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Summary

  • FHCO will discontinue dividends to help fund initiatives to improve sales and possibly diversify.
  • The announcement confirms my initial belief that FHCO may be too limited in both product line and capacity.
  • I believe it may be a sign that it is time to sell FHCO.

The Female Health Company (NASDAQ:FHCO) announced today (July 14, 2014) that its Board of Directors had decided to suspend dividend payments, and that it has hired Susan Ostrowski to serve as Executive Vice President of New Business Development. These moves are intended to pursue opportunities to increase sales of the FC2 Female Condom, and to examine possibilities for "new products, technologies and/or businesses." The company also will expand its stock repurchase program.

In my original article I felt that FHCO - which displayed excellent fundamentals - was a praiseworthy organization that appeared to have significant potential. Since then, however, the company's share price has plummeted nearly 40%, to $4.93 from $8.06. It was noted at the time that the company still had to show that it was a "long-term, growth-conducive operation." Apparently, the company has finally realized that its operations are too limited at present.

Originally, I did believe that FHCO had a place in any portfolio that sought to include socially responsible investments ("SRIs"). However, in the three months ended March 31, 2014, FHCO saw a net revenue drop of more than 54% - to $4.35 million from $9.48 million - from the same period in 2013. That is a rather precipitous drop, and the recent announcement may be, in my opinion, too little, too late. I'm changing my recommendation to "sell" until such time as FHCO shows it has definitively changed course.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Source: Update: The Female Health Company Strategy Decision