Helen of Troy Limited’s (HELE - Free Report) stock has been moving up the charts, thanks to its focus on strategic growth initiatives, which have also helped the company put up an impressive record. Well, this consumer products player has gained 14.3% in the past three months, outpacing the industry’s 1.6% growth. So, let’s take a closer view of the factors that have spurred investors’ confidence in this Zacks Rank #2 (Buy) stock, which is most likely to keep its spectacular show on.
Focus on Leadership Brands
Helen of Troy has been focused on making solid investments in its Leadership Brands, which is a portfolio of market leading brands. The company’s constant investments in such brands that are considered most productive have been delivering robust results. Markedly, Leadership Brands formed more than 77% of Helen of Troy’s total sales from continuing operations in fiscal 2018. Also, in the fourth quarter, sales in this category jumped 16%, thereby contributing significantly to consolidated net sales growth. Management remains on track with investments in product launches, marketing efforts and e-commerce strategies for Leadership Brands, which is one of the highest margin, greatest volume generating and most efficient businesses for the company. In fact, the recent sale of Healthy Directions also forms part of the company’s efforts to shift resources to Leadership Brands, which generates a major chunk of revenues and also delivers high operating profits.
Solid Digital Efforts Driving Top Line
The company is likely to keep gaining from its consistent online sales and digital marketing efforts. Notably, online sales represented more than 14% and 15% of Helen of Troy’s top-line growth in the fourth quarter and fiscal 2018, respectively. This fares much better than the year-ago period. Online sales increased in all three segments in the fourth quarter, courtesy of impressive digital marketing efforts. In fact, management plans to make further investments in this arena in an attempt to keep pace with the evolving consumer environment. Incidentally, the company plans to allocate 14-18% of its planned additional brand investments for fiscal 2019 toward digital initiatives on Leadership Brands.
Project Refuel to Boost Profits
Helen of Troy introduced Project Refuel in October 2017. This restructuring plan was initiated to improve the performance of the company’s Beauty and Nutritional Supplements units. After the sale of Nutritional Supplements, management continues to target generating annualized profit growth of nearly $8.0 million over the tenure of this strategic plan. The company expects to conclude Project Refuel by the first quarter of fiscal 2020.
Solid Q4 Reflects Transformation Plan Success
Helen of Troy posted spectacular results for fourth-quarter fiscal 2018, as both top and bottom lines improved year over year and came ahead of the Zacks Consensus Estimate. Notably, this marked the company’s 11th straight quarter of earnings beat. Results were driven by solid performance by Leadership Brands along with growth in online sales. In fact, the company’s Health & Home unit delivered one of its best quarters in a long time. Clearly, this reflects management’s focus on its Transformation Plan that was announced in fiscal 2015. The plan mainly concentrates on making investments in core areas, undertaking customer-centric innovations, undertaking prudent mergers and acquisitions, building superior shared services, making upgrades to workforce and systems, and reducing wastage to improve quality and curtail costs. The company expects this plan to help enrich shareholder value.
All said, we believe that Helen of Troy is firmly placed to reach greater heights and be a fruitful bet.
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