leverage some of the innovations that we're bringing into the market. We had some good innovation in the category that was in the prepared remarks on comorbidity diets, which we think is an opportunity for further growth. But the biggest opportunity we see is obviously the continued low brand penetration that we're seeing in some of the growing segments, like cat, like wet, like Small Paws. So if we're deliberate and intentional about focusing on those opportunities, we think we can continue to drive nice growth. But we're not immune to the softness of the category, and we're going to be focused on, obviously, the opportunities that we see and the levers that we can control around the world. I didn't talk about the broad-based nature of the business. Clearly, the U.S. had a strong quarter, and that's the bulk of our business. But a call-out to the EMEA group and the European group who had a really strong quarter as well and continued to execute against the business in a very promising and positive way with a lot of the consistent strategies that I've talked to. And I'm nothing but delighted to say this is the last quarter we have to talk about private label. I've been assured that that will not be in our nomenclature moving forward, so you'll get clear reads. But obviously, the volume growth, which is where I wanted to go to next, Robert, it looks terrific. If you take the trans ex-private label, 1.2 in the first quarter, 1.2 in the second quarter, 1.8 in the third quarter, we're going to be comping a little bit more aggressive comp in the fourth quarter next year, so don't get too far ahead of yourselves on that. But overall, the team is executing well. And as you said, the Fresh opportunity is a long-term opportunity. We're not looking to any home runs quarter to quarter. We're looking to build this business in a really sticky way to drive long-term, durable growth of the business over the next couple years, and that's how we're executing the bundle and how we're executing our marketing strategies as well. On Africa, obviously, we've moved Let me start with that. We've moved that into our new division segmentation, so that sits under Jean-Luc and his team in Europe. Jean-Luc ran Africa previously before he was in the European job and the U.S. job, so he knows that region extraordinarily well. And what's interesting is you see the European influence across many of the growth markets we have in Africa. And so we're doing a lot of work to align the portfolios and optimize the sourcing to really leverage some of the European innovation that has been so successful for that group over the last couple years, particularly on the premium side, where elmex makes sense. That's particularly in the Middle East, where we've seen some nice opportunities there. So overall, I think that integration into the European business with the strategies that we're deploying across that region will play out nicely for Africa as we move forward. And speaking of Africa, one of the regions we haven't talked about is we've invested quite considerably over the last couple years is in Nigeria. We did see a very strong double-digit growth in Nigeria, continued market share growth. That's a long-term play for us, as I would say some of the Asia markets that we've recently invested in, like Bangladesh as well, where we're investing for long-term growth, and we're seeing that starting to play out nicely as we get the fundamentals and the distribution right. Africa, clearly a growth opportunity, but the caveat there is a region that's wrought with volatility and uncertainty, but the teams on the ground do an exceptional job dealing with that and being quite resilient. On the Asia side, listen, Philippines, Vietnam, Thailand, all nice growth in the quarter. I think it speaks to the broadness of our portfolio. We've been in these regions and geographies for a long, long time. They are a bit more volatile, but the good news, I think the execution we have on oral care, the premiumization, the move to digital that's been so forward-thinking for the China business, that we're applying those learnings across most of Southeast Asia and seeing nice growth from it in some of those markets I just mentioned. Overall, it doesn't necessarily move in a straight line always in that region, but the fundamentals and the basic underlying aspects of the category and the growth opportunities we see are encouraging.

The next question comes from Andrea Teixeira of JPMorgan. Please go ahead.

Good morning, everyone. Noel, I was just trying to piece together the commentary about the North America, in particular the U.S. You said you have seen some signs, some green shoots of improvement in toothpaste market share. I was wondering if you can comment on how we should be thinking as we progress there. Basically, competitive environments getting more normalized, or there's still a lot of promo there, and how Colgate is going to be able to continue to improve that metric. Then a follow-up also in Europe. You had very strong numbers, and you called out Northern European, also Southern European. Just wondering how we should be thinking, as I'm assuming you're going through the process of discussing pricing into next year, your ability to pass on some of the cost pressures, which I'm assuming for the consumer in Europe is even more pronounced than it is in U.S. or other developed markets. Thank you.

