Erin Lash: Similar to others in the consumer products space, wide-moat Colgate's sales have succumbed to unfavorable foreign exchange and slowing category growth. However, we don't believe that this indicates an erosion in the firm's competitive edge but rather believe the firm's leading brand mix, entrenched relationships with retailers, and cost advantages should ensure it weathers these headwinds.
Our thinking regarding the sustainability of the firm's competitive positioning stems from its bent toward driving profitable top-line growth longer term. Over the last eight years sales have averaged around 5% annually, and that's been driven by a balanced mix of price and volume growth. Beyond this, Colgate is working to extract excess costs from its already lean operations, both with by driving efficiencies within its supply chain as well as manufacturing and marketing. However, we don't anticipate that Colgate will allow the entirety of these savings to fall to the bottom line but rather suspect that the firm will continue to invest to support the intangible asset source of its wide moat.
In line with our thinking, management continues to stress the importance of bringing locally relevant product innovation to market even at premium prices and to market these new products in front of consumers. We suspect that these efforts will ensure that Colgate maintains its leading 45% share of the global toothpaste category which is more than three times greater than its next closest competitor.
While the stock currently trades in line with our valuation, if the share price retreats we'd suggest investors stock up on this wide-moat name.