U.S. stocks opened lower this morning, with the S&P 500 (SNPINDEX:^GSPC) and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES:^DJI) down 0.78% and 0.57%, respectively, at 10:05 a.m. EDT. Barring a significant reversal, that puts the S&P 500 on track to record its first weekly loss since mid-April.
P&G: McDonald is out as CEO
Bill Ackman, the brash hedge-fund manager at the head of Pershing Square Capital Management, can now add a head to his trophy wall from his campaign at the world's largest consumer-products company, Dow component Procter & Gamble (NYSE:PG). Late Thursday, P&G replaced CEO Bob McDonald with his retired predecessor, A. G. Lafley -- effective immediately.
In recent years, P&G has struggled to find its focus and adapt to a consumer who has adopted a more frugal mind-set in the post-crisis era. Shareholder returns during Mr. McDonald's tenure have been disappointing:
Mr. Lafley, on the other hand, was widely respected for his leadership and the turnaround he implemented at the company. The following graph shows the total return of P&G shares relative to that of the S&P 500 and its closest peer, Unilever, between June 8, 2000, when Lafley was first appointed CEO, through June 30, 2009, the end of his term as CEO:
P&G shares trounced the broad market and beat their nearest competitor in the process. That performance was no fluke: It was the result of operational improvements. As Lafley wrote in May 2009: "Since 2000 P&G's market TSR has outperformed that of the S&P 500 and the Dow Jones Industrial Average. Over the same period, on average, P&G has grown organic sales, diluted earnings-per-share, and free cash flow ahead of long-term targets."
Will Lafley be able to work his magic again? He knows the company intimately, so he'll be able to hit the ground running. He'll need it -- with Ackman watching over him, he won't have infinite time to show results.