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3 Factors That Makes Helen of Troy (HELE) a Promising Pick

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Helen of Troy Limited (HELE - Free Report) is well positioned on the back of strength in its Leadership Brands as well as online operations. Moreover, the company’s focus on strategic growth efforts is worth mentioning. Notably, shares of this Zacks Rank #1 (Strong Buy) company have increased 20.4% in the past year compared with the industry’s growth of 2.3%. Moreover, shares have comfortably outperformed the Zacks Consumer Staples sector, which witnessed a decline of 2.4% during the same period.

Leadership Brands: A Key Driver

Helen of Troy is focused on making solid investments in its “Leadership Brands,” which is a portfolio of market leading brands. Brands in this portfolio are positioned well to enhance market share. These brands contribute a significant chunk of the company’s sales, which generate solid margins and volumes. The company’s constant investments in these brands that are considered most productive have been delivering robust results. Helen of Troy made another move in this direction, when it acquired Drybar Products in January 2020. Drybar Products, which marks the company's eighth Leadership Brand, is yielding.

During the third quarter of fiscal 2021, sales from the company’s eight Leadership Brands surged 33.9%, including 4.6 percentage points of growth from the Drybar products acquisition. As part of its strategy to focus on Leadership Brands, the company decided to divest certain assets of its mass channel personal care business. It expects the divestiture to be completed within fiscal 2021.

 

Solid Digital Efforts

The company is likely to keep gaining from its consistent online sales and digital marketing efforts. Notably, online sales advanced nearly 34% year over year in the third quarter of fiscal 2021 and contributed nearly 24% to the company’s top line. Management is on track to make continued investments in this arena to keep pace with the evolving consumer environment. In fact, the company is persistently augmenting its digital presence through sophisticated marketing plans and improved content. Earlier, the company stated that online development has been a key area of focus for its transformation plan — both Phase 1 and 2.

Focus on Strategic Initiatives

Helen of Troy, which shares space with Coty (COTY - Free Report) , is making major investments in key areas to continue driving growth. To this end, the company is focused on investing in direct-to-consumer channels, new product development, customization, marketing, next-gen distribution infrastructure among others. Notably, management is on track to continue to invest in key growth areas as part of its Phase II Transformation efforts.

Moreover, the company expects to create further value though strategic acquisition in the future. Apart from these, in December 2020 Helen of Troy, via its subsidiaries, entered into a 100-year exclusive Trademark License Agreement with Revlon to license the trademark for hair care appliances and tools of the latter. Well, this marks another step for Helen of Troy to bolster its Beauty business and strengthen its brand portfolio.

All said, we believe that focus toward such growth endeavors are likely to help Helen of Troy stay in investors’ good books.

More Solid Cosmetics Bet

The Estee Lauder Companies (EL - Free Report) , with a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 13%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nu Skin (NUS - Free Report) , with a Zacks Rank #2, has a long-term earnings growth rate of 7.3%.

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