Shares of Procter & Gamble touched a two-year low of $143.45 on Friday. The decline was triggered by unusually candid remarks from Chief Financial Officer Andre Schulten at the Morgan Stanley conference on December 2. He indicated a notable pullback in U.S. consumer spending, with declines in both the volume and value of goods sold. This has raised questions about the underlying market dynamics.
A Candid Assessment from Management
Speaking at the conference, CFO Schulten pointed to concrete data: October sales across P&G’s product categories fell significantly “in both volume and value.” He does not anticipate a material improvement for November. The direct language from the finance chief was uncommon and contributed to the stock falling more than 3% during the trading session.
The situation has been exacerbated by the government shutdown and the temporary suspension of food assistance programs (SNAP), adding pressure to an already strained consumer environment. Schulten described shoppers as appearing “nervous and cautious.” The share price decline pushed it below key technical levels, breaching both the 50-day moving average near $149.67 and the 200-day line around $155.63.
Despite this warning, the company reaffirmed its full-year guidance. It expects adjusted earnings per share to land between $6.83 and $7.10, representing a range of zero to approximately 4% growth compared to the prior year.
Restructuring Efforts Amid Market Challenges
Parallel to the softening sales figures, P&G is advancing a substantial organizational overhaul. Announced in June, the plan will eliminate roughly 7,000 positions over the next two years, affecting about 15% of its non-manufacturing workforce. The cuts will focus on corporate and office functions, leaving the company’s 99 global production facilities untouched.
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Key elements of the restructuring plan include:
- Estimated pre-tax restructuring costs of $1.0 to $1.6 billion.
- Approximately one-quarter of these costs are non-cash charges.
- A comprehensive review of the brand portfolio and geographic footprint.
- Potential brand divestitures and market exits.
According to Schulten, the objective is to streamline the organizational structure by creating broader roles and smaller teams. Investments in automation and artificial intelligence are expected to generate savings that can be redirected into growth initiatives.
Leadership Transition on the Horizon
A change at the top is imminent. Effective at the turn of the year, Shailesh Jejurikar will assume the CEO role from Jon Moeller, who will transition to Executive Chairman. Jejurikar is a 36-year company veteran with experience across multiple segments, including Health & Beauty and Home Care, as well as in emerging markets.
Most analysts maintain a constructive view despite the stock’s drop. Current ratings show 12 “Buy” recommendations against 9 “Hold” ratings. The average price target of approximately $171.53 suggests an upside potential of 19-20%. Furthermore, the dividend yield has risen to about 3% following the share price decline. P&G boasts an impressive record of having increased its dividend for 69 consecutive years.
Looking Ahead to the Next Catalysts
Jejurikar will officially take the helm on January 1. The next major event will be the release of second-quarter fiscal results in late January, a critical report for investors. Company management has indicated they anticipate Q2 will be the weakest quarter before conditions are expected to improve in the second half of the fiscal year. Additional headwinds include tariff impacts, which are estimated to be a $600 million pre-tax drag on earnings.
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