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Helen of Troy (HELE) Q4 Earnings Top Estimates, Decline Y/Y
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Helen of Troy Limited (HELE - Free Report) posted fourth-quarter fiscal 2023 results, with the top and the bottom line declining year over year but beating the Zacks Consensus Estimate.
Quarter in Detail
Adjusted earnings of $2.01 per share beat the Zacks Consensus Estimate of $1.89 and our estimate of $1.88. However, the bottom line declined 19.9% year over year. The metric was mainly hurt by reduced adjusted operating income and higher interest expense. These were somewhat offset by reduced weighted average diluted shares outstanding and lower effective income tax rate.
Consolidated net sales of $484.6 million surpassed the Zacks Consensus Estimate of $456.2 million and our estimate of $450 million. However, the metric fell 16.7% from the year-ago quarter’s levels. The downside was a result of softness in the organic business to the tune of 19.8%, partly compensated by the buyout contributions from Osprey ($10.8 million) and Curlsmith ($9 million).
The organic business was hurt by reduced consumer demand, a shift in consumer spending patterns and lower order levels from retail customers stemming from increased trade inventory levels. The net sales revenue dropped in the Non-Core business, due to the divestiture of the Personal Care business, was also a hurdle. These were somewhat made up by a rise in the sales of prestige liquid hair care products, higher organic net sales from Osprey and customer price rise associated with higher freight and product costs.
Helen of Troy Limited Price, Consensus and EPS Surprise
The consolidated gross profit margin came in at 43.3%, up 0.7 percentage points. The upside resulted from the improved product mix of greater Home & Outdoor sales within consolidated net sales and positive impact of the Curlsmith buyout among other reasons. These were somewhat offset by a less favorable product mix, channel mix within the Home & Outdoor segment and product mix within the wellness categories of the Beauty & Wellness segment as well as increased inventory obsolescence costs.
The consolidated operating income stood at $53.7 million, up from the $50.4 million reported in the year-ago quarter. The consolidated operating margin came in at 11.1%, up from 8.7% reported in the year-ago quarter. The increase in consolidated operating margin was mainly led by lower annual incentive compensation expenses and share-based compensation costs. Reduced EPA compliance costs, lower outbound freight costs and reduced marketing expense among others also led to the upside.
Segmental Performance
Net sales in the Home & Outdoor segment inched up 0.5% to $211.9 million mainly on contributions from the Osprey acquisition. This was somewhat offset by declines in the organic business.
Net sales in the Beauty & Wellness segment declined 26.5% to $272.7 million due to the organic business decrease of 28.7%, stemming from the soft sales of thermometry, hair appliance, air filtration, seasonal products and humidification.
Other Details
Helen of Troy ended the quarter with cash and cash equivalents of $29.1 million and total short-and long-term debt of $934.4 million. Net cash provided by operating activities for the fiscal year ended Feb 2023 was $208.2 million.
HELE unveiled that chief executive officer (CEO), Julien R. Mininberg, intends to retire effective Feb 29, 2024. The company revealed that Noel Geoffroy will succeed Mr. Mininberg as CEO, effective Mar 1, 2024.
Restructuring Plan
In the second quarter of fiscal 2023, Helen of Troy focused on developing a global restructuring plan, Project Pegasus. The plan aims to expand operating margins via initiatives designed to improve efficiency and reduce costs.
Project Pegasus includes efforts to optimize the company’s brand portfolio, streamline and simplify the organization, grow the cost of goods savings projects and improve the efficiency of the supply-chain network. The project aims to streamline indirect spending and improve cash flow and working capital.
As part of Project Pegasus, management is unveiling three major changes to HELE’s organizational structure. During the fourth quarter of fiscal 2023, Helen of Troy undertook changes in the structure of its organization, as part of the global restructuring plan. The company has two reportable units — Home & Outdoor and Beauty & Wellness.
Further, the changes include creating a North America Regional Market Organization to take care of sales and go-to-market strategies for all categories and channels in the United States and Canada. Finally, the company announced the further centralization of various functions under shared services, mainly Operations and Finance.
The newly-unveiled structure is likely to lower Helen of Troy’s workforce by nearly 10%. The major role reductions were concluded by Mar 1, 2023. Management expects to complete the remaining role reductions before the end of fiscal 2024. The company anticipates Project Pegasus to generate $20 million worth savings for fiscal 2024.
