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Hain Celestial (HAIN) Stock Falls 40.3% YTD: Here's Why

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The Hain Celestial Group, Inc. (HAIN - Free Report) has been grappling with several headwinds for a while now. Macroeconomic issues, including inflationary pressures, along with supply constraints and other headwinds have been weighing on the company’s performance. Sluggishness in the company’s North American unit is an added deterrent.

Consequently, shares of this Zacks Rank #4 (Sell) company have plunged 40.3% in the year-to-date period, wider than the industry’s 9.4% decline. For fiscal 2024, the Zacks Consensus Estimate for HAIN’s earnings per share (EPS) is currently pegged at 45 cents, showing a decline of 10% from the year-ago period’s figure.

Let’s Delve Deeper

The company has posted soft fourth-quarter fiscal 2023 results, wherein the top line declined year over year. The top line dipped 2% from the year-ago fiscal quarter’s reported figure. After adjusting for foreign exchange, acquisitions, divestitures and discontinued brands, adjusted net sales slipped 1.5% from the year-ago fiscal quarter’s reported figure.

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The net sales in the North America segment tumbled 5.1% from the year-ago fiscal quarter’s reported figure to $281.8 million. After adjusting currency movements, divestitures and discontinued brands, adjusted net sales fell 4.3%. The decline was owing to lower sales in personal care and ParmCrisps, somewhat offset by increased sales in yogurt, tea and baby. Lower distribution and customer promotions, in relation to the ParmCrisps brand, hurt the sales.

Management expects the investments, along with the refunding of the company’s incentive plan, to hurt the adjusted EBITDA by nearly $20 million. It further cited that the first quarter of the fiscal year is generally the smallest quarter seasonally in terms of net sales and adjusted EBITDA. The company expects multiple headwinds to hurt the North America business in the first quarter. It is likely to witness industry-wide supply constraints with respect to its Earth's Best organic baby formula business. Also, the company has been optimizing promotional activity for Terra chips, leading to a near-term revenue headwind.

Additionally, there has been a timing shift in the personal care program. On the margin front, carryover inflation in the first quarter is likely to be higher than the rest of the fiscal year. For the first quarter, adjusted net sales are projected to decrease by a low-single-digit percentage year over year and adjusted EBITDA is expected to be between $20 million and $21 million.

What Else?

Although the company is struggling with various headwinds, management recently revealed its Hain Reimagined strategy to drive profitable growth. This is a multi-year transformation plan created to boost sustainable growth in the long term and maximize shareholder returns. Management further stated that fiscal 2024 highlights the foundational year of the plan for simplifying the business, resetting the global operating model, initiating Fuel Program, investing in jumpstart critical capabilities and starting pivot to growth.

The Hain Reimagined strategy revolves around four pillars to drive growth. These pillars are focus, grow, build and fuel. Management remains focused on the portfolio of five consumer-centric global BFY platforms, which include BFY Snacks, BFY Baby & Kids, BFY Beverages, BFY Meal Prep, and BFY Personal Care. The company looks forward to materially simplify its footprint with direct presence across five major markets, comprising United States, Canada, UK, Ireland, and Europe. It will further align its global operating model as well as leverage scale and generate synergies across businesses.

The grow pillar involves growth, buoyed by three important platforms such as BFY Snacks, BFY Baby & Kids, and BFY Beverages. The build pillar consists of efforts related to brand building, channel expansion and innovation. Its Fuel Program includes three main levers, which are revenue growth management, working capital management, and operational efficiency. This program is likely to deliver 400-500 basis points of adjusted gross margin expansion and achieve $400 million as cumulative free cash flow by fiscal 2027.

Although the aforesaid positives make us optimistic about the company over the long haul, we remain cautious about the stock in the near term. A Momentum Score of F further adds to weakness.

Key Picks

Inter Parfums (IPAR - Free Report) , which manufactures, markets and distributes a range of fragrances and fragrance-related products, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales indicates 19.7% growth from the year-ago reported figure. IPAR has a trailing four-quarter earnings surprise of 45.9% on average.

Helen of Troy (HELE - Free Report) , a provider of several consumer products, currently has a Zacks Rank #2 (Buy). HELE’s expected EPS growth rate for three to five years is 8%.

The Zacks Consensus Estimate for Helen of Troy’s current fiscal-year sales suggests a decline of 2.9% from the year-ago reported numbers. HELE has a trailing four-quarter earnings surprise of 8.1%, on average.

Ingredion Incorporated (INGR - Free Report) , a producer and distributor of sweeteners, nutrition ingredients and biomaterial solutions, currently carries a Zacks Rank of 2.

The Zacks Consensus Estimate for INGR’s current financial-year EPS is expected to rise 23.9% from the corresponding year-ago reported figure.

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