Colgate Shares Fall 11% on Warning

Colgate-Palmolive Co. on Monday issued its first formal profit warning in almost a decade, citing higher marketing spending and raw-material costs, sending its shares down 11.2% to a four-year low.

The warning’s timing surprised financial analysts, who argued that the effect of higher prices of resin, pet food ingredients and other raw materials, as well as the increased marketing spending, should have been apparent earlier.

“That’s the question that has everybody scratching their head right now,” said William Chappell, analyst at SunTrust Robinson Humphrey. He noted that Colgate had made a public presentation at an investor conference 12 days ago without lowering its profit forecast.

The maker of Colgate toothpaste, Irish Spring soap and other products had 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.

Colgate forecast earnings per share of 57 to 59 cents in the third and fourth quarters. Analysts’ average forecasts were 67 cents a share for the third quarter and 68 cents a share for the fourth quarter, according to Reuters Estimates.

The company said last December that it had lost its focus in the U.S. oral-care market as it concentrated on introducing a tooth-whitening product that had disappointing sales. Colgate has been in a fierce battle with Procter & Gamble Co. in the U.S. toothpaste market.

Pressure from P&G; also led, in part, to an earnings warning Monday by food and consumer goods company Unilever. Unilever shares fell almost 5% in London and P&G; shares were down 3.3% in New York.

Colgate Chairman and Chief Executive Reuben Mark forecast a gross profit margin for full-year 2004 “even with or slightly better than the record 55% set in 2003.”

Shares of New York-based Colgate fell $6.10 to $48.23 on the New York Stock Exchange.