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CEO Warning: Weak Advertising Will Not Be Tolerated

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CINCINNATI (AdAge.com) -- Procter & Gamble Co. President-CEO A.G. Lafley told analysts today he expects to see weakness in many of the company's categories, as well as stiff competition from private-label brands, but he said P&G may be able to gain or hold its ground and stood by earnings guidance for the year.

P&G reported earnings down 5.1% to $1.1 billion, or 79 cents a share, for its fiscal first quarter as restructuring charges ate into higher operating profits. Sales were flat at $9.77 billion after foreign currency effects shaved two percentage points of growth.

Private-label market

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shares have been flat in drug and supermarket channels but have grown in mass-merchandise channels from 11% to 14% in the past four years, he said, adding that private-label shares remain much higher overall in food than non-food categories.

"There is room for leading national brand growth and private-label growth at the same time," he said.

P&G has maintained total marketing spending as a percent of sales at levels similar to a year ago, Mr. Lafley said, but is demanding more from its money.

"We no longer tolerate advertising that's not building market share profitably," he said, adding that 13 of P&G's top 15 brands have advertising that scores in the top tier of the company's pre-market advertising test scoring system.

"The other two," he said, "will get better advertising soon."

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