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What's in the Cards for Helen of Troy (HELE) Q2 Earnings?

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Helen of Troy Limited (HELE - Free Report) is slated to release second-quarter fiscal 2019 results on Oct 9. This consumer products player has delivered positive earnings surprise for twelve straight quarters now. Let’s see what’s in store for the company this time around.

Helen of Troy Limited Price and EPS Surprise


Helen of Troy Limited Price and EPS Surprise | Helen of Troy Limited Quote

Factors Impacting Helen of Troy

Robust online sales and digital-marketing efforts should 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 of fiscal 2019. 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.

Talking of Leadership Brands, Helen of Troy continues to make significant investments in this portfolio of market leading brands such as OXO, Honeywell, Braun, PUR, Hydro Flask and more. 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. 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.

These factors bode well for Helen of Troy’s upcoming results. However, the company’s Beauty segment has been delivering a weak performance for quite some time now. Sales at this segment, which did not witness even a single quarter of year-over-year growth throughout fiscal 2018, remained soft in the first quarter of fiscal 2019 as well. The Beauty segment has been suffering from softness in personal care category, mainly due to tough competition. In the first quarter, Beauty segment sales dropped 5.8%, worse than the previous quarter’s dip of 2.1%. Sales continued to decline due to weakness across brick and mortar channels, while rationalization efforts for certain brands and products also hit Beauty segment sales. Further, segment sales are projected to dip low to mid-single digits in fiscal 2019, which is a concern.

Well, the Zacks Consensus Estimate for Helen of Troy’s second-quarter sales stands at $351 million, down 7.1% from the year-ago period.

Will Earnings Increase Y/Y?

Helen of Troy continues to bear the brunt of increased promotional programs. Also, gross margin in the first quarter was somewhat hit by negative margin impacts from greater club channel sales. Persistence of these factors is a threat to margins. Also, management expects commodity inflation and impacts of tariff changes to weigh on Helen of Troy’s cost of goods sold, which, in turn, is likely to impact the bottom line. Apart from this, management expects fiscal 2019 bottom line to be hit by increased investments in Leadership Brands.

Nevertheless, we commend the company’s Project Refuel program, which is aimed at driving profits. This restructuring plan was initiated 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.

These factors along with the sales-driving initiatives give out positive signals for second-quarter earnings. Notably, the current consensus mark for earnings is pegged at $1.67, which shows a 1.2% rise from the year-ago period. Notably, the earnings estimate has gone up by a notch in the past 30 days.

What the Zacks Model Unveils

Our proven model doesn’t show that Helen of Troyis likely to beat bottom-line estimates this quarter.  For this to happen, the stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Though Helen of Troy carries a Zacks Rank #3, the company’s Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat:

Inter Parfums, Inc. (IPAR - Free Report) , a Zacks #2 Ranked company, has an Earnings ESP of +0.81%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cott Corporation (COT - Free Report) has an Earnings ESP of +2.63% and a Zacks Rank #3.

Coty Inc. (COTY - Free Report) , a Zacks #3 Ranked stock, has an Earnings ESP of +6.67%.

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