Image Source: Zacks Investment Research
Fiscal 2024 Guidance
Helen of Troy expects fiscal 2024 consolidated net revenues in the range of $1.965-$2.015 billion, reflecting a decline of 5.2-2.8%. The year over year decline includes the removal of Bed, Bath & Beyond revenues and the reduction from the Pegasus SKU rationalization initiative. The top-line view reflects a continued slower economy and uncertainty in spending patterns mainly for discretionary categories. The outlook also considers that consumers continue to prioritize value during the current environment of inflation and increased interest rates. In addition, the company is seeing reduction of trade inventory on a sequential basis.
The company’s fiscal 2024 net sales view assumes Home & Outdoor segment net sales decline of 1.7% to growth of 1%. The view also considers Beauty & Wellness net sales decline of 5.8-8%.
HELE expects adjusted earnings per share (EPS) in the range of $8.50-$9.00. This indicates a consolidated adjusted EPS decline of 4.8-10.1%. The outlook reflects additional year-over-year expenses related to the restoration of annual incentive compensation expenses and increased interest and depreciation expenses. Management anticipates consolidated adjusted EBITDA of $338-$348 million, indicating growth of 3.2-6.3% for fiscal 2024.
The company envisions declines in net sales of 9-7% and 7-5% in the first and second quarters of fiscal 2024, respectively. Management anticipates a decline in adjusted EPS of 20-30% in the first half of fiscal 2024, almost offsetting growth in the second half of the year.
Shares of this Zacks Rank #4 (Sell) company have declined 25.1% in the past three months compared with the industry’s 5.5% decline.
Lamb Weston, which operates as a frozen potato product company, currently sports a Zacks Rank #1 (Strong Buy). LW has a trailing four-quarter earnings surprise of 47.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and earnings suggests increases of 29.6% and 116.8%, respectively, from the year-ago reported number.
General Mills, a branded consumer food company, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 6.3% and 7.4%, respectively, from the year-ago reported figures.
Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank #2. CAG has a trailing four-quarter earnings surprise of 13.2%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests improvements of 7.1% and 16.5%, respectively, from the year-ago reported number.
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Helen of Troy (HELE) Q4 Earnings Top Estimates, Decline Y/Y
Helen of Troy Limited (HELE - Free Report) posted fourth-quarter fiscal 2023 results, with the top and the bottom line declining year over year but beating the Zacks Consensus Estimate.
Quarter in Detail
Adjusted earnings of $2.01 per share beat the Zacks Consensus Estimate of $1.89 and our estimate of $1.88. However, the bottom line declined 19.9% year over year. The metric was mainly hurt by reduced adjusted operating income and higher interest expense. These were somewhat offset by reduced weighted average diluted shares outstanding and lower effective income tax rate.
Consolidated net sales of $484.6 million surpassed the Zacks Consensus Estimate of $456.2 million and our estimate of $450 million. However, the metric fell 16.7% from the year-ago quarter’s levels. The downside was a result of softness in the organic business to the tune of 19.8%, partly compensated by the buyout contributions from Osprey ($10.8 million) and Curlsmith ($9 million).
The organic business was hurt by reduced consumer demand, a shift in consumer spending patterns and lower order levels from retail customers stemming from increased trade inventory levels. The net sales revenue dropped in the Non-Core business, due to the divestiture of the Personal Care business, was also a hurdle. These were somewhat made up by a rise in the sales of prestige liquid hair care products, higher organic net sales from Osprey and customer price rise associated with higher freight and product costs.
Helen of Troy Limited Price, Consensus and EPS Surprise
Helen of Troy Limited price-consensus-eps-surprise-chart | Helen of Troy Limited Quote
The consolidated gross profit margin came in at 43.3%, up 0.7 percentage points. The upside resulted from the improved product mix of greater Home & Outdoor sales within consolidated net sales and positive impact of the Curlsmith buyout among other reasons. These were somewhat offset by a less favorable product mix, channel mix within the Home & Outdoor segment and product mix within the wellness categories of the Beauty & Wellness segment as well as increased inventory obsolescence costs.
The consolidated operating income stood at $53.7 million, up from the $50.4 million reported in the year-ago quarter. The consolidated operating margin came in at 11.1%, up from 8.7% reported in the year-ago quarter. The increase in consolidated operating margin was mainly led by lower annual incentive compensation expenses and share-based compensation costs. Reduced EPA compliance costs, lower outbound freight costs and reduced marketing expense among others also led to the upside.
