Colgate Plans More Price Increases to Offset Slower Sales, Higher Costs — Update

By Connor Hart

Colgate-Palmolive said it needs to further raise prices and adjust product sizes to hit the low end of its full-year organic sales outlook, as consumers remain cautious amid a volatile environment.

"Over time, we fully expect all our categories to normalize and get back to historical growth rates," Chief Executive Noel Wallace said Friday on a call with analysts. "But right now, given the level of uncertainty that we see externally, and particularly in the U.S., I think you're going to see the categories hold where they are in the short term."

Shares--which initially edged higher in premarket trading after Colgate beat Wall Street's second-quarter profit and sales projections--ebbed 0.8% to $83.22 in midday trading. The stock has lost almost 20% of its value in the past year.

Beyond higher prices, the maker of Irish Spring soaps and Speed Stick deodorants said it will push more of its higher-end products, though it needs to do so without losing too many customers as a result. One way to do this, Wallace said, is to leverage its global supply chain to respond more quickly to changes in consumer preferences.

The company is currently adjusting its pack sizes to deliver more value to consumers, offering larger multi-packs with lower per-unit costs, as well as smaller sizes aimed at shoppers seeking lower out-of-pocket prices.

Still, higher raw-material and packaging costs, including those tied to tariffs, are expected to weigh on margins, Wallace said. Colgate now expects about $75 million in tariff-related costs this year, down from a previous estimate of roughly $200 million.

For the year, the New York-based consumer-products company backed its forecast for low-single-digit net sales growth. It said organic sales growth is likely to come in at the low end of its previously guided range of 2% to 4%.

Analysts polled by FactSet expect full-year sales of $20.33 billion, a 1.1% increase from last year.

Looking ahead, Colgate said it plans to ramp up investments in artificial intelligence as part of a broader productivity initiative aimed at simplifying its organizational structure and optimizing its supply chain. The company expects to incur $200 million to $300 million in related charges in the next three years.

In the second quarter, Colgate posted a profit of $743 million, or 91 cents a share, compared with $731 million, or 89 cents a share, a year earlier. Adjusted earnings were 92 cents a share, ahead of the 90 cents a share that analysts forecast.

Revenue ticked 1% higher to $5.11 billion, topping the $5.04 billion that Wall Street projected.

Write to Connor Hart at connor.hart@wsj.com