Colgate-Palmolive Co.'s (CL) second-quarter earnings rose 14% and profit margins improved due to cost cuts, but the toothpaste and soap maker's volume dropped.

Colgate's stock was recently down $3.04, or 4%, to $72.81 after the volume decline, which was larger than some analysts had expected. Colgate has driven some of its recent profit gains by boosting prices on its products. But the company said it now believes pricing is "where it should be" and that it plans to put more focus on boosting unit volume.

Analysts also raised concerns about a pullback in the company's advertising spending. Colgate said its worldwide advertising costs declined from a year earlier as a percentage of sales, partly due to lower media rates. Colgate said it plans to increase ad spending for new products and on marketing inside stores in the second half of the year in order to improve volume.

The company said it is making some "pricing adjustment" in parts of its Hills pet food business because recent increases took its prices too high.

The company - whose products include its namesake toothpaste and dish soap - reported a profit of $561.6 million, or $1.07 a share, up from $493.8 million, or 92 cents a share, a year earlier. The prior year included 6 cents in restructuring charges.

Revenue decreased 5.5% to $3.75 billion as volume fell 1.5%. JPMorgan analyst John Faucher said he had expected volume to be flat.

Analysts polled by Thomson Reuters had expected earnings of $1.05 on revenue of $3.82 billion.

Gross margin rose to 58.8% from 56.5% as higher prices and cost-cutting more than offset foreign-exchange impacts and lower volume. The company's organic sales - a key measure that excludes the effects of currencies, acquisitions and divestitures - rose 6%.

The company said it was comfortable with Street views for the third quarter and year. Analysts expect, on average, 2009 earnings of $4.25 on revenue of $15.14 billion, according to Thomson Reuters. For the third quarter analysts expect $1.10 a share on $3.9 billion in revenue.

-By Anjali Cordeiro, Dow Jones Newswires; 212-416-2200; anjali.cordeiro@dowjones.com

(Tess Stynes contributed to this report.)