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Procter & Gamble shares near high on CEO switch

NEW YORK (AP) -- Procter & Gamble shares approached their all-time high on Friday after the world's largest consumer goods maker said current CEO Bob McDonald is retiring and his predecessor A.G. Lafley was taking back the top spot.

THE SPARK: Procter & Gamble, which makes products ranging from Tide detergent to Crest toothpaste found in 98 percent of households, said in a surprise announcement late Thursday that Lafley, who helmed the company from 2000 to 2009, would return to the top spot effective immediately. The company said he is charged with improving results, keeping the current cost-cutting plan on track and creating a CEO succession plan.

THE BIG PICTURE: P&G is known for its premium products that cost more than competitors but are perceived by customers to be of higher quality. But growth for the company has slowed in developed markets like North America and Europe. Under McDonald, who became CEO in 2009, P&G has been expanding into rapidly growing emerging markets such as Latin America, India and Russia. It is in the middle of a broad restructuring plan, aimed at saving $10 billion by 2016.

But investors have been frustrated by the company's slow revenue growth and stagnant market-share gains globally. 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 results.

Even though results had been improving — in the third quarter the Cincinnati company reported net income rose 6 percent as the company cut costs and gained market share in North America — revenue growth remained weak. Third quarter revenue rose 2 percent to $20.6 billion but fell short of expectations, and the company's fourth-quarter outlook missed expectations as well.

THE ANALYSIS: "We believe Mr. Lafley will firstly seek to improve P&G's global market share, which could result in earnings being rebased given higher investment spending," said Stifel Nicolaus analyst Mark Astrachan. He said he believes one the tasks for Lafley, 65, will be to groom a successor either from inside or outside the organization.

"P&G is a large organization filled with talented individuals but no current manager is an obvious successor," he said.

SHARE ACTION: Shares of P&G had risen 16 percent since the beginning of the year. On Friday the stock rose $3.12, or 3.9 percent, to $81.82, close to its all-time high of $82.54 it reached April 23.