You’ve heard it said that the markets don’t like uncertainty. Well, neither do individual investors. Unpleasant events, whether in the form of nasty earnings surprises or executive departures, need to be telegraphed well in advance so management can devise a plan and at least look like it knows what it’s doing.
That’s why seeing Dole Food Company, Inc. (NYSE:DOLE) lurch from a stock buyback program one day to suspending it weeks later so it can buy new ships instead, rattled investors and caused its stock to drop 10% so far.
Left hand, meet right hand
Certainly, the rationale it offered makes the executive suite seem schizophrenic. When announcing the buyback program on May 9, Dole Food Company, Inc. (NYSE:DOLE) President and COO C. Michael Carter said the fruit purveyor’s new capital structure was specifically designed and implemented to allow it to “launch the new Dole” while increasing shareholder value, which a share buyback would help achieve.
Unfortunately, the “new Dole” is apparently one that’s ready for the rubber room, because three weeks later, Carter was bemoaning “significant losses” in its strawberry business as part of the reason it had to suspend the repurchase program. It also has more than 20,000 acres of land on Oahu that it can’t get rid of, so coupled with a desire to suddenly buy three new ships to upgrade its aging fleet, the stock buyback is now out the window.
Hello? Wasn’t this apparent three weeks ago, when Dole Food Company, Inc. (NYSE:DOLE) announced the $200 million repurchase plan? In just 19 days, management suddenly realized that money they planned on returning to investors might actually be better used elsewhere? Didn’t they even look at the financial statements they released the week before they announced the program?
Slipped on a banana peel
Maybe they were just envious of rival Fresh Del Monte Produce Inc (NYSE:FDP), which had served up a buyback plan the week before they did and wanted to show they had the financial wherewithal, too.
After all, like Chiquita Brands International Inc (NYSE:CQB) , Dole Food Company, Inc. (NYSE:DOLE)’s been undergoing a significant corporate restructuring, and last month it sold its packaged-foods and Asia fresh business for $1.7 billion, making it a more focused international fresh fruit business, but one subject to all the vagaries that entails. In comparison, Chiquita Brands International Inc (NYSE:CQB)’s reorganization has it looking to become a high-volume, low-cost producer of bananas and chopped salads.