Given the current economic changes, Procter & Gamble’s senior management of consumer goods has announced that the company would be selling up to 100 brands by the end of this summer as a way of triaging some of its low-performing brands.
For the average American, the fact that the US dollar has been picking up momentum means the world, however, earning reports from some of the major US companies may contradict this. For companies who rely on large portions of their earnings to come from outside the US, a stronger dollar means that they are, in effect, earning less back home for products sold abroad. Such companies include Procter & Gamble, McDonald’s, Coca-Cola, IBM, Apple and eBay, as at least 50 percent of their earnings stem from outside the United States.
Many companies are already dealing with this issue, which eventually adds up to billions of dollars in revenue. Amazon.com, for instance, has already announced a $895 million hit in revenue. Ebay foresees similar figures, announcing that the stronger dollar might cause revenue hits of approximately $600 million.
Similarly, Procter & Gamble also expects hard hits, however, with the behemoth company, the figure might reach billions.
According to BTIG chief Strategist, Don Greenhaus, the issue that companies had with the dollar getting stronger over the last quarters is the fact that no one actually anticipated how fast it would strengthen. As a result, even for those companies who had already prepared themselves for a surging dollar were still taken by surprise by the magnitude of the surge.
“It’s not necessarily the direction, but the magnitude and speed, which has been surprising for companies,”
US Bank Private Client Reserve senior portfolio manager, Eric Weigand, said.
Procter & Gamble CFO, John Moeller, explained that, for the company, this was by far the most significant currency impact that the company has incurred, causing a blow to the company’s revenue of $1.4 million.
Such drops in revenue, combined with the fact that some of the brands currently under Procter & Gamble’s management are underperforming, has led to Moeller’s decision that the company would be letting some of these brands go.
Such sales would, of course, impact P&G’s revenue as sales would drop by as much as 14 percent, however, Moeller views this move as a “refinement” of the company’s plan. One of the most surprising is the sale of Duracell, which the company plans to sell to Berkshire Hathaway next year.
Moeller noted that neither company being sold by P&G shouldn’t be regarded as difficult business, as they may continue producing beautiful figures under new management. However, as for Procter & Gamble’s strengths, these brands no longer reflect the company’s general direction, he said.
Image Source: Cleveland.com
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