Helen of Troy Stock Falls 40% in Three Months: What's Next for HELE?
Helen of Troy Limited HELE experienced significant stock volatility, with shares dropping 40.4% in the past three months. This steep decline contrasts sharply with the broader industry's fall of 22.8%. The Consumer Staple sector and the S&P 500 posted positive increases of 8.3% and 2.4%, respectively, highlighting HELE’s underperformance during this period.
The downturn in Helen of Troy's stock stemmed from operational challenges, ongoing macroeconomic uncertainty and a strained consumer environment. Elevated costs have further put pressure on the company’s performance, contributing to weaker-than-expected results for first-quarter fiscal 2025. Following these soft results, HELE adjusted its fiscal 2025 outlook downward, signaling ongoing struggles.
Analyst’s sentiment remains cautious, as the Zacks Consensus Estimate for HELE’s upcoming quarter points to a 7% drop in sales and a 37.9% decline in earnings year over year. Trading below its 200-day moving average, the stock is showing bearish signals. This reflects concerns over its ability to rebound in the near term. Let's discuss.
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Decoding Challenges Faced by Helen of Troy
One of the biggest issues Helen of Troy is grappling with is the shift in consumer behavior. Amid underlying inflationary pressure, shoppers are prioritizing essential purchases over discretionary items like outdoor products, specialty beauty items, and household goods such as humidifiers and hair appliances. This drop in demand is being felt across the company’s key segments, including Beauty & Wellness.
In the first quarter of fiscal 2025, the company’s net sales dropped by 12.2% to $416.8 million. Much of this decline was attributed to weaker sales of hair appliances and prestige hair care products. Retailers, dealing with excess inventory and slowing consumer demand, have been cautious in placing new orders, exacerbating Helen of Troy’s sales woes. As a result, the company’s adjusted earnings per share (EPS) dropped sharply by 49%, reaching 99 cents.
While demand is falling, Helen of Troy is also dealing with rising operational costs. Selling, general and administrative expenses surged during the first quarter, with the SG&A ratio expanding to 40.9%, up by 560 basis points. Several factors contributed to this upside, including higher marketing expenses, inefficiencies at the company’s Tennessee distribution facility and rising health insurance costs.
These operational challenges dented the company’s profitability, as adjusted operating income fell 35.1% to $43 million. The adjusted operating margin also contracted, dropping 360 basis points to 10.3%. Helen of Troy’s struggles with cost management suggest that the company will need to find ways to improve efficiency to protect margins in the coming quarters.
Helen of Troy’s Future Looks Challenging
Facing a challenging economic environment and operational inefficiencies, Helen of Troy revised its outlook for the fiscal 2025. The company expects net sales to fall between 3.5% and 6%, with revenues projected to range from $1.885 billion to $1.935 billion. This marks a significant downward revision from earlier expectations of up to 1% growth. The company also cut its EPS forecast for the year. Adjusted EPS is now expected to range from $7.00 to $7.50, suggesting a decline of 15.8% to 21.4%. The metric was anticipated to be between $8.70 and $9.20. This reduction highlights the challenges Helen of Troy is facing in managing rising costs and navigating a difficult consumer landscape.
What’s Next For HELE Investors?
Helen of Troy is facing several challenges, including declining consumer demand for discretionary products and rising operational costs. The company’s downward revision of the fiscal 2025 outlook, combined with a difficult macroeconomic environment, suggests increased volatility in the coming months. Investors should closely monitor how the company handles cost management and navigates the ongoing slowdown in consumer spending. Currently, Helen of Troy holds a Zacks Rank #4 (Sell).
Better-Ranked Staple Stocks
Here, we have highlighted three better-ranked food stocks, namely, The Chef's Warehouse CHEF, Flowers Foods FLO and McCormick & Company, Inc. MKC.
The Chef’s Warehouse, which engages in the distribution of specialty food products, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimate for The Chef’s Warehouse’s current fiscal year sales and earnings each indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Flowers Foods, one of the largest producers of packaged bakery foods in the United States, currently carries a Zacks Rank #2 (Buy). FLO has a trailing four-quarter earnings surprise of 1.9%, on average.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales and earnings each implies growth of around 1% and 5%, respectively, from the year-ago reported numbers.
McCormick is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors. It currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for McCormick & Company’s current fiscal-year sales and earnings indicates advancements of 0.1% and 5.6%, respectively, from the year-ago reported figures. MKC has a trailing four-quarter earnings surprise of 8.3%, on average.
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McCormick & Company, Incorporated (MKC) : Free Stock Analysis Report
Flowers Foods, Inc. (FLO) : Free Stock Analysis Report
Helen of Troy Limited (HELE) : Free Stock Analysis Report
The Chefs' Warehouse, Inc. (CHEF) : Free Stock Analysis Report