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More signs that North American consumers are falling out of love with big brands.
Shares in Colgate-Palmolive fell more than 3 per cent in pre-market trading after the company behind Colgate toothpaste reported a sharp slowdown in organic sales growth during the first quarter amid continued sluggishness its North American business.
Organic sales – a key industry metric – grew just 0.5 per cent in the three months to the end of March, compared to the 1.5 per cent pace it grew at in the fourth quarter and the 5 per cent growth notched in the year ago period.
“Clearly the first quarter was challenging and did not meet our organic sales growth expectations, driven mainly by softer results in North America,” said chief executive Ian Cook.
As a result of the slow start to the year, Colgate said it now expects full year organic sales growth to be “modestly below” its previous 4-7 per cent forecast range.
Big companies from diaper maker Kimberly-Clark to PepsiCo have all been contending with weak North America sales during the first quarter. While some have blamed higher gas prices and shifting consumer taste, analysts say big brands are also losing ground to smaller and more health-conscious or eco-friendly brands.
The shift was underscored by Colgate’s North American business. The unit, which accounts for a fifth of total group sales, saw net sales drop 5 per cent during the quarter. Within this, organic sales were down 5.5 per cent, “reflecting the impact of market share losses during the quarter from a portfolio transition within our home care business, retailer inventory reductions and a further slowdown in category growth,” the company said. A 5 per cent drop in unit volume was further compounded by the aggressive price war that has broken out among major US consumer groups and led to a 0.5 per cent drop in pricing for the region during the quarter.
Overall, net sales for the company was flat at $3.76bn for the first quarter, below market expectations for a slight rise to $3.8bn. Net income was up nearly 7 per cent at $570m however, amid tighter control and higher pricing in some markets. Excluding restructuring charges, adjusted net income was $601m, or 67 cents a share, beating forecasts for $586.2m or 65 cents a share.