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Helen of Troy (HELE) Q2 Earnings Top Estimates, Sales Down
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Helen of Troy Limited (HELE - Free Report) reported second-quarter fiscal 2022 results, with the top and the bottom line beating the Zacks Consensus Estimate. However, the metrics declined year over year. The company encountered dismal sales performance in the Health & Home segment. Management stated that as part of its focus on Leadership Brands, the company divested its Personal Care business (excluding the Latin America and Caribbean regions) to HRB Brands LLC for $44.7 million in cash during the quarter under review.
The company raised its fiscal 2022 guidance owing to better-than-anticipated quarterly performance, favorable trends in Beauty and Housewares along with more favorable-than-anticipated EPA resolution.
Results in Detail
Adjusted earnings of $2.65 per share beat the Zacks Consensus Estimate of $2.13 but declined 29.7% year over year. The downside can be mainly attributed to reduced adjusted operating income in the Health & Home and Housewares units, higher effective income tax rate as well as an increase in interest expenses. These factors were somewhat countered by increased adjusted operating income in the Beauty unit as well as reduced weighted average diluted shares outstanding.
Consolidated net sales declined 10.5% year over year to $475.2 million. The consensus mark for quarterly revenues was pegged at $433.6 million. The year-over-year downside was caused by declines in the Organic business to the tune of 10.9%, stemming from lower sales in the Health & Home segment. Sales in the segment were challenged by the EPA packaging compliance concerns as well as associated stop shipment actions. Apart from this, lower net sales revenues from Non-Core business due to the sale of the North America Personal Care business also hurt the metric. Nevertheless, improved brick and mortar sales in the Beauty and Housewares units as well as higher closeout channel sales offered some respite. Also, consolidated international sales growth was an upside. Net sales growth also reflects 0.4% positive impact from foreign currency translations.
Helen of Troy Limited Price, Consensus and EPS Surprise
During the quarter, Leadership Brands net sales fell 8.7% and online channel net sales declined 17.5%. Management highlighted that online sales in the quarter were affected by stop ship action associated with the EPA matter. Also, consumers’ return to in-person shopping hurt online sales. Core business reported a net sales decline of 7.9%.
Consolidated gross profit margin moved up 0.9 percentage points to 44.3%, mainly driven by a positive product mix in the Beauty segment. Also, a favorable mix of increased Housewares and Beauty sales in the overall consolidated net sales revenues led to the growth. Increased inbound freight expenses, unfavorable channel mix in the Housewares unit and EPA compliance costs were a concern for the metric.
Consolidated operating income of $67.3 million was lower than $99.3 million reported in the year-ago quarter. Consolidated operating margin contracted 4.5 percentage points to 14.2%. The downside was mainly caused by higher inbound freight expenses, increased distribution costs, unfavorable operating leverage and EPA compliance costs among other reasons. These were somewhat offset by a positive product mix in the Beauty segment, lower amortization costs and reduced royalty expense among others.
Segmental Performance
Net sales in the Housewares segment increased 6.6% to $215.2 million driven by 6.5% growth in the organic business. Organic growth was backed by increased brick and mortar sales for OXO and Hydro Flask brands. Higher sales in international as well as closeout channel contributed to the same. These were partly offset by lower online sales stemming from unfavorable year-over-year comparison due to a spike in digital sales in the year-ago quarter amid pandemic-led store closures. Also, lower sales in the club channel were a downside.
Net sales in the Health & Home segment slumped 33.1% to $141.5 million, thanks to an organic business decline of 33.5%. The downside was mainly caused by lower brick and mortar as well as online sales of air filtration, water filtration and humidification products, thanks to the EPA packaging compliance concerns and associated stop shipment actions. Lower thermometer sales also affected organic sales. The company witnessed a massive spike in pandemic-induced demand for healthcare products in the year-ago period. That being said, higher sales of heaters and new product introductions offered some respite.
Total net sales in the Beauty segment inched up 0.8% to $118.5 million, reflecting the divestiture of the Non-Core North America Personal Care business. Core business Beauty net sales rose 13.9% on more appliance sales, increase in volumizer franchise, improved distribution as well as escalated international sales.
Other Financial Details
Helen of Troy ended the quarter with cash and cash equivalents of $31.8 million as well as total short-and long-term debt of $472.2 million. Net cash used by operating activities for the six months ended Aug 31, 2021 was $58.3 million.
