Procter & Gamble, which just announced a sweeping restructuring plan, is not the place to be right now, “Mad Money” host Jim Cramer said Monday.
“All the big consumer staple plays are getting squeezed between the rock of higher input costs and the hard place of private label competition,” he said.
Procter & Gamble announced Thursday that it plans to cut $10 billion worth of costs through 2016, including laying off 5,600 workers.
While Cramer thinks Procter & Gamble is “doing the right thing,” he sees big hurdles for the “troubled” company.
The cuts will help manufacture higher earnings, but not revenue growth. He also thinks the company has a credibility problem when it comes to saving money. However, the real problem lies with the entire consumer packaged goods industry, which Cramer says is in “complete disarray.”
“We've got a slowdown in birth rates, ... real food inflation, input costs on the rise across the board, and worst of all, generic private label store brands—the cheap knock-off versions of Procter's products—are still very much in favor,” Cramer said. “All of this leaves Procter and companies like it's in a serious bind.”
He suggests being selective about this industry and only buy the stocks at a discount, unless there is a special situation catalyst.
“This industry is just way too difficult for the big boys right now, without catalysts, and the stocks still don't reflect these problems, not with Procter trading at a premium multiple of 16.5 times earnings,” Cramer said.
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