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Why Is Helen of Troy (HELE) Down 14.8% Since Last Earnings Report?
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It has been about a month since the last earnings report for Helen of Troy (HELE - Free Report) . Shares have lost about 14.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Helen of Troy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Helen of Troy Cuts FY23 View Despite Q2 Earnings Beat
Helen of Troy posted second-quarter fiscal 2023 results. Adjusted earnings of $2.27 per share beat the Zacks Consensus Estimate of $2.22 but declined 14.3% year over year. The metric was hurt by reduced adjusted operating income in the Beauty unit and increased interest expenses. These were somewhat offset by increased adjusted operating income across the Health & Wellness and Home & Outdoor units, lower adjusted effective tax rate as well as less weighted average diluted shares outstanding.
Consolidated net sales of $521.4 million surpassed the Zacks Consensus Estimate of $519.1 million. The metric grew 9.7% from the second quarter of fiscal 2022. The upside can be contributed to the gains from the Osprey and Curlsmith buyouts. These were somewhat offset by softness in organic business to the tune of 1.5%. Declines in the organic business mainly reflect reduced sales in the Beauty unit hair appliances category and home-related categories in the Home & Outdoor segment owing to less consumer demand, shifts in consumer spending patterns as well as reduced orders from retail customers. Net sales revenue drop in Non-Core business stemming from the divestiture of the Personal Care business was a hurdle. Higher sales in the Health & Wellness unit, improved international sales, increased prestige market personal care category sales in the Beauty segment and the impact of customer price rise associated with higher freight and product costs offered respite.
The 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, 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. A positive product mix across the Beauty segment was a breather. Consolidated operating income stood at $46.9 million, down from $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 Home & Outdoor segment increased 11.8% to $240.6 million, driven by contributions from Osprey. The upside was somewhat offset by declines in the organic business.
Net sales in the Health & Wellness segment increased 27.6% to $180.5 million owing to organic business growth of 27.9%.
Net sales in the Beauty segment fell 15.4% to $100.3 million.The downside was caused by a decline in organic business to the tune of 23.1%.
Guidance
Due to the sale of the company’s Personal Care business, management is currently not anticipating any material activity associated with Non-Core businesses in fiscal 2023. Hence, the fiscal 2023 updated guidance includes consolidated results. Since fiscal 2022 results include the material activity associated with Non-Core businesses, the consolidated and Core business year-over-year growth rates are different. Management considers the Core business growth to be the most relevant.
Management now anticipates consolidated net sales between $2.00 billion and $2.05 billion, implying a decrease of 7.8 and a Core business decline of 6.4%-8.6%. Earlier, the company had anticipated consolidated net sales between $2.15 billion and $2.20 billion, implying a decrease of 3.3 and a Core business decline of 1.8%-0.5%.
The company’s updated net sales view assumes Home & Outdoor net sales growth of 3.5-5.5%, including $180-$185 million in sales from Osprey. Management expects Health & Wellness net sales decline of 11-13%. Beauty Core business net sales are anticipated to decrease 19-21%, including sales worth $30-$35 million from Curlsmith.
The company now expects adjusted earnings per share (EPS) in the range of $9.00-$9.40. This indicates the consolidated adjusted EPS decline of 23.9-27.2% and the Core adjusted EPS drop of 22.8-26.1%. This includes 35-40 cents and 15-20 cents contributions from Osprey and Curlsmith, respectively. Earlier, management had anticipated adjusted EPS in the range of $9.85-$10.35, indicating a consolidated adjusted EPS decline of 20.3-16.3% and the 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 adjusted EPS for the fiscal third quarter and a low-twenties percent decline in the fourth quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -17.28% due to these changes.
VGM Scores
At this time, Helen of Troy has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Helen of Troy has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is Helen of Troy (HELE) Down 14.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Helen of Troy (HELE - Free Report) . Shares have lost about 14.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Helen of Troy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Helen of Troy Cuts FY23 View Despite Q2 Earnings Beat
Helen of Troy posted second-quarter fiscal 2023 results. Adjusted earnings of $2.27 per share beat the Zacks Consensus Estimate of $2.22 but declined 14.3% year over year. The metric was hurt by reduced adjusted operating income in the Beauty unit and increased interest expenses. These were somewhat offset by increased adjusted operating income across the Health & Wellness and Home & Outdoor units, lower adjusted effective tax rate as well as less weighted average diluted shares outstanding.
Consolidated net sales of $521.4 million surpassed the Zacks Consensus Estimate of $519.1 million. The metric grew 9.7% from the second quarter of fiscal 2022. The upside can be contributed to the gains from the Osprey and Curlsmith buyouts. These were somewhat offset by softness in organic business to the tune of 1.5%. Declines in the organic business mainly reflect reduced sales in the Beauty unit hair appliances category and home-related categories in the Home & Outdoor segment owing to less consumer demand, shifts in consumer spending patterns as well as reduced orders from retail customers. Net sales revenue drop in Non-Core business stemming from the divestiture of the Personal Care business was a hurdle. Higher sales in the Health & Wellness unit, improved international sales, increased prestige market personal care category sales in the Beauty segment and the impact of customer price rise associated with higher freight and product costs offered respite.
The 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, 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. A positive product mix across the Beauty segment was a breather. Consolidated operating income stood at $46.9 million, down from $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 Home & Outdoor segment increased 11.8% to $240.6 million, driven by contributions from Osprey. The upside was somewhat offset by declines in the organic business.
Net sales in the Health & Wellness segment increased 27.6% to $180.5 million owing to organic business growth of 27.9%.
Net sales in the Beauty segment fell 15.4% to $100.3 million.The downside was caused by a decline in organic business to the tune of 23.1%.
Guidance
Due to the sale of the company’s Personal Care business, management is currently not anticipating any material activity associated with Non-Core businesses in fiscal 2023. Hence, the fiscal 2023 updated guidance includes consolidated results. Since fiscal 2022 results include the material activity associated with Non-Core businesses, the consolidated and Core business year-over-year growth rates are different. Management considers the Core business growth to be the most relevant.
Management now anticipates consolidated net sales between $2.00 billion and $2.05 billion, implying a decrease of 7.8 and a Core business decline of 6.4%-8.6%. Earlier, the company had anticipated consolidated net sales between $2.15 billion and $2.20 billion, implying a decrease of 3.3 and a Core business decline of 1.8%-0.5%.
The company’s updated net sales view assumes Home & Outdoor net sales growth of 3.5-5.5%, including $180-$185 million in sales from Osprey. Management expects Health & Wellness net sales decline of 11-13%. Beauty Core business net sales are anticipated to decrease 19-21%, including sales worth $30-$35 million from Curlsmith.
The company now expects adjusted earnings per share (EPS) in the range of $9.00-$9.40. This indicates the consolidated adjusted EPS decline of 23.9-27.2% and the Core adjusted EPS drop of 22.8-26.1%. This includes 35-40 cents and 15-20 cents contributions from Osprey and Curlsmith, respectively. Earlier, management had anticipated adjusted EPS in the range of $9.85-$10.35, indicating a consolidated adjusted EPS decline of 20.3-16.3% and the 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 adjusted EPS for the fiscal third quarter and a low-twenties percent decline in the fourth quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -17.28% due to these changes.
VGM Scores
At this time, Helen of Troy has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Helen of Troy has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.