P&G’s Stock Price Reaction to the Old Spice Lawsuit
Procter & Gamble’s Old Spice Deodorant: Too Spicy?
Stock price movement
After a lawsuit was filed against Procter & Gamble (PG), or P&G, for its Old Spice deodorant, P&G’s stock price opened with a fall of 0.4% to $82.46 on March 24, 2016. Although the stock reacted to the news, it rebounded and was trading ~0.1% higher than the previous day’s close.
Procter & Gamble’s stock has consistently fallen since the beginning of last year. However, the stock was able to post some gains last year until September. It fell almost 17.2% to $68.06 on September 14, 2015, from $82.24 on July 17, 2015. The fall was primarily due to currency headwinds and the fall of global markets, particularly in the Asia-Pacific region. P&G’s stock fell 8.6% to $82.62 from January 2015 to March 28, 2016.
Stock prices of peers
In comparison, the shares of consumer packaged goods competitors Colgate-Palmolive (CL), Kimberly-Clark (KMB), and Clorox (CLX) have risen 1.3%, 16.2%, and 22.8%, respectively, since January 2015. However, like P&G, the benchmark S&P 500 Index (SPY) (IVV) (VOO) has fallen 1.0% since January 2015.
Deodorants versus antiperspirants
According to Damon Jones, a P&G spokesperson, Old Spice is used every year by tens of millions of men without incidents reported. However, men who have experienced rashes or any other reaction to a deodorant are advised to use antiperspirants, which have a different formulation. Deodorant products contain alcohol, which leads to irritation.
The lawsuit claims Old Spice is defective, but P&G is still selling the product and claims it is safe to use. This could affect P&G’s revenue and weaken its stock price.
PG makes up 2.4% of the iShares Global 100 ETF (IOO)..
Procter & Gamble’s stock rose 2.6% after the company declared fiscal 2Q16 results. The company’s fiscal 3Q16 ends tomorrow. We’ll see how the lawsuit affects earnings when the company reports results next month.
Browse this series on Market Realist: