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P&G Brings Back Lafley as CEO

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The Procter & Gamble Company (PG - Free Report) brought back its previous chief executive officer (CEO), Alan George Lafley, to immediately replace its existing CEO Robert McDonald, as the consumer goods giant struggles to turn around its business.

Lafley has re-joined P&G as President and CEO and will also chair the board of directors, effective immediately. Joining the company in 1977, he became the President and CEO of P&G in 2000 and continued till 2009. McDonald is due to retire in June this year after serving P&G for 33 years. He was President and CEO from 2009 to 2013. P&G also stood by its fiscal 2013 and fourth-quarter guidance.

It is widely rumored that McDonald was asked to step down as the company’s results and turnaround efforts were not showing any material improvement. Fiscal 2012 (ending Jun 2012) was a tough year for P&G and it performed below its expectations in the year. McDonald’s fiscal 2012 pay was shrunk by 6.1% due to the sluggish profits and revenue performance — a clear sign that his job might be at stake. However, the first two quarters of fiscal 2013 were much better, proving to be a breather for McDonald. The relief however, was short lived as the company posted mixed third-quarter results in late April. Though earnings exceeded management’s expectations on strong cost savings, organic revenue growth was quite weak. Its fourth-quarter outlook was also quite subdued with earnings expected to decline from the year-ago results, further adding to McDonald’s woes.

McDonald embarked on a turnaround plan to implement some meaningful changes to re-accelerate its top and bottom-line growth keeping in pace with the peer companies.

P&G laid out plans to improve results in developed markets while maintaining momentum in the developing nations. The company is focusing on the 40 of its largest and most profitable businesses, most of which are in developed markets. These businesses account for about 50% of sales and 70% of operating profit. The company is also focusing on driving 20 of its biggest innovations like Tide Pods, Always Radiance, Bounty Trap & Lock and Bounty Unstoppables in more markets in fiscal 2013. Moreover, the company is concentrating on its 10 most important developing markets. In addition, the company has implemented costs-savings and productivity-improvement initiatives which are expected to generate $10 billion in cost reductions by the end of fiscal 2016.

P&G carries a Zacks Rank #3 (Hold). Other consumer staples stocks that are worth considering include Flower Foods, Inc. (FLO - Free Report) , carrying a Zacks Rank #1 (Buy) and Campbell Soup Company (CPB - Free Report) and H. J. Heinz Company , both carrying a Zacks Rank #2 (Buy).

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