As P&G CEO looks abroad, Home Depot cuts costs
Two leading companies. Two strategies for coping with a slow-growth US economy: overseas expansion versus austerity.
Procter & Gamble, the 172-year-old consumer-products giant, is talking about expanding into emerging markets. On Wednesday, it named 29-year P&G veteran Robert McDonald to be its CEO to lead that charge.
On the same day, home-improvement giant Home Depot forecast that its 2009 profits would decline less than it suggested a month ago. The reason wasn't increased sales 鈥� those are still expected to fall 9 percent 鈥� but better control of expenses. Bloomberg :
The retailer, led by Chief Executive Officer Frank Blake, has reduced expenses, shuttered its Expo design chain and frozen 2009 base salaries for officers as declining housing starts depress demand for home improvements.
鈥淥ur economic engine is no longer driven by new square footage,鈥� Blake told analysts on a conference call today. 鈥淚nstead it is driven by discipline, capital allocation and productivity and efficiencies within our existing stores.鈥�
P&G is expected to look toward Asia and other growing markets because Mr. McDonald, who takes over from CEO A.G. Lafley July 1, has talked in recent months about the need to expand. AP reports ():
Mr. McDonald has said that P&G鈥檚 fastest growth is coming from emerging markets, and that the company will aggressively step up its presence in the developing world, building new plants in countries as far-flung as Pakistan and Nigeria. He has said that P&G, whose sales and earnings growth have fallen during the recession, can more than double its annual sales, to $175 billion a year, over the next 15 years by increasing its reach into countries like India, China and Brazil.
鈥淭here鈥檚 no question that the basic demographics are going to take the center of gravity of our business to Asia, to Africa 鈥� where the people are, where the babies are being born,鈥� Mr. McDonald said in an interview last year.
Which strategy fits best with the realities of the new economy? Wall Street leaned toward austerity Wednesday.
Halfway through the trading day on the New York Stock Exchange, P&G was down 15 cents (0.3 percent) while Home Depot was up 35 cents (1.4 percent).
But it will take years to tell who took the better path 鈥� or indeed, if both were right, given their circumstances.
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