Procter & Gamble, Activist Spar Over Latest Results -- 6th Update
July 27 2017 - 2:47PM
Dow Jones News
By Sharon Terlep
Procter & Gamble Co. sparred with activist investor Nelson
Peltz on Thursday, with the two sides debating whether the
company's latest results prove a turnaround is taking hold.
P&G executives argued the company's higher profit and sales
showed progress on multiyear efforts to cut costs and refocus on
its biggest brands, building their case against Mr. Peltz's demand
for a board seat.
But soon after Thursday's report, Mr. Peltz's Trian Fund
Management issued a statement saying the maker of Tide, Crest and
Gillette continues to lose market share and is saddled with
"excessive costs and bureaucracy."
In an interview, P&G Chief Executive David Taylor said he
would listen to Mr. Peltz but there was no reason to revisit the
company's strategy or give the activist a board seat. "I want to
stay focused on delivering the plan," he said. "We have done a
tremendous amount of work -- redoing it is not needed."
Mr. Peltz "hasn't offered incremental thoughts that we haven't
considered," Mr. Taylor said, "and there's a history of
establishing a shadow management team which we believe firmly would
derail the work that is already delivering improvement."
Mr. Taylor said Mr. Peltz had offered to have Trian researchers
do additional analysis on the company, something the CEO considered
unnecessary. DuPont Co., which won a proxy fight against Mr. Peltz
in 2015, had accused Trian of seeking to establish a "shadow
management" team focused on short-term results.
P&G said organic sales increased 2% for the quarter and full
year ended June 30. The closely watched metric, which strips out
currency moves, acquisitions and divestitures, remains well below
prerecession levels and lags behind some rivals. P&G forecast
growth of 2% to 3% next year.
Shares of P&G rose 1% to $90.21 in afternoon trading. The
shares are up about 7% this year compared with the S&P 500's
11% rise.
Trian is arguing that P&G remains bogged down by bureaucracy
and failed to capitalize on a recently completed five-year, $10
billion cost-cutting plan. P&G last year launched a second $10
billion savings plan and Mr. Peltz said giving him a seat on the
board will help ensure that money is well-spent.
On Thursday, Mr. Taylor said men's razors in the U.S. and
diapers in China will be two major areas of focus as P&G, which
has dropped hundreds of brands in recent years, looks to use its
smaller size to win back share in key markets. Mr. Taylor said that
turning around the Gillette razor brand, which has ceded market
share in recent years to cheaper online upstarts, is P&G's
biggest challenge.
In the final quarter of the company's fiscal year, P&G
reported a profit of $2.2 billion, or 82 cents a share, compared
with $1.96 billion, or 69 cents a share, a year ago.
Total revenue fell 0.1% in the quarter to $16.07 billion, and
slipped 0.4% in the full year. The revenue figures were depressed
by currency swings, since P&G generates much of its sales
outside the U.S.
Organic sales of beauty products and fabric and home-care
products both rose 5% in the quarter. Still, concerns remain about
the company's grooming and health-care lines, where organic sales
fell 1% each. Customers have increasingly turned to online sellers
for things such as razors and over-the-counter medications.
P&G fared better than some rivals in the most recent
quarter. Colgate-Palmolive Co.'s organic sales for the quarter were
flat and Kimberly-Clark saw a 1% decline. Unilever PLC reported a
3% organic sales increase, a decline from 4.7% growth a year
ago.
One analyst questioned whether heavy discounting by P&G is
in part responsible for the sluggish market. "You are taking prices
down more and raising prices less than competitors," Bernstein
analyst Ali Dibaj said on the call with executives.
P&G's Mr. Moeller said discounting by retailers has
contributed to lower pricing on consumer goods. "The ultimate price
consumers pay is at the discretion of retail partners and that's at
their sole discretion," he said.
--Cara Lombardo contributed to this article.
Write to Sharon Terlep at sharon.terlep@wsj.com
(END) Dow Jones Newswires
July 27, 2017 14:32 ET (18:32 GMT)
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