Yeah. Good morning, Andrea. Thank you. Let me start with North America again. Clearly, this is very much a work in process, and as I mentioned on the second quarter, this is going to take some time. We want to do this the right way. Premium bundles require real value orientation and connection. As I mentioned earlier with the consumer, we need to ensure that we get that premium innovation seeded in the market effectively, and you're going to start to see that translate into a better portfolio in 2027. So, we're clearly gearing up for that, and that will be important for us to establish that from a long-term standpoint, because that's where the growth is. The growth numbers are quite startling when you look, particularly within the toothpaste category, the difference between the super premium, the premium, and the mid-price and value are multiples of 2-3. The growth is certainly at the top end of the premium segment, and that's where we need to get our portfolio right. The other thing I mentioned is clearly the advertising effectiveness that we want to push even harder in the U.S. We're seeing, obviously, it translate into good brand equity, but we need to see it translate into more purchase. We're going to be much more deliberate and intentional and analytical about the spending in the U.S., and the teams gearing up for more data personalization using some of the AI models we have in place to truly optimize that as we move forward. Structurally, I already talked about some of the changes we're making. We got a new team in place there, very energized, very excited, and bringing some very fresh perspectives to it. So, we'll watch that carefully. Clearly, our objective is to get back to sustainable top line organic growth and market share growth, and we'll keep everyone well apprised of that as we move forward. On Europe, again, strong execution from a premium standpoint, particularly on our whitening and the relaunch of Colgate Total, and the continued very strong growth we're seeing on elmex, which has been terrific. So, I give the team a lot of credit in a more difficult consumer environment, as you rightfully alluded to. They're able to execute against the premiumization, and that's being done, as I mentioned in my upfront comments, through really effective omni-demand generation. truly understanding the myriad of different media opportunities we have and how to connect those much more systematically to drive brand equity and drive persuasion across the premium part of our business. The elmex market shares are a good testament to that, and we need to clearly continue to step that up from an innovation standpoint and from an advertising standpoint. Likewise, we had some under-supported brands, as I alluded to, I think in the first or second quarter across Europe, particularly the Sanex brand, and that is driving really nice growth on body wash that we see our ability to sustain moving forward because of the unique nature and the positioning of that brand and the fact that we haven't supported it very strongly historically, and seeing a good return on that investment.

The next question comes from Michael Lavery of Piper Sandler. Please go ahead.

Thank you. Good morning.

Good morning, Michael.

I just wanted to come back to pricing, and you pointed out how you've got a nice, pretty steady pace and making efforts to get ahead of it and just keep that going. Maybe can you give a little sense of the composition and how much is list pricing versus mix or price-pack architecture? Then maybe as you look ahead, there's still a lot to figure out for next year in your planning process, but is this recent level about right? Would you expect for it to have to step up? If cost pressures stay elevated, is this about how we should think about where pricing needs to be, or is it something a little different?

Yeah. Thanks, Michael. I haven't really talked a lot about revenue growth management, a lot of the work that we're doing in that space. I mentioned it in my upfront because it's very important for everyone to understand the PromoAI tools that our team has generated here. We're starting to obviously scale that much more systematically around the world and seeing a really nice return on that proprietary tool, which is giving us incredible insights on how to optimize our promotional spending by analyzing hundreds of millions of data points historically, and particularly high-low retailers and how effective the promotions have been or haven't been. That continues to learn and effectively generate improvements as we move forward. So, on the essence of your question, how much is new price, list price versus other aspect, we have six or seven levers we pulled under revenue growth management. Every year and every quarter, there's different aspects. If we have a really strong premium innovation lineup, that's going to drive more of the pricing. If we don't have that necessarily and we see a lot of cost inflation, we'll take list price increases. But we're very deliberate and thoughtful about how we take those pricing in the category, and every 10 basis points is important to us. So, it is price-pack architecture, it is premium line innovation, it is promo optimization, and looking at overall how we effectively drive our everyday pricing versus our promotion pricing. So, over the teams, I think it's discipline around the revenue growth management and making sure that they're using the levers at their disposal and the capabilities and technology that we're offering them to be more effective in how they execute it. Moving forward, well, listen, we've got a couple new components to deal with. We'll see where foreign exchange ends up. That's moved obviously against us, and we're going to have to look that compounded with some of the cost inflation that we're seeing in the categories, and I think that's, as I mentioned earlier, that's going to impact everyone. In some markets, we will lead with pricing, and others, we will follow. But it's a challenge that everyone's dealing with, and the good news is we've been able to afford some of the pricing in the category, certainly not all, to offset this. But I think the effectiveness of how we're executing our portfolio and funding-the-growth, and the fact that we're getting some margin growth in a very challenging environment is encouraging and gives us confidence that we're doing the right things.