In fiscal 2022, management expects to incur capital asset expenditures in the range of $100-$125 million. This includes the envisioned initial expenses associated with the development of a new distribution facility for the Housewares unit.
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Fiscal 2022 Guidance
For fiscal 2022, management anticipates consolidated net sales between $2.02 billion and $2.07 billion, suggesting a year-over-year decline of 3.5% to 1.5%. Earlier, the company had expected the metric between $1.93 billion and $1.98 billion, suggesting year-over-year decline of 8% to 5.5%. The increased sales outlook reflects better-than-expected second quarter sales as well as improved sales projections for the rest of the year.
The company’s updated net sales view is based on the assumption that its Health & Home segment net sales will fall 20-18%. Nevertheless, management expects Housewares net sales to grow 9-11%. Net sales in the Beauty segment are projected to improve 7.5-9.5% in fiscal 2022.
Helen of Troy now envisions fiscal 2022 Core net sales in the band of $1.99-$2.03 billion, indicating a decline of 1.5% to growth of 0.5%. Earlier, Helen of Troy had envisioned Core net sales in the band of $1.9-$1.95 billion, indicating a decline of 6-3.5%. Excluding the impact of EPA matter, management expects Core net sales growth of 3.4% to 4.3% in fiscal 2022.
The company now expects consolidated adjusted earnings per share (EPS) in the range of $11.26-$11.56. Prior to this, the metric was expected in the range of $10.46-$10.97. The increased outlook reflects on greater-than-anticipated earnings during the second quarter. Management expects Core adjusted EPS to increase 0.2-2.9%, including the impact of EPA matter. The company projects year-over-year inflationary cost pressures of $60-$65 million for fiscal 2022.
Price Performance
Shares of this Zacks Rank #1 (Strong Buy) company have gained 5.7% in the past three months against the industry’s 7.5% decline.
United Natural Foods, Inc. (UNFI - Free Report) , currently flaunting a Zacks Rank #1, has a trailing four-quarter earnings surprise of 13.1%, on average.
Sysco Corporation (SYY - Free Report) , currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 13.3%, on average.
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Helen of Troy (HELE) Q2 Earnings Top Estimates, Sales Down
Helen of Troy Limited (HELE - Free Report) reported second-quarter fiscal 2022 results, with the top and the bottom line beating the Zacks Consensus Estimate. However, the metrics declined year over year. The company encountered dismal sales performance in the Health & Home segment. Management stated that as part of its focus on Leadership Brands, the company divested its Personal Care business (excluding the Latin America and Caribbean regions) to HRB Brands LLC for $44.7 million in cash during the quarter under review.
The company raised its fiscal 2022 guidance owing to better-than-anticipated quarterly performance, favorable trends in Beauty and Housewares along with more favorable-than-anticipated EPA resolution.
Results in Detail
Adjusted earnings of $2.65 per share beat the Zacks Consensus Estimate of $2.13 but declined 29.7% year over year. The downside can be mainly attributed to reduced adjusted operating income in the Health & Home and Housewares units, higher effective income tax rate as well as an increase in interest expenses. These factors were somewhat countered by increased adjusted operating income in the Beauty unit as well as reduced weighted average diluted shares outstanding.
Consolidated net sales declined 10.5% year over year to $475.2 million. The consensus mark for quarterly revenues was pegged at $433.6 million. The year-over-year downside was caused by declines in the Organic business to the tune of 10.9%, stemming from lower sales in the Health & Home segment. Sales in the segment were challenged by the EPA packaging compliance concerns as well as associated stop shipment actions. Apart from this, lower net sales revenues from Non-Core business due to the sale of the North America Personal Care business also hurt the metric. Nevertheless, improved brick and mortar sales in the Beauty and Housewares units as well as higher closeout channel sales offered some respite. Also, consolidated international sales growth was an upside. Net sales growth also reflects 0.4% positive impact from foreign currency translations.
Helen of Troy Limited Price, Consensus and EPS Surprise
Helen of Troy Limited price-consensus-eps-surprise-chart | Helen of Troy Limited Quote
During the quarter, Leadership Brands net sales fell 8.7% and online channel net sales declined 17.5%. Management highlighted that online sales in the quarter were affected by stop ship action associated with the EPA matter. Also, consumers’ return to in-person shopping hurt online sales. Core business reported a net sales decline of 7.9%.