Segmental Performance
Net sales in the Home & Outdoor segment inched up 0.5% to $211.9 million mainly on contributions from the Osprey acquisition. This was somewhat offset by declines in the organic business.
Net sales in the Beauty & Wellness segment declined 26.5% to $272.7 million due to the organic business decrease of 28.7%, stemming from the soft sales of thermometry, hair appliance, air filtration, seasonal products and humidification.
Other Details
Helen of Troy ended the quarter with cash and cash equivalents of $29.1 million and total short-and long-term debt of $934.4 million. Net cash provided by operating activities for the fiscal year ended Feb 2023 was $208.2 million.
HELE unveiled that chief executive officer (CEO), Julien R. Mininberg, intends to retire effective Feb 29, 2024. The company revealed that Noel Geoffroy will succeed Mr. Mininberg as CEO, effective Mar 1, 2024.
Restructuring Plan
In the second quarter of fiscal 2023, Helen of Troy focused on developing a global restructuring plan, Project Pegasus. The plan aims to expand operating margins via initiatives designed to improve efficiency and reduce costs.
Project Pegasus includes efforts to optimize the company’s brand portfolio, streamline and simplify the organization, grow the cost of goods savings projects and improve the efficiency of the supply-chain network. The project aims to streamline indirect spending and improve cash flow and working capital.
As part of Project Pegasus, management is unveiling three major changes to HELE’s organizational structure. During the fourth quarter of fiscal 2023, Helen of Troy undertook changes in the structure of its organization, as part of the global restructuring plan. The company has two reportable units — Home & Outdoor and Beauty & Wellness.
Further, the changes include creating a North America Regional Market Organization to take care of sales and go-to-market strategies for all categories and channels in the United States and Canada. Finally, the company announced the further centralization of various functions under shared services, mainly Operations and Finance.
The newly-unveiled structure is likely to lower Helen of Troy’s workforce by nearly 10%. The major role reductions were concluded by Mar 1, 2023. Management expects to complete the remaining role reductions before the end of fiscal 2024. The company anticipates Project Pegasus to generate $20 million worth savings for fiscal 2024.
Image Source: Zacks Investment Research
Fiscal 2024 Guidance
Helen of Troy expects fiscal 2024 consolidated net revenues in the range of $1.965-$2.015 billion, reflecting a decline of 5.2-2.8%. The year over year decline includes the removal of Bed, Bath & Beyond revenues and the reduction from the Pegasus SKU rationalization initiative. The top-line view reflects a continued slower economy and uncertainty in spending patterns mainly for discretionary categories. The outlook also considers that consumers continue to prioritize value during the current environment of inflation and increased interest rates. In addition, the company is seeing reduction of trade inventory on a sequential basis.
The company’s fiscal 2024 net sales view assumes Home & Outdoor segment net sales decline of 1.7% to growth of 1%. The view also considers Beauty & Wellness net sales decline of 5.8-8%.
HELE expects adjusted earnings per share (EPS) in the range of $8.50-$9.00. This indicates a consolidated adjusted EPS decline of 4.8-10.1%. The outlook reflects additional year-over-year expenses related to the restoration of annual incentive compensation expenses and increased interest and depreciation expenses. Management anticipates consolidated adjusted EBITDA of $338-$348 million, indicating growth of 3.2-6.3% for fiscal 2024.
The company envisions declines in net sales of 9-7% and 7-5% in the first and second quarters of fiscal 2024, respectively. Management anticipates a decline in adjusted EPS of 20-30% in the first half of fiscal 2024, almost offsetting growth in the second half of the year.
Shares of this Zacks Rank #4 (Sell) company have declined 25.1% in the past three months compared with the industry’s 5.5% decline.
Solid Consumer Staple Picks
Some better-ranked consumer staple stocks are Lamb Weston (LW - Free Report) , General Mills (GIS - Free Report) and Conagra Brands (CAG - Free Report) .
Lamb Weston, which operates as a frozen potato product company, currently sports a Zacks Rank #1 (Strong Buy). LW has a trailing four-quarter earnings surprise of 47.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and earnings suggests increases of 29.6% and 116.8%, respectively, from the year-ago reported number.
General Mills, a branded consumer food company, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 6.3% and 7.4%, respectively, from the year-ago reported figures.
Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank #2. CAG has a trailing four-quarter earnings surprise of 13.2%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests improvements of 7.1% and 16.5%, respectively, from the year-ago reported number.