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(Bloomberg) -- Colgate-Palmolive Co. shares rose despite cutting its outlook as its tariff exposure was less than Wall Street feared.
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Organic sales are now expected to grow 2% to 4%, the toothpaste-maker said in a statement. Its previous long-term growth target was 3% to 5%. Analysts expected 3.4%. The new trade policies will add $200 million in costs for the company, resulting in a weaker profit view as well.
Despite the worsening outlook, the announcement “will have been better than investors were beginning to fear with regard to gross tariff exposure,” Barclays Plc analyst Lauren Lieberman wrote following the results, noting the $200 million equates to around 3% of cost of goods sold.
Numerous corporate chiefs have warned this earnings season that tariffs will result in higher costs for everyday items, with companies passing on increased input expenses to shoppers. Higher costs could further dampen consumer demand. For Colgate, tariffs will drive raw and packaging materials costs higher as commodity prices increase, according to its presentation.
“As we look ahead, uncertainty and volatility in global markets, including the impact of tariffs, remain challenging,” Chief Executive Officer Noel Wallace said.
Colgate jumped as much as 3.4% at the open in New York. Shares were up 2% this year through Thursday’s close.
First-quarter organic sales growth fell short of analyst expectations as its North America business fell more than expected. Analysts has forecast the Asia Pacific division would grow 2.6%. It fell 3.1%.
In the US, volumes were pressured as consumers responded to increased uncertainty, Wallace said during a call with analysts. Trends began to stabilize in April, though he still expects a “soft” second quarter before improvement in the second half of the year.
While sales trends may be stabilizing, tariff costs will bite profitability regardless. Colgate expects gross margin, excluding some items, to be little changed from the 60.6% Colgate reported last year. Previously, the company had seen it expanding, while advertising spending was steady as a percentage of sales. Analyst had forecast a minor expansion to almost 61%.
To mitigate the higher costs, the company will seek out “additional productivity” and “revenue growth management,” Wallace said during the call. Colgate will also explore changes to sourcing, production and formulas.