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Helen of Troy (HELE) Q4 Earnings Top Estimates, Sales Rise Y/Y

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Helen of Troy Limited (HELE - Free Report) posted impressive fourth-quarter fiscal 2024 results, wherein the top and bottom lines beat the Zacks Consensus Estimate and increased year over year. The company remains committed to prioritizing consumers by continuously delivering quality brands and products that are well-messaged and appropriately placed.

"Elevate for Growth" signifies a transformative strategy for the company, prioritizing innovative portfolio management, incremental investment in brands and capabilities, and exploration of distribution avenues. This comprehensive approach is designed to ensure the achievement of the company's goals in fiscal 2025 and beyond.

Helen of Troy Limited Price, Consensus and EPS Surprise


Helen of Troy Limited Price, Consensus and EPS Surprise

Helen of Troy Limited price-consensus-eps-surprise-chart | Helen of Troy Limited Quote

Quarter in Detail

Adjusted earnings of $2.45 per share beat the Zacks Consensus Estimate of $2.31 and rose 21.9% year over year. This was due to increased adjusted operating income across the Beauty & Wellness and Home & Outdoor segments, a reduction in interest expenses, and higher interest income.

Consolidated net sales of $489.2 million surpassed the Zacks Consensus Estimate of $478 million. Also, the metric increased 1% from the year-ago quarter. This rise was largely fueled by $3.2-million, or 0.7%, growth in sales from the Organic business segment.

This growth came from stronger online sales of travel tumblers and hair appliances in Home & Outdoor, and Beauty & Wellness, respectively, alongside international demand for thermometry products and travel packs. Additional gains were seen in club and closeout channels, and prestige hair care. These increases were partly offset by declines in air purifiers, fans and heaters due to SKU rationalization and reduced consumer interest, as well as a drop in humidification tied to a milder cough/cold/flu season than the past years.

The consolidated gross profit margin expanded 570 basis points (bps) to 49%, mainly attributed to a reduction in inventory obsolescence expenses, decreased costs of inbound freight and commodities, lower customer discount and program expenses, and a more favorable product mix in the Beauty & Wellness segment, including the benefits of SKU rationalization efforts. However, these positive factors were partially offset by a less favorable customer and product mix in the Home & Outdoor segment. We expected the gross profit margin to expand 260 bps to 45.9% in the fiscal fourth quarter.

The consolidated SG&A ratio increased 490 basis points to 34.7%. This was primarily driven by higher share-based compensation, increased marketing investments, higher annual incentive compensation, and escalated expenses related to the expansion of a new distribution facility in Gallaway, TN. These increases were partially offset by cost savings from Project Pegasus and lower EPA compliance costs compared to the previous year.

Adjusted operating income increased 24.9% to $83.3 million, with the adjusted operating margin improving 320 bps to 17%.

The margin expansion resulted from lower inventory obsolescence expenses, reduced inbound freight and commodity costs, decreased trade discounts and program expenses, and a more favorable product mix in Beauty & Wellness, including benefits from SKU rationalization efforts. These gains were partially offset by higher marketing investments, increased annual incentive compensation, greater depreciation and distribution expenses due to a new distribution facility, and a less favorable customer and product mix in Home & Outdoor.


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Segmental Performance

Net sales in the Home & Outdoor segment advanced 5.4% to $223.3 million, as the Organic business rose 5.1%. Growth in Organic sales was backed by home category sales through brick-and-mortar and club channels, as well as increased insulated beverageware sales, notably from the new travel tumbler, and international growth, driven by strong demand for travel packs.

These positive trends were partially offset by the negative impacts of the Bed, Bath & Beyond bankruptcy and a decline in online sales for travel packs and home category products. We expected net sales in the Home & Outdoor segment to increase 2% to $216.2 million.

Net sales in the Beauty & Wellness segment declined 2.5% to $265.9 million due to the Organic business’ dip of 2.8%. The decline stemmed from the soft sales of air purifiers, fans and heaters due to SKU rationalization and weaker consumer demand, as well as a decrease in humidification sales, reflecting a below-average incidence of cough, cold and flu illnesses compared with the previous year.

These negative factors were partially offset by growth in sales of hair appliances and thermometry, which contributed to higher international sales, and an increase in prestige hair care product sales. We expected Beauty & Wellness net sales to decline 4.5% to $260.4 million.

Other Details

Helen of Troy ended the quarter with cash and cash equivalents of $18.5 million, and total short and long-term debt of $665.7 million. Net cash provided by operating activities in fiscal 2024 was $306.1 million. The free cash flow for the same period was $269.4 million.

FY25 Outlook

For the first quarter of fiscal 2025, the company expects a decline in sales of 7-5%. Following this, for each of the remaining quarters, sales are projected between flat and 3% growth. The first half of the year is likely to see a slight decline in adjusted EPS, with a drop of 15-20% in the fiscal first quarter, nearly offset by growth in the second quarter. In the second half of the year, EPS is expected to be flat to up 5%.

For fiscal 2025, the company projects consolidated net sales between $1.965 billion and $2.025 billion, implying a decrease of up to 2% or an increase of up to 1%. This takes into account the anticipated ongoing inflation and a continuation of subdued consumer spending on discretionary items.

The company estimates EPS between $6.68 and $7.45. Adjusted EPS is expected between $8.70 and $9.20, which could either decrease by up to 2.4% or increase by up to 3.3%.

Adjusted EBITDA is forecast between $324 million and $331 million, indicating a decrease of 3.6-1.6% due to reinvestments for growth from Project Pegasus and other gross profit improvements. The free cash flow is expected to be $255-$275 million. The net leverage ratio is anticipated between 1.25X and 1.00X. The company expects interest expenses between $34 million and $36 million.

The weighted average diluted shares outstanding are projected to be 23.7 million for the year. The outlook excludes the impacts of unforeseeable major economic shifts, acquisitions, asset impairments, currency fluctuations, further interest rate increases, or share buybacks, as these factors cannot be precisely predicted.

Shares of this Zacks Rank #3 (Hold) company have rallied 10.9% in the past year against the industry’s 29.7% decline.

Some Better-Ranked Staple Bets

Here, we have highlighted three better-ranked stocks, namely, Freshpet Inc. (FRPT - Free Report) , General Mills Inc. (GIS - Free Report) and Celsius Holdings (CELH - Free Report) .

Freshpet is a pet food company. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Freshpet’s current fiscal-year sales and earnings suggests growth of 24.3% and 110%, respectively, from the year-ago reported numbers. FRPT has a trailing four-quarter earnings surprise of 61.8%, on average.

General Mills is a global manufacturer and marketer of branded consumer foods sold through retail stores. It currently has a Zacks Rank #2.

The Zacks Consensus Estimate for General Mills’ current fiscal-year earnings suggests growth of 4.9% from the year-ago reported figures. GIS has a trailing four-quarter earnings surprise of 7.2%, on average.

Celsius Holdings, which offers functional drinks and liquid supplements, currently carries a Zacks Rank of 2. CELH has a trailing four-quarter earnings surprise of 67.4%, on average.

The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales and earnings suggests growth of 41.6% each from the year-ago reported numbers.

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