Second quarter revenue at Helen of Troy was flat, as an influx of sales from Hydro Flask offset declines in the company’s beauty and nutritional supplements segments.
Company-wide sales for the period ended August 31 was $368.2 million, a 0.3% decline from sales in the same quarter the previous year. Net income for the quarter was $28.355 million, up from net income of $24.452 million for the second quarter of the prior year.
“While sales remained relatively flat year-over-year, we drove a 4.2 percentage point improvement in gross margin reflecting accretion from the Hydro Flask acquisition and our efforts to sweeten the mix and reduce our costs,” said Julien Mininberg, Helen of Troy CEO. “We are very pleased with Hydro Flask’s growth and performance, which contributed $29.1 million of net sales during the quarter, fueling a 34.4% increase in net sales in our housewares segment.”
On a segment basis, housewares net sales increased by 34.4% driven by net sales growth of 36.8% from Hydro Flask, with no comparable results in the same period last year, partially offset by a 2.4% decline in core business net sales revenue. In the core business, successful new product introductions were offset by a soft retail environment and lower consumer store traffic in the U.S., which is contributing to smaller and less frequent replenishment orders from key retailers, company officials said.
Beauty net sales decreased 22.3%, which includes anticipated declines of 5.3% and 3.7%, respectively, from the company’s Venezuelan and U.S. personal care businesses, and the negative impact of approximately 1.2% from foreign currency fluctuations. Gains from new product introductions were offset by the anticipated decline in the foot care category of $4.2 million, or 3.8%, due to competitive pressures and high inventory in the channel.
In addition, Helen of Troy officials said SKU rationalization and a de-emphasis of sales into the discount channel and other lower margin business negatively impacted net sales by approximately 4.4%. The remaining decline is primarily due to a softer than expected retail environment and an overall decline in the beauty appliances category.
The company’s health and home division net sales rose 0.8% driven by strong sales of water filtration, seasonal fans, and early season shipments of heaters, which were partially offset by declines in humidification due to retailers exiting last year’s cough/cold/flu season with higher inventory levels. Adjusted operating margin improved 3.3 percentage points to 9.7% due to product cost reductions, a better product sales mix, lower cooperative advertising expense and lower freight costs, the company said.
Nutritional supplements net sales decreased 13%, reflecting lower response rates in the offline channel and a decline in the legacy newsletter subscription business, as the company continues to implement a multi-year strategic transition from offline to online channels.