The company's financial results have been enough to give even the steeliest of investors indigestion, as Cott's stock price has sunk from $16 a year ago to less than $3 today. Surprising absolutely no one, interim CEO David T. Gibbons labeled Cott's first-quarter 2008 performance "disappointing."
Expectations for Cott were low, because of company-specific struggles, but also because of great difficulty in the North American carbonated-soft-drink market, seen in Coca Cola Enterprises'
Though terrible, the company's financial results were not the most troubling aspect of this morning's release. It had been previously disclosed that Cott would lose shelf space for its private-label carbonated soft drinks at major customer Wal-Mart
The company's management turmoil also became quite obvious on the earnings conference call. Former CEO Brent Willis was terminated March 24 after a truly disastrous tenure. Interim CEO Gibbons seems a good fit because of his experience with private-label medicine maker Perrigo
First, Gibbons assured everyone that he was treating his position as CEO as "full-time" and not "part-time." I'm so glad to hear that he's not treating this as some sort of weekend hobby! Any time this sort of assurance is necessary from a CEO, interim or not, I think there is a major problem.
Also, Gibbons said that, "over the coming weeks and months, I'll continue to dig into the details of our business." Yikes again! Doesn't sound to me like he is exactly hitting the ground running. To make this all the worse, Gibbons also said that, "I will not hesitate to make major changes to our strategies and how we are operating." Whaaa? He has to assure us that he's not part-timing his CEO role and that he is still learning the details of the business, but he will not hesitate to make dramatic changes to the company. That's a pretty scary combination for any investor to swallow!
I think that there is a place for Cott in the American beverage landscape, and that the company will be able to return to modest operating profitability over the long run. This will likely make it a good value pick at some point, but I'd wait for more managerial stability and a quantification of the hit from Wal-Mart before swigging back the shares.