Helen Of Troy Sees Mixed Results In Q4

Helen of Troy reported mixed results for its fourth quarter ended February 28, 2017, posting a strong increase in net income although net sales declined. The company said its housewares business showed positive growth momentum, while its health and beauty segments showed declines.

Consolidated net sales revenue decreased 2.3% to $376.7 million compared to $385.7 million, reflecting a decrease in core business net sales revenue of 8.3%, a decline from Venezuela re-measurement of 1.2%, and a decrease from foreign currency fluctuations of 0.5%, partially offset by growth from acquisitions of 7.6%. The company said the core business decline includes a decrease of approximately 1.2% from the rationalization of certain lower margin business, a decline in the nutritional supplements segment of 23.1%, a weak cough/cold/flu season and the impact of lower store traffic and soft spending at traditional brick and mortar retail, along with inventory rationalization by several key retailers, partially offset by the shift in consumer preference to purchasing online.

Net income in the quarter was $35.7 million, or $1.30 per diluted share, compared to $9.6 million, or $0.34 per diluted share, in the previous fourth quarter. Adjusted income was $49 million, or $1.78 per diluted share, compared to $57.5 million, or $2.03 per diluted share.

In terms of segment operating results, the company’s housewares net sales increased by 30.5% driven by a 37.1% contribution from Hydro Flask, partially offset by a 6% decrease in core business net sales revenue.

The health and home core business net sales declined 4.3% reflecting the company’s de-emphasis of the low-margin hot/cold therapy business, the impact of a second consecutive weak cough/cold/flu season on replenishment orders, and the comparative impact of strong PUR water filtration sales in fiscal 2016 due to heightened consumer concerns over public water quality. These declines were partially offset by growth in the seasonal heater and humidification categories.

Beauty core business net sales decreased 11.2% primarily due to rationalization of lower margin and commoditized business, a soft brick and mortar retail environment, retail inventory rationalization, competitive factors in the personal care category and an overall decline in point of sale activity for the broader retail beauty appliances category.

The nutritional supplements core business net sales decreased 23.1%, primarily reflecting lower response rates in the offline channel, lower average order values, an increase in discounts to promote buyer file growth, and a decline in the offline and legacy newsletter subscription business, as the company continues to implement a strategic transition from offline to online channels.

Julien Mininberg, Helen of Troy CEO, stated, “Overall we made considerable progress in fiscal 2017. We demonstrated the benefits of our diversified portfolio and key transformational strategies to deliver earnings growth and 22% growth in cash flow from operations despite external headwinds. Looking specifically at the fourth quarter, earnings were above expectations, as we delivered adjusted diluted EPS of $1.78, while making important investments in PUR, OXO and Hydro Flask and facing continued headwinds from a sluggish brick and mortar retail environment and unfavorable currency.”

He continued, “As we focus on reaccelerating sales growth in fiscal 2018, we plan to strategically invest an incremental $28 million, primarily behind our leadership brands that make up the majority of our revenue and an even higher proportion of our operating profit. We are also increasing our attention on e-commerce, which grew over 30% in fiscal 2017, and digital marketing, which also made considerable progress during the year. We believe these efforts will position us to achieve core business sales growth in fiscal 2018 in line with our 2-3% long-term sales growth outlook.”