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Helen of Troy (HELE) Looks Troubled: Stock Down 25% in 3 Months
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Helen of Troy Limited (HELE - Free Report) appears in a troubled zone due to elevated cost concerns and softness in its Beauty segment. These downsides were witnessed in the company’s second-quarter fiscal 2023 results, wherein the bottom line declined year over year.
Management lowered its sales and earnings guidance for fiscal 2023 to reflect the impact of headwinds like the shift in consumer buying patterns, inflation and rising interest rates.
The Zacks Consensus Estimate for the current fiscal-year earnings per share (EPS) has declined from $10.08 to $9.82 over the past seven days. This Zacks Rank #5 (Strong Sell) stock has slumped almost 25% in the past three months against the industry’s rise of 16%. Let’s delve deeper.
Helen of Troy Limited Price, Consensus and EPS Surprise
In the second quarter of fiscal 2023, Helen of Troy's consolidated gross profit margin came in at 42.5%, down 1.8 percentage points. The downside was mainly caused by the unfavorable impact of lower Beauty segment sales, an unfavorable product mix in the Home & Outdoor unit, higher EPA compliance costs, increased inventory obsolescence expenses and the net dilutive impact of inflationary costs and associated customer price increases.
The consolidated operating income stood at $46.9 million, down from the $67.3 million reported in the year-ago quarter. The consolidated operating margin declined 5.2 percentage points to 9% due to higher outbound freight costs, an increase in EPA compliance costs, a rise in marketing expenses and greater salary and wage costs, among others.
Net sales in the company’s Beauty segment fell 15.4% to $100.3 million in the second quarter. The downside was caused by a decline in the organic business to the tune of 23.1%. Beauty Core business’ net sales are anticipated to decrease 19-21% in fiscal 2023, including sales worth $30-$35 million from Curlsmith.
Image Source: Zacks Investment Research
Fiscal 2023 Guidance
Management now anticipates consolidated net sales between $2.00 billion and $2.05 billion, implying a decrease of 7.8%-10% and a Core business decline of 6.4%-8.6%. Earlier, the company anticipated consolidated net sales between $2.15 billion and $2.20 billion, implying a decrease of 3.3%-1% and a Core business decline of 1.8%-0.5%.
The company now expects the adjusted EPS in the range of $9.00-$9.40. This indicates a consolidated adjusted EPS decline of 23.9-27.2% and a Core adjusted EPS drop of 22.8-26.1%. This includes 35 to 40 cents and 15 to 20 cents contributions from Osprey and Curlsmith, respectively.
Earlier, management anticipated the adjusted EPS in the range of $9.85-$10.35, indicating a consolidated adjusted EPS decline of 20.3-16.3% and a Core adjusted EPS drop of 19.2-15.1%.
Management expects a mid-teen-percent sales decline in the fiscal third quarter and a high-teen sales decline in the fiscal fourth quarter. The company expects a high-twenties-percent decline in the adjusted EPS for the fiscal third quarter and a low-twenties-percent decline in the fourth quarter.
While strength in Leadership Brands and a focus on Project Pegasus bode well for Helen of Troy, we cannot ignore the abovementioned headwinds, at least in the near term.
Lancaster Colony, which manufactures and markets food products for the retail and foodservice markets, currently sports a Zacks Rank of 1 (Strong Buy). LANC delivered an earnings surprise of 170% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lancaster Colony’s current financial-year sales and EPS suggests growth of 9.6% and 38.3%, respectively, from the corresponding year-ago reported figures.
Lamb Weston, a frozen potato product company, currently sports a Zacks Rank #1. LW has a trailing four-quarter earnings surprise of 47.3%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 14.8% and 42.3%, respectively, from the year-ago reported numbers.
The J. M. Smucker, which manufactures and markets branded food and beverage products, carries a Zacks Rank #2 (Buy) at present. The J. M. Smucker has a trailing four-quarter earnings surprise of 20.8%, on average.
The Zacks Consensus Estimate for SJM’s current financial-year sales suggests growth of 4.4% from the year-ago reported number.
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Helen of Troy (HELE) Looks Troubled: Stock Down 25% in 3 Months
Helen of Troy Limited (HELE - Free Report) appears in a troubled zone due to elevated cost concerns and softness in its Beauty segment. These downsides were witnessed in the company’s second-quarter fiscal 2023 results, wherein the bottom line declined year over year.
