Colgate, Unilever wary

NEW YORK -- Colgate-Palmolive Co. and Unilever NV warned of profit shortfalls Monday, leading an overall decline for stocks in consumer goods makers, who face tougher competition and increased expenses heading into the last quarter of the year.

New York-based Colgate said a planned boost in marketing activities will likely fuel a surge in third-quarter sales but warned that the increased marketing spending and higher raw material costs will drag its quarterly profit well below Wall Street expectations.

Colgate shares slid 11 percent, or $6.10, to close at $48.23 in heavy volume on the New York Stock Exchange, falling below its 52- week low of $48.56.

Meanwhile, Anglo-Dutch Unilever, maker of Ben & Jerry's ice cream and Dove soap, saw its shares drop more than 5 percent after the company trimmed its full-year estimate because of increased competition and weak consumer confidence overseas.

The company said bad weather hurt ice cream and beverage sales in Northern Europe, while consumer spending sagged in Western Europe and competition continued to intensify in Asia. Unilever now expects earnings growth of less than 5 percent in 2004, compared with a previous forecast for growth of more than 10 percent.

Unilever shares recently traded down nearly 5 percent, or $2.78, at $58.16 on heavy volume, nearing its 52-week low of $56.25.

Argus Research consumer staples analyst Erin Smith said Unilever and Colgate are just the latest consumer products makers to forecast sluggish results in the second half of 2004 as concerns over energy and packaging costs span the industry.

The anticipated profit shortfall from Colgate also underscores escalating competition with industry giant Procter & Gamble Co., which has been taking bigger bites of the market with a heightened focus on skin-care and beauty products, Smith said.

"Procter & Gamble has been investing in skin care and hair care; they're constantly being mentioned . . . as a skin-care company," Smith said. "Colgate doesn't have as much of an influence in that category."

Procter & Gamble earlier this month held fast on its expectations for a first-quarter profit of 72 cents per share, saying it anticipates double-digit sales growth from new products and expanding to developing markets.

Smith said she expects Colgate's increased investment in marketing and new products to pay off over the next 12 months, adding that its gloomy outlook may be skewed since the company planned to release fewer products in the current quarter than it did in the prior period.

"It really depends on the products Colgate's putting out," she said. "If they're new or advanced, that will pay off. If it's only improvements on existing products with high market share, that will probably help, but I don't think it will have a huge effect."

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