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Is Procter & Gamble Company (PG) Posting Q1 in Line Enough to Appease Ackman?

PERSHING SQUAREThe Procter & Gamble Company (NYSE:PG) has returned over 13% since the end of the second quarter, giving funds like Bill Ackman’s Pershing Square, which opened a $1.34 million position in the company during the second quarter as well as a $514,000 call position, a solid return. But, according to the Wall Street Journal, Ackman has said “that P&G needs to address a bloated cost structure that has had an effect on results in recent years” and has “advocated for deeper cost cuts and the replacement of [Bob] McDonald,”  Procter & Gamble Co.’s Chief Executive Officer.
McDonald may have received a slight reprieve after the Procter & Gamble Company (NYSE:PG)’s posted first quarter fiscal results in line with analyst estimates. The company had posted a profit of 96 cents per share, falling short of last year’s $1.03 a share but met consensus expectations. On revenue, Procter & Gamble posted sales of $20.7 billion for the quarter, under last year’s $21.92 billion and in line with analyst predictions of $20.78 billion. But, while these figures were “ahead of the company’s forecast due to easing commodity prices and cost savings… P&G continued to lose market share in most of its businesses.”
The Wall Street Journal writes that Procter & Gamble Company (NYSE:PG) lost “market share in businesses that represent more than 55% of overall sales in the period, but it was an improvement from the prior quarter, when it lost market share in 70% of its business. In the U.S., where P&G has imposed price cuts in categories like razor blades and powdered laundry detergent, P&G held or gained market share in businesses representing 60% of sales, up from just 15% in the prior quarter.” With this in mind, the company is holding its view for the year. “We’re going to take this opportunity to lean forward and strengthen marketing plans,” said P&G Chief Financial Officer Jon Moeller. “The maker of Tide laundry detergent and Gillette razors also hinted at furthering its cost-savings program beyond the $10 billion restructuring plan announced earlier this year.”
“We’re focused on embedding a culture of productivity in the company that’s equal to our culture of innovation,” Mr. McDonald said Thursday in a conference call, but critics of the Procter & Gamble Company (NYSE:PG)’s recent policies and Mr. McDonald in general, like Pershing Square’s Bill Ackman, are not convinced that this is the right move for right now. McDonald had reduced P&G’s forecast several times last fiscal year, earning a 75-page litany of complaints from the fund manager and activist investor for that and other issues – complaints that are not going to be addressed by merely making the mark.

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