The next question comes from Robert Moskow of TD Cowen. Please go ahead.

Hey, thank you. Just to finish up, I did not hear a number for cost inflation in absolute terms. I think last quarter you said a little below $300 million. Where are you now? Is it higher than that? Secondly, there is a lot of talk about pricing. We are all wondering whether it is possible in developed markets. When will we know whether the pricing is going through? Is January a typical timeframe for raising list price? Thanks.

I will start with the cost inflation. We had originally said $300 million. We said coming out of the last quarter's earnings call that, at the time, oil had been lightening up a little bit, that it might be a little bit less. Obviously, we saw what happened through the quarter as that escalated again. I would say roughly, it is still in the same original range of $300± million, and that is with our locked in. We do not have a price for fourth quarter because we have a series of lock-ins that occur over time. I would say we are roughly in line with the original guidance.

Yeah, on the pricing, Robert, it is a tough question. Clearly, we are not going to necessarily guide to where we are in 2027 with regards to pricing. I would just leave you with the fact that the cost environment, as we have said consistently, will peak in the fourth quarter. I think as everyone is looking at their 2027 plans, obviously getting pricing in the categories will be very, very important, whether that is through new innovation, which is probably more the likelihood of where you will see pricing come through in the developed part of the world, where we have a little bit more opportunity in the emerging markets to take list prices. That, as I mentioned just a moment ago, it really is market-dependent and category-dependent, and we will see that as we see the fluctuations of pricing come through and where the competition is and where the consumer is. It's all very thoughtful approach, but you know, historically, we've done a really good job on managing pricing in tough environments, and I wouldn't expect that to change much moving forward.

Our last question comes from Edward Lewis of Rothschild & Co. Please go ahead.

Thanks very much. Yes. Noel, just looking at the performance of Colgate China, up high single digits in obviously what's a tough consumer economy over there. I guess I was struck by your comments on the U.S. around world of connections and premium innovation that gets full value with consumers. I mean, how much does what you've done or the success you've had in China, in sort of similar consumer environment it seems, how much can you deploy that in the U.S. as you go forward?

Yeah, Ed, thanks for the question and area that I love talking about, because I think I've mentioned in previous meetings, we had taken almost all of our executive operating teams from each division over to China, and while some of it applies, some of it doesn't, but the key is getting them to think on ultimately where the world is going. That being said, there are applications that translate very directly to any market around the world, and you're seeing obviously a stronger growth around social commerce, whether that's the TikTok platforms here in the U.S. You'll see to a certain extent where agentic starts to come in. But the key is really translating those learnings, as you said, Ed, very quickly. The enterprise oral care, if I speak to oral care team along with our marketing organization, are very focused on building those capabilities across all of our divisions as aggressively as possible and using AI as a way to facilitate that, particularly around content creation and data personalization. So, your observation is spot on, we clearly want to see, and we are translating those capabilities across the world as quickly as we can. Okay, I think that's it. Let me just close up. First of all, we measure duration at Colgate on the years we've worked. Hope Spiller measures those on the quarters she's delivered for the company, and today is, many of you know, Hope, is her last day, last earnings call with us. She will leave the company and retire happily moving forward after 103 quarters of earnings. So, we're impressed with that. That will be a record that's tough to beat. They will hold, but we will certainly set everyone up for that success. But Hope, thank you for everything that you've done, I'm sure all of you can reach out and congratulate her on such a stellar and exciting career at Colgate. Then let me just thank, in keeping with the incredible work our 34,000 people have done around the world, it's a tough market out there, and we are relentlessly focused on the details and getting the execution right, and case by case, tube by tube, brush by brush, finding ways to drive value across the world and doing that in a tough environment. So, I applaud the teams and thank them for executing the strategy and delivering another solid quarter of consistent top-line and bottom-line growth. With that, I thank everyone and look forward to seeing everyone soon and wish everyone a very happy Halloween.

The conference has now concluded. Thank you for attending today's call, and you may now disconnect.