The Procter & Gamble Company (NYSE:PG) announces departure of CEO Bob McDonald and return of predecessor CEO A.G. Lafley. This surprise announcement comes at a time when many expected The Procter & Gamble Company (NYSE:PG)’s fortunes to finally be improving. Substantial reinvestments behind marketing spend were driving sales growth acceleration after several quarters of hit-and-miss, and in particular after the last set of results disappointed investor expectations.

 Procter & Gamble

Procter & Gamble Company (NYSE:PG) new CEO

The return of A.G. Lafley may remind investors (and no doubt employees) of happier days and will likely be welcomed. During Mr Lafley’s tenure as CEO, PG delivered best-in-class performance and during many years set the benchmark for operating performance in global HPC. Lafley is often credited with building out the now struggling beauty business at The Procter & Gamble Company (NYSE:PG) and is well respected internally, even as growth slowed in the last several quarters of his previous tenure. If nothing more, his first task is to stem share losses and grow P&G at least in-line with global peers, something that hasn’t happened in over 5 years. However, this was clearly during a time of global macro-economic prosperity and when some of Procter & Gamble’s global competitors were punching below their weight.

At almost 66 years old (this is an early birthday present – Lafley was born on June 13, 1947), many are unclear if this is an interim assignment or if Lafley expects to assume the role on a more permanent basis, noting the press release states “…and facilitate an ongoing succession process”.

Therefore investors/pundits etc. should be cautious about expecting immediate miracles since PG is in a transition phase. In fact, some of the issues Procter & Gamble are still dealing with today (such as premium price points in many categories, and a sub-scale presence in some key emerging markets) are ones Mr. McDonald inherited and partly originate from this period of time.

Credit Suisse analysts believe The Procter & Gamble Company (NYSE:PG) may well get its first outside CEO, which would be a potentially significant catalyst for the stock. CS notes that similar to Unilever until the appointment of Paul Polman, PG has in the past recruited its senior leadership from within. This may change in light of today’s announcement. Mr Lafley will likely spend a significant portion of his time working with the The Procter & Gamble Company (NYSE:PG) board to search for the next CEO, which could be an outside candidate. Either way, CS thinks the prospect of change will excite investors. The announcement was made after post market hours of trading but many expect the stock to react positively to today’s announcement.

CS believes that a new outside CEO with a mandate to conduct a comprehensive top-to-bottom review could be a major catalyst for the stock and could lead to some changes that are more radical than what the previous leadership were implementing. In addition to the current restructuring program, this could ultimately lead to the company shrinking its category exposure by divesting non-core assets.

Win for Bill Ackman

See A Rising Tide is a Good Gamble – Ira Sohn Conference 2013 Bill Ackman

Many have termed this a win for Bill Ackman who has been taking an ‘activist’ role in an attempt to change corporate governance. Gina Chon of Quartz notes:

Just a few weeks ago, Ackman said time was running out for McDonald to show improvements in the company’s performance.