Consolidated gross profit margin moved up 0.9 percentage points to 44.3%, mainly driven by a positive product mix in the Beauty segment. Also, a favorable mix of increased Housewares and Beauty sales in the overall consolidated net sales revenues led to the growth. Increased inbound freight expenses, unfavorable channel mix in the Housewares unit and EPA compliance costs were a concern for the metric.
Consolidated operating income of $67.3 million was lower than $99.3 million reported in the year-ago quarter. Consolidated operating margin contracted 4.5 percentage points to 14.2%. The downside was mainly caused by higher inbound freight expenses, increased distribution costs, unfavorable operating leverage and EPA compliance costs among other reasons. These were somewhat offset by a positive product mix in the Beauty segment, lower amortization costs and reduced royalty expense among others.
Segmental Performance
Net sales in the Housewares segment increased 6.6% to $215.2 million driven by 6.5% growth in the organic business. Organic growth was backed by increased brick and mortar sales for OXO and Hydro Flask brands. Higher sales in international as well as closeout channel contributed to the same. These were partly offset by lower online sales stemming from unfavorable year-over-year comparison due to a spike in digital sales in the year-ago quarter amid pandemic-led store closures. Also, lower sales in the club channel were a downside.
Net sales in the Health & Home segment slumped 33.1% to $141.5 million, thanks to an organic business decline of 33.5%. The downside was mainly caused by lower brick and mortar as well as online sales of air filtration, water filtration and humidification products, thanks to the EPA packaging compliance concerns and associated stop shipment actions. Lower thermometer sales also affected organic sales. The company witnessed a massive spike in pandemic-induced demand for healthcare products in the year-ago period. That being said, higher sales of heaters and new product introductions offered some respite.
Total net sales in the Beauty segment inched up 0.8% to $118.5 million, reflecting the divestiture of the Non-Core North America Personal Care business. Core business Beauty net sales rose 13.9% on more appliance sales, increase in volumizer franchise, improved distribution as well as escalated international sales.
Other Financial Details
Helen of Troy ended the quarter with cash and cash equivalents of $31.8 million as well as total short-and long-term debt of $472.2 million. Net cash used by operating activities for the six months ended Aug 31, 2021 was $58.3 million.
In fiscal 2022, management expects to incur capital asset expenditures in the range of $100-$125 million. This includes the envisioned initial expenses associated with the development of a new distribution facility for the Housewares unit.
Fiscal 2022 Guidance
For fiscal 2022, management anticipates consolidated net sales between $2.02 billion and $2.07 billion, suggesting a year-over-year decline of 3.5% to 1.5%. Earlier, the company had expected the metric between $1.93 billion and $1.98 billion, suggesting year-over-year decline of 8% to 5.5%. The increased sales outlook reflects better-than-expected second quarter sales as well as improved sales projections for the rest of the year.
The company’s updated net sales view is based on the assumption that its Health & Home segment net sales will fall 20-18%. Nevertheless, management expects Housewares net sales to grow 9-11%. Net sales in the Beauty segment are projected to improve 7.5-9.5% in fiscal 2022.
Helen of Troy now envisions fiscal 2022 Core net sales in the band of $1.99-$2.03 billion, indicating a decline of 1.5% to growth of 0.5%. Earlier, Helen of Troy had envisioned Core net sales in the band of $1.9-$1.95 billion, indicating a decline of 6-3.5%. Excluding the impact of EPA matter, management expects Core net sales growth of 3.4% to 4.3% in fiscal 2022.
The company now expects consolidated adjusted earnings per share (EPS) in the range of $11.26-$11.56. Prior to this, the metric was expected in the range of $10.46-$10.97. The increased outlook reflects on greater-than-anticipated earnings during the second quarter. Management expects Core adjusted EPS to increase 0.2-2.9%, including the impact of EPA matter. The company projects year-over-year inflationary cost pressures of $60-$65 million for fiscal 2022.
Price Performance
Shares of this Zacks Rank #1 (Strong Buy) company have gained 5.7% in the past three months against the industry’s 7.5% decline.
Other Solid Staple Picks
Darling Ingredients Inc. (DAR - Free Report) , currently sporting a Zacks Rank #1, has a trailing four-quarter earnings surprise of 39.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
United Natural Foods, Inc. (UNFI - Free Report) , currently flaunting a Zacks Rank #1, has a trailing four-quarter earnings surprise of 13.1%, on average.
Sysco Corporation (SYY - Free Report) , currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 13.3%, on average.