Will Procter & Gamble hold up post-Lafley?

Chairman A.G. Lafley to step down in January. How will company do under new leadership?

By James Dlugosch Dec 8, 2009 4:51PM

Jamie DlugoschAfter a couple of years of news dominated by corporate scoundrels, it's bittersweet to report on the retirement of A.G. Lafley at Procter & Gamble (PG). Having already relinquished the reigns of chief executive officer, Lafley will step aside completely by handing the Chairman role over to his replacement.

 

Lafley has agreed to stay on during the transition, which is fitting given his record as one of the good guys. He has had a tremendous impact on the consumer goods giant, making money for his shareholders simply by making good stuff. 

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Lafley is a bit of a dinosaur in terms of today's business executive. The man spent most of his career at Procter & Gamble, logging 32 years. When he took over as CEO in 2000, the company was struggling. There were profit warnings, and the stock was sinking in value. But by focusing on what consumers really needed, Lafley grew the company’s billion-dollar-a-year brands from 10 to today's 22.

 

His biggest move was the $57 million acquisition of Gillette. That move allowed the company to move away from traditional brands like Tide and Pampers to the growing male grooming products market.

 

Lafley also oversaw PG's sales growth overseas. Like many companies, PG moved its popular brands to markets in China and India. The strategy worked well.

 

PG had been on a steady ascent since 2000 until the downturn that came with the recession and credit crisis. The stocks has already recovered most of the ground it lost.

 

The Lafley story is about excellence, about wealth creation for shareholders by making products with real sales. Considering all of the bad news about fraud, abuse of corporate perks and other Wall Street shenanigans, it is nice to know that there are still good guys out there running companies. And a bit sad to see one go.

 

How will PG do under new leadership?

 

I suspect the company is in good hands. Growth from overseas will more than offset any difficulties domestically. In fact, the company will benefit from a falling dollar.

 

Shares pay a nice dividend of nearly 3% with a valuation that is reasonable. PG is a stock you can own almost forever and rest fairly easily in doing so.

 

At the time of this writing, Jamie Dlugosch did not own shares of PG in personal or client portfolios.

 

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