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Helen of Troy (HELE) Troubled by Cost Woes & Soft Beauty Unit
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Helen of Troy Limited (HELE - Free Report) looks troubled by escalated cost concerns and softness in the Beauty segment. The impact of these downsides was visible in the company’s third-quarter fiscal 2023 results, wherein the top and bottom lines declined year over year.
Although management raised the lower end of its sales and adjusted earnings per share (EPS) guidance for fiscal 2023, it suggests a year-over-year decline. The Zacks Consensus Estimate for fiscal 2023 EPS has gone down from $9.59 to $9.21 in the past 30 days. Further, shares of this Zacks Rank #5 (Strong Sell) company have declined 11.7% in the past six months against the industry’s growth of 0.8%.
Let’s take a closer look at the third quarter and the aspects acting as downsides for Helen of Troy.
Helen of Troy Limited Price, Consensus and EPS Surprise
A tough operating landscape, including inflation, increased interest rates and reduced operating leverage were downsides in the third quarter of fiscal 2023. Also, consumption remained low in certain categories.
Adjusted earnings of $2.75 per share declined 26.1% year over year. The metric was hurt by reduced adjusted operating income, increased interest expenses and an elevated effective income tax rate.
Consolidated net sales of $558.6 million tumbled 10.6% from the third quarter of fiscal 2022. The downside was a result of softness in the organic business to the tune of 18.5%.
The organic business was hurt by decreased sales in all segments stemming from reduced consumer demand, lower orders from retail customers and spending pattern shifts. A net sales revenue drop in the Non-Core business stemming from the divestiture of the Personal Care business was also a hurdle.
Management now anticipates consolidated net sales between $2.025 billion and $2.05 billion, implying a decrease of 8.9%-7.8% and a Core business decline of 7.5%-6.4%. The company now expects adjusted EPS in the range of $9.20-$9.40. This indicates a consolidated adjusted EPS decline of 25.6-23.9% and a Core adjusted EPS drop of 24.5-22.8%.
Main Deterrents
Cost inflation has been a headwind for a while now. In the third quarter, HELE’s consolidated gross profit margin was hurt by an unfavorable product mix in the Home & Outdoor unit and the net impact of inflationary costs and associated customer price increases. The consolidated operating margin declined 0.6 percentage points to 13.8% due to adverse operating leverage, higher outbound freight costs, and greater salary and wage costs, among others.
Management expects the adjusted operating margin to decline 100-120 basis points in fiscal 2023 due to adverse operating leverage, the net impact of pricing, an adverse product mix in Health & Wellness and the dilutive impact of the Osprey acquisition in Home & Outdoor. The company also expects to witness several cost-related headwinds in fiscal 2024.
Further, Helen of Troy has been seeing softness in the Beauty segment. Net sales in the Beauty segment tumbled 14.7% to $149.2 million in the third quarter. The downside was caused by a decline in the organic business to the tune of 20.7%. This was largely a result of a decline in the overall beauty appliance category.
Beauty Core business net sales are anticipated to decrease 18.5-17.5% in fiscal 2023. While strength in Leadership Brands and a focus on Project Pegasus bode well for Helen of Troy, the abovementioned barriers cannot be ignored, at least in the near term.
Inter Parfums, a manufacturer, marketer and distributor of a range of fragrances and fragrance-related products, currently sports a Zacks Rank #1 (Strong Buy). IPAR has a trailing four-quarter earnings surprise of 27.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ 2023 sales and earnings suggests growth of 5.8% and 5.3%, respectively, from the corresponding year-ago reported figures.
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank of 2 (Buy). CPB has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings suggests growth of 8.3% and 4.6%, respectively, from the corresponding year-ago reported figures.
e.l.f. Beauty, which provides cosmetic and skin care products, currently sports a Zacks Rank #1. ELF has a trailing four-quarter earnings surprise of 92.8%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current fiscal-year sales and EPS suggests an increase of 24.8% and 33.3%, respectively from the year-ago reported number.
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Helen of Troy (HELE) Troubled by Cost Woes & Soft Beauty Unit
Helen of Troy Limited (HELE - Free Report) looks troubled by escalated cost concerns and softness in the Beauty segment. The impact of these downsides was visible in the company’s third-quarter fiscal 2023 results, wherein the top and bottom lines declined year over year.
