Procter & Gamble brings back A.G. Lafley as CEO

Associated Press + More

CINCINNATI (AP) — Procter & Gamble is bringing back former CEO A.G. Lafley to its top post in a surprise move as the world's largest consumer goods maker tries to grow globally.

Lafley, 65, replaces CEO Bob McDonald, effective immediately. McDonald, who will retire June 30 after a transition period, served as CEO since 2009. Lafley previously held the role from 2000 to 2009.

Under McDonald, P&G, which makes Tide detergent, Crest toothpaste and other household goods, has been cutting costs and ramping up innovation to offset a weakened European economy and slowing growth in China. P&G is in the middle of a cost-cutting plan aimed at saving $10 billion by 2016. But investors have been frustrated by slow revenue growth and stagnant market share gains globally.

"It sounds like the board needed a change at the top," said Bernstein analyst Ali Dibadj. "Clearly frustration was very high."

The pressure stepped up last July, when activist investor William Ackman, took a 1 percent stake. He has been vocal about the company's need to streamline operations and improve market share globally.

Last year, P&G acknowledged that it had made missteps in some emerging markets — which make up nearly 40 percent of its sales — when it expanded in certain product areas too quickly. But it then introduced a plan to focus on its 20 biggest new products and its 10 most-profitable emerging markets, which has led to improving market share.

In P&G's most recent quarter, net income rose 6 percent as the company cut costs, and revenue rose 2 percent to $20.6 billion, but fourth-quarter guidance was below expectations.

Dibadj said Lafley was appealing because he knows the culture of P&G. "Everybody respects him," he said.

Shares rose 42 cents to $79.12 in aftermarket trading.

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.