P&G Earnings: Bob McDonald’s Good Day at the Office

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Chalk this up as a “black”-letter day for Procter & Gamble CEO Bob McDonald, as the company beat analysts’ forecasts with its quarterly profit and P&G stock rose to its highest level in four years. After several months of unrelenting pressure on McDonald over the company’s less-than-stellar performance, no one would blame him for enjoying the rest of the afternoon.

McDonald has been battling slipping sales, market share and margins in many of P&G’s brands with newly hatched plans to cut costs, renew product innovation, and narrow the focus onto key markets, products and countries. He’s also being prodded by critics such as hedge-fund investor Bill Ackman, who’s got a $1.8-billion stake in the company and wants changes fast, and the P&G executive retiree who wrote a 13-page letter of complaint that he sent recently to McDonald. And it didn’t help that Warren Buffett this week commented that “the jury is out right now” on the company.

Yet in announcing per-share earnings of $1.06 for the fiscal first quarter that beat last year’s $1.01 a share and analysts’ expectations of a 96-cent quarter, P&G appeared to benefit from progress in all of McDonald’s key areas of concern, including boosting productivity and widening gross margins.[more]

McDonald stated in a press release:

We are continuing to focus on executing our growth and productivity strategy – maintaining momentum in developing markets, strengthening our core developed market business, building a strong innovation pipeline, and aggressively driving cost savings and productivity improvements. We’re confident that this strategy will enable P&G to generate superior levels of shareholder return in both the short- and long-term.

Some highlights from this morning’s earnings call with analysts:

  • P&G expects to increase marketing and advertising spending with new product launches set for 2013.
  • 4% growth is pegged for global markets, with 1% in developed markets and closer to 9% in emerging markets.
  • Europe remains steady, with potential gains in India and China still forecast.
  • Organic sales rose 2% on broad segment gains.
  • Baby Care and Family Care Segment was the best performing segment by volume. 

P&G CFO Joe Moeller acknowledged in a interview with CNBC’s Squawk Box that they’re out of the woods just yet: “There’s certainly … a high degree of uncertainty as we round the corner here in the U.S. and with the situation still in Europe, and that degree of uncertainty certainly affects spending of both companies and individuals. Given that, we’re trying to focus on those things that we can control … and that’s again a very strong focus on cost savings.”

And the day’s developments contained one other welcome development for P&G, if not for the CPG sector and employees: Rival Colgate-Palmolive, which has been perceived as eating P&G’s lunch lately, said that it plans to cut its workforce by about 6 percent over the next four years as economies slow in many of its markets.

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