P&G's Strategic Slimming: A Play for Profitability or a Risky Gamble?

The consumer goods giant Procter & Gamble (PG) is doubling down on cost-cutting, slashing 5,700 jobs—roughly 5% of its global workforce—to fuel a push toward “agility” and $10 billion in savings. But here's the question: Are these moves a masterstroke to outpace rivals, or a risky gamble that could hollow out innovation? Let's dissect the strategy, its risks, and what it means for investors.

The Cuts: A Pivot to External Partners and Efficiency

P&G is gutting in-house functions like marketing, design, and logistics, shifting those roles to external partners. This isn't just about cutting costs—it's a radical reorganization to streamline decision-making and free up capital for growth areas. The CEO, Bob McDonald, calls it “becoming a faster-moving company,” but the stakes are high. By outsourcing non-core functions, P&G hopes to reduce bureaucratic drag and redirect resources to its “Power Brands,” which drive 75% of sales.

The $10 billion savings target, first mentioned in 2015, now seems to be a recurring theme. While the latest cuts are part of a 2025 push, the lack of a new savings deadline raises questions: Is P&G chasing the same goal for a decade, or has it finally found a scalable model?

A rising stock price with a steady dividend yield signals confidence in PG's cash flow, but investors must watch for margin pressures.

Agility Meets Digital Transformation: A Match Made in Heaven?

The shift to external partners could turbocharge P&G's digital push. By relying on specialized firms for marketing and analytics, P&G might gain sharper insights into consumer trends—like real-time data on shifting preferences in beauty or household products. This could help it compete with agile startups and tech giants like Amazon.

But here's the catch: P&G's internal “master strategic integrators”—the experts who blended R&D, marketing, and supply chain—are being cut. That risks losing the unique chemistry of innovation. Without in-house talent, will partnerships suffice? The answer hinges on execution. If P&G can turn vendors into true strategic allies (not just contractors), it could win. If not, it risks becoming a middleman in its own ecosystem.

The R&D Risk: Sacrificing Tomorrow for Today's Margins

The cuts target R&D, marketing, and design—areas critical to long-term growth. P&G's iconic brands like Tide and Gillette face declining relevance among younger consumers. Without investment in innovation, competitors like Unilever or even niche startups could steal share.

Investors must ask: Are the short-term EPS gains worth the risk of stagnation? P&G's Q3 2025 results showed a 2% sales dip but EPS growth thanks to pricing and productivity. That's a win for now, but if organic sales stagnate further, the strategy's cracks will show.

Valuation Implications: A New Playbook for Consumer Staples

P&G's moves force a rethink of how to value consumer goods stocks. Traditional metrics like P/E ratios might overvalue companies clinging to legacy costs, while those like P&G—trimming fat and boosting margins—could justify higher multiples. But if R&D cuts stifle innovation, growth-oriented investors may flee.

For income-focused investors, P&G's dividend (currently yielding ~2.5%) remains a lifeline. The payout is safe as long as cost savings offset top-line headwinds like forex and commodity prices. But if margins slip due to execution failures, the dividend could come under pressure.

Cramer's Call: Hold with Caution—But Stay Dividend-Driven

P&G's strategy is a high-stakes gamble. The cuts could unlock a leaner, more agile machine, but they're also a bet that external partners can replace the irreplaceable. For income investors, PG remains a core holding—its dividend is still a fortress. But keep an eye on R&D output and market share in key categories.

A decline in R&D investment could signal future growth risks.

In short: P&G's moves are bold, but they're not without peril. For now, the dividend makes it a “hold,” but investors must demand proof that agility isn't just a buzzword—especially when the next big thing in consumer goods might come from a startup, not a corporate giant.

Stay aggressive, stay nimble—and watch those margins!