Helen of Troy Limited HELE appears to be on strong footing, courtesy of its focus on Leadership brands, solid digital efforts and progress on the transformation plan, among other growth strategies. To top it, the company’s Housewares segment is displaying a robust performance. These factors have been aiding this Zacks Rank #1 (Strong Buy) stock, which has surged 37.7% in the past six months, easily crushing the industry’s growth of 9.5%.
Let’s delve deeper.
Focus on Leadership Brands
Helen of Troy has been focused on making solid investments in the “Leadership Brands,” which is a portfolio of market-leading brands. These brands account for a significant chunk of the company’s sales, with solid margins and volumes. Hence, the company’s constant investments in these brands have been enhancing their performance. In fact, the company made another move in this direction, when it inked a deal to buy Drybar Products. This is likely to become the company's eighth Leadership Brand. Markedly, Leadership Brands’ sales improved nearly 3.8% year over year in the second quarter of fiscal 2020. Management is on track with investments in product launches, marketing efforts and e-commerce strategies for Leadership Brands.
The company is likely to keep gaining from its consistent, robust online sales and digital marketing efforts. Notably, online sales advanced 25% year over year in the second quarter of fiscal 2020 and comprised nearly 24% of the company’s top line. Management plans to make further investments in this arena to keep pace with the evolving consumer environment.
Solid Housewares Segment
Helen of Troy’s Housewares unit has been experiencing sturdy growth. Net sales in the segment advanced 22.1% in the second quarter, backed by growth in point of sale, increased distribution with brick-and-mortar customers, higher online sales, improved international sales and innovation. In fact, improved brick-and-mortar business in Housewares drove the company’s core business in the quarter. Encouragingly, sales in the Housewares unit are expected to grow 13-15% in the fiscal.
Transformation Plan Underway
Helen of Troy, which shares space with Inter Parfums IPAR, is on track with Phase II of its transformation plan, which is expected to drive growth for the next five years. Phase II of the plan includes continued investments in Leadership Brands, with plans to grow the same through customer-friendly innovation, international expansion and acquisitions. Also, the company aims to enhance its operating efficiency and shared service facility. Long-term goals of Helen of Troy’s transformation plan include better organic sales growth, continued margin expansion and efficient capital allocation.
Clearly, these factors paint a bright picture for Helen of Troy, which is slated to report third-quarter fiscal 2020 results on Jan 8. Notably, the Zacks Consensus Estimate for fiscal 2020 has moved up a couple of cents to $8.69 per share over the past seven days.
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