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Why Is Helen of Troy (HELE) Up 14% 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 added about 14% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Helen of Troy due for a pullback? 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 drivers.
Helen of Troy Q4 Earnings Top Estimates, Sales Rise Y/Y
Helen of Troy posted fourth-quarter fiscal 2024 results, with 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. 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.
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.
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 & Outlook
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.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -21.3% due to these changes.
VGM Scores
Currently, Helen of Troy has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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. Notably, Helen of Troy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Helen of Troy (HELE) Up 14% Since Last Earnings Report?
It has been about a month since the last earnings report for Helen of Troy (HELE - Free Report) . Shares have added about 14% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Helen of Troy due for a pullback? 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 drivers.
Helen of Troy Q4 Earnings Top Estimates, Sales Rise Y/Y
Helen of Troy posted fourth-quarter fiscal 2024 results, with 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. 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.
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.
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 & Outlook
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.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -21.3% due to these changes.
VGM Scores
Currently, Helen of Troy has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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. Notably, Helen of Troy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.