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5 Reasons Why Helen of Troy Stock Must be in Your Portfolio

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Investors must take note of Helen of Troy Limited’s (HELE - Free Report) bull run before it is too late. This leading consumer products player has gained 40% in the past six months, against the industry’s drop of 6.8%. This Zacks Rank #2 (Buy) company, which has been gaining from its impressive strategic initiatives, is likely to continue with its stellar show. This also becomes evident from management’s raised earnings outlook for fiscal 2019.



Let’s delve deeper.

Leadership Brands — A Major Sales Driver

Helen of Troy continues to make significant investments in “Leadership Brands,” which is a portfolio of market leading brands like OXO, Honeywell, Braun, PUR, Hydro Flask and more. The company’s constant investments in these brands have been delivering robust results. Markedly, Leadership Brands’ sales jumped 14.7% year over year and formed roughly 79% of Helen of Troy’s consolidated sales in the first quarter of fiscal 2019. Notably, management remains on track with investments in product launches, marketing efforts and e-commerce strategies for Leadership Brands, which is the most efficient business of the company. In fact, sale of Healthy Directions was also 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.

Digital Endeavors on Track

Robust online sales and digital-marketing efforts are likely to continue benefiting Helen of Troy. Notably, online sales surged 30% year over year and represented nearly 16.2% of Helen of Troy’s top line in the first quarter. It fared much better than the company’s year-ago period contribution of 13.5%. Online sales increased in all three segments, 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 intends to allocate 14-18% of its planned additional brand investments for fiscal 2019 toward digital initiatives on Leadership Brands.

Project Refuel to Drive Savings

Helen of Troy remains committed toward Project Refuel that was introduced in October 2017 to improve the performance of the company’s Beauty and Nutritional Supplements units. During the first quarter of fiscal 2019, the company expanded this program to realign and streamline its supply-chain network. Notably, management now expects Project Refuel to lead to annualized profit growth of nearly $8.0-$9.0 million, up from the old guidance of $8.0 million. The company expects to conclude Project Refuel by the first quarter of fiscal 2020.

Robust Transformation Plan

Helen of Troy’s strong first-quarter results reflect the company’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, conducting 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. That said, let’s take a look at the first-quarter results.

Solid Q1 & Outlook Fuel Estimates

Helen of Troy posted spectacular results for first-quarter fiscal 2019, as both top and bottom lines improved year over year and came ahead of the Zacks Consensus Estimate. While sales marked its second straight beat, earnings kept its positive surprise streak alive for the 12th consecutive quarter. While earnings were backed by improved adjusted operating income across all segments, reduced interest costs and lower share count, sales gained from continued strength in Leadership Brands, strong online sales and core business advancement. Core business was backed by solid international sales, product introductions, rise in domestic brick and mortar sales, and sturdy online sales.

Encouragingly, management raised its bottom-line view. Adjusted earnings from continuing operations are now projected in the range of $7.45-$7.70 per share, up from the previously guided range of $7.30-$7.55. These factors have also made analysts more optimistic about the stock’s ongoing performance. Evidently, the Zacks Consensus Estimate for fiscal 2019 has gone up by from $7.39 to $7.68 in the past 60 days.

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