Management lowered its sales and earnings guidance for fiscal 2023 to reflect the impact of headwinds like the shift in consumer buying patterns, inflation and rising interest rates.
The Zacks Consensus Estimate for the current fiscal-year earnings per share (EPS) has declined from $10.08 to $9.82 over the past seven days. This Zacks Rank #5 (Strong Sell) stock has slumped almost 25% in the past three months against the industry’s rise of 16%. Let’s delve deeper.
Helen of Troy Limited Price, Consensus and EPS Surprise
Helen of Troy Limited price-consensus-eps-surprise-chart | Helen of Troy Limited Quote
Downsides in Detail
In the second quarter of fiscal 2023, Helen of Troy's consolidated gross profit margin came in at 42.5%, down 1.8 percentage points. The downside was mainly caused by the unfavorable impact of lower Beauty segment sales, an unfavorable product mix in the Home & Outdoor unit, higher EPA compliance costs, increased inventory obsolescence expenses and the net dilutive impact of inflationary costs and associated customer price increases.
The consolidated operating income stood at $46.9 million, down from the $67.3 million reported in the year-ago quarter. The consolidated operating margin declined 5.2 percentage points to 9% due to higher outbound freight costs, an increase in EPA compliance costs, a rise in marketing expenses and greater salary and wage costs, among others.
Net sales in the company’s Beauty segment fell 15.4% to $100.3 million in the second quarter. The downside was caused by a decline in the organic business to the tune of 23.1%. Beauty Core business’ net sales are anticipated to decrease 19-21% in fiscal 2023, including sales worth $30-$35 million from Curlsmith.
Image Source: Zacks Investment Research
Fiscal 2023 Guidance
Management now anticipates consolidated net sales between $2.00 billion and $2.05 billion, implying a decrease of 7.8%-10% and a Core business decline of 6.4%-8.6%. Earlier, the company anticipated consolidated net sales between $2.15 billion and $2.20 billion, implying a decrease of 3.3%-1% and a Core business decline of 1.8%-0.5%.
The company now expects the adjusted EPS in the range of $9.00-$9.40. This indicates a consolidated adjusted EPS decline of 23.9-27.2% and a Core adjusted EPS drop of 22.8-26.1%. This includes 35 to 40 cents and 15 to 20 cents contributions from Osprey and Curlsmith, respectively.
Earlier, management anticipated the adjusted EPS in the range of $9.85-$10.35, indicating a consolidated adjusted EPS decline of 20.3-16.3% and a Core adjusted EPS drop of 19.2-15.1%.
Management expects a mid-teen-percent sales decline in the fiscal third quarter and a high-teen sales decline in the fiscal fourth quarter. The company expects a high-twenties-percent decline in the adjusted EPS for the fiscal third quarter and a low-twenties-percent decline in the fourth quarter.
While strength in Leadership Brands and a focus on Project Pegasus bode well for Helen of Troy, we cannot ignore the abovementioned headwinds, at least in the near term.
Consumer Staple Stocks Worth a Look
Some better-ranked stocks from the sector are Lancaster Colony (LANC - Free Report) , Lamb Weston (LW - Free Report) and The J. M. Smucker (SJM - Free Report) .
Lancaster Colony, which manufactures and markets food products for the retail and foodservice markets, currently sports a Zacks Rank of 1 (Strong Buy). LANC delivered an earnings surprise of 170% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lancaster Colony’s current financial-year sales and EPS suggests growth of 9.6% and 38.3%, respectively, from the corresponding year-ago reported figures.
Lamb Weston, a frozen potato product company, currently sports a Zacks Rank #1. LW has a trailing four-quarter earnings surprise of 47.3%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 14.8% and 42.3%, respectively, from the year-ago reported numbers.
The J. M. Smucker, which manufactures and markets branded food and beverage products, carries a Zacks Rank #2 (Buy) at present. The J. M. Smucker has a trailing four-quarter earnings surprise of 20.8%, on average.
The Zacks Consensus Estimate for SJM’s current financial-year sales suggests growth of 4.4% from the year-ago reported number.