Although management raised the lower end of its sales and adjusted earnings per share (EPS) guidance for fiscal 2023, it suggests a year-over-year decline. The Zacks Consensus Estimate for fiscal 2023 EPS has gone down from $9.59 to $9.21 in the past 30 days. Further, shares of this Zacks Rank #5 (Strong Sell) company have declined 11.7% in the past six months against the industry’s growth of 0.8%.
Let’s take a closer look at the third quarter and the aspects acting as downsides for Helen of Troy.
Helen of Troy Limited Price, Consensus and EPS Surprise
Helen of Troy Limited price-consensus-eps-surprise-chart | Helen of Troy Limited Quote
Soft Q3 & View
A tough operating landscape, including inflation, increased interest rates and reduced operating leverage were downsides in the third quarter of fiscal 2023. Also, consumption remained low in certain categories.
Adjusted earnings of $2.75 per share declined 26.1% year over year. The metric was hurt by reduced adjusted operating income, increased interest expenses and an elevated effective income tax rate.
Consolidated net sales of $558.6 million tumbled 10.6% from the third quarter of fiscal 2022. The downside was a result of softness in the organic business to the tune of 18.5%.
The organic business was hurt by decreased sales in all segments stemming from reduced consumer demand, lower orders from retail customers and spending pattern shifts. A net sales revenue drop in the Non-Core business stemming from the divestiture of the Personal Care business was also a hurdle.
Management now anticipates consolidated net sales between $2.025 billion and $2.05 billion, implying a decrease of 8.9%-7.8% and a Core business decline of 7.5%-6.4%. The company now expects adjusted EPS in the range of $9.20-$9.40. This indicates a consolidated adjusted EPS decline of 25.6-23.9% and a Core adjusted EPS drop of 24.5-22.8%.
Main Deterrents
Cost inflation has been a headwind for a while now. In the third quarter, HELE’s consolidated gross profit margin was hurt by an unfavorable product mix in the Home & Outdoor unit and the net impact of inflationary costs and associated customer price increases. The consolidated operating margin declined 0.6 percentage points to 13.8% due to adverse operating leverage, higher outbound freight costs, and greater salary and wage costs, among others.
Management expects the adjusted operating margin to decline 100-120 basis points in fiscal 2023 due to adverse operating leverage, the net impact of pricing, an adverse product mix in Health & Wellness and the dilutive impact of the Osprey acquisition in Home & Outdoor. The company also expects to witness several cost-related headwinds in fiscal 2024.
Further, Helen of Troy has been seeing softness in the Beauty segment. Net sales in the Beauty segment tumbled 14.7% to $149.2 million in the third quarter. The downside was caused by a decline in the organic business to the tune of 20.7%. This was largely a result of a decline in the overall beauty appliance category.
Beauty Core business net sales are anticipated to decrease 18.5-17.5% in fiscal 2023. While strength in Leadership Brands and a focus on Project Pegasus bode well for Helen of Troy, the abovementioned barriers cannot be ignored, at least in the near term.
Key Consumer Staple Stocks
Some better-ranked stocks are Inter Parfums (IPAR - Free Report) , e.l.f. Beauty, Inc. (ELF - Free Report) and Campbell Soup (CPB - Free Report) .
Inter Parfums, a manufacturer, marketer and distributor of a range of fragrances and fragrance-related products, currently sports a Zacks Rank #1 (Strong Buy). IPAR has a trailing four-quarter earnings surprise of 27.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ 2023 sales and earnings suggests growth of 5.8% and 5.3%, respectively, from the corresponding year-ago reported figures.
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank of 2 (Buy). CPB has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings suggests growth of 8.3% and 4.6%, respectively, from the corresponding year-ago reported figures.
e.l.f. Beauty, which provides cosmetic and skin care products, currently sports a Zacks Rank #1. ELF has a trailing four-quarter earnings surprise of 92.8%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current fiscal-year sales and EPS suggests an increase of 24.8% and 33.3%, respectively from the year-ago reported number.