Colgate-Palmolive Co on Monday issued its first formal profit warning in almost a decade, saying earnings will fall well short of Wall Street forecasts due to higher marketing spending, sending its shares down 11 percent to a four-year low.
The maker of Colgate toothpaste, Irish Spring soap and other products, whose warning dragged down the Dow Jones industrial average, has made clear in recent months that it would spend aggressively on marketing and promotion to maintain or increase market share, with cost-cutting programs helping fuel the accelerated marketing.
But as it faces increasing marketing pressure from Procter & Gamble Co and other household-products makers, it has also seen raw-material prices surge, eating into some of the cost savings it has been reaping in longer-term efforts.
Analysts were not sure how long the company would have to keep boosting its marketing spending.
"They made it pretty clear they would spend pretty heavily to maintain share, so this could go on for a while," said Linda Bolton Weiser, analyst at Oppenheimer & Co She rates the stock "neutral."
Colgate forecast earnings per share of 57 to 59 cents in both the third and fourth quarters.
Analysts' average forecasts are 67 cents per share for the third quarter and 68 cents per share for the fourth quarter, according to Reuters Estimates.
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