P&G Outlook: Deeper Trouble for CEO Bob McDonald

Many Procter & Gamble (NYSE: PG) investors do not like CEO Bob McDonald. His strategy to pull the large consumer goods company out of its sales funk have not worked. Shares of the firm have traded down slightly over the past two years, compared with a gain of more than 29% by the S&P. Opinions about McDonald are bound to worsen now that the company backed off its revenue estimates for the April to June quarter and revised downward expectations for fiscal 2013. The new estimates are so bad that McDonald may not be able to keep his job.

P&G management reported today that for the current quarter:

Core earnings per share are now expected to be in the range of $0.75 to $0.79 per share, compared to a prior range of $0.79 to $0.85.

And, for the years ahead:

Organic sales are expected to increase in the range of two to four percent. Core earnings per share are expected to be in-line to up mid-single digits percentage versus fiscal 2012 results.

In the cases, Wall St. expected better, although currency exchange rates, which P&G cannot control, will be one culprit in 2013 shortfalls.

Like many CEOs with no acceptable formula to improve prospects, McDonald has come up with a series of gimmicks that he calls a turnaround program. He has named his the “Total Shareholder Return (TSR)” plan, which is driven primarily by cost cuts. He is, at least, on target to accomplish those. Management noted:

P&G reiterated its objective to deliver $10 billion in cost savings by the end of fiscal year 2016, a program that includes a reduction of approximately 5,700 non-manufacturing roles by the end of fiscal year 2013.

In his comments about P&G’s future, McDonald said:

“The entire P&G organization — and specifically its leadership — is committed to winning.”

P&G’s results magnify the failure of McDonald to “win” his battle to make the company a success again.

Douglas A. McIntyre