New P&G CEO seeks to reverse tide - Alan G. Lafley - Brief Article - Statistical Data Included

CINCINNATI -- Sometimes a company is faced with difficult choices. Procter & Gamble made the choice to allocate more of its resources to its newer brands than its core brands. The result was an even more difficult choice: Changes in leadership. Alan G. Lafley, known as A.G., has replaced Durk Jager as the company's president, chief executive and director. Lafley most recently ran the consumer giant's global beauty business and served as the marketing director for North America.

Jager held the top post for a mere 17 months (but served the company for 30 years). He has received jabs from analysts who said his single-minded focus on new brands, the $2 billion-plus acquisition of Iams pet food business, flirtation with acquiring a drug company and aggressive earnings per share estimates contributed to the company's recent earnings shortfall and stock slide. P&G's stock went from a high in January of $118 to $56 at press time.

But William Steele of Banc of America Securities believes Jager actually put the company back in the saddle toward gaining global market share.

"I give him a great deal of credit for understanding that in the long term P&G has to gain global market share. Over the past five years P&G has achieved earnings growth through efficiencies, like distribution. But, in the longer term, a consumer product company has to gain market share," Steele said.

Under Jager's leadership the company successfully launched several products, such as Swiffer, Febreze and Dryel.

While Jager may have steered P&G in the right direction with his global market share approach, many have argued he was targeting an earnings per share growth that was too aggressive. P&G originally had estimated fourth quarter net EPS of 15 to 17 percent. It now expects fourth quarter core net EPS to be equal to one year ago. This reflects lower volume growth and competitive pressures, as well as reduced marketing support on several key businesses, including fabric and home care.

Steele declined to predict how Lafley would run the company compared with Jager, but in a conference call Lafley stated he would balance out his focus on core brands and new brands.

"Going forward, job one will be ensuring we're making the choices to return our big core businesses to consistent year-to-year sales and profit growth, starting now," Lafley said. "Over the next six weeks I will sort through the new and established business initiatives to make choices on investments and ensure a balanced portfolio that will drive top and bottom line growth. I'll also focus on the tough choices needed for better cost control."

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