Yahoo Finance Helen of Troy's (HELE) Brands Aid Amid Pressured Spending
Helen of Troy Limited HELE maintains a strategic focus on Leadership Brands, investing in innovation and distribution channels. Initiatives like Project Pegasus aim to improve efficiency and reduce costs. However, economic pressures and uncertainties, including inflation and reduced consumer spending, are persistent challenges.
Let’s discuss this in detail.
Leadership Brands Aid Growth
The Zacks Rank #3 (Hold) company benefits from its focus on a solid Leadership Brand portfolio. Brands in this portfolio, including OXO, Hydro Flask, Vicks, Braun, Honeywell, PUR, Hot Tools, Drybar and Osprey, are positioned to enhance market share. In fourth-quarter fiscal 2024, leadership brand sales inched up 1% to $418.9 million, backed by brands like OXO, Hydro Flask, Osprey, Drybar and Braun. The company’s constant investments in the most productive brands are likely to keep delivering robust results.
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Strategic Initiatives on Track
In October 2023, the company unveiled Elevate for Growth, a six-year strategic plan representing a significant pivot. It is a transformative strategy, prioritizing innovative portfolio management, incremental investment in brands and capabilities and exploration of distribution avenues. This comprehensive approach is designed to ensure that HELE achieves its goals in the fiscal 2025 and beyond.
Management is on track to sharpen its brand equity to focus on target consumers and brand positioning. Growing the company's international business is also an integral part. Management is on track to fully leverage its new state-of-the-art Tennessee distribution center to bring significant scale and service capabilities for growth.
Project Pegasus Shows Potential
Helen of Troy is focused on developing a global restructuring plan, Project Pegasus. The plan aims to expand operating margins via initiatives designed to improve efficiency and reduce costs. Project Pegasus includes efforts to optimize the company’s brand portfolio, streamline and simplify the organization, grow the cost of goods savings projects and improve the efficiency of the supply-chain network. The project aims to streamline indirect spending and improve cash flow and working capital.
Shortcomings in the Beauty & Wellness Industry
Helen of Troy is witnessing softness across its Beauty & Wellness division, which is hurting the top line. The trend continued in the fourth quarter of fiscal 2024, with segmental net sales declining 2.5% to $265.9 million due to the organic business’ drop of 2.8%. The decline stemmed from the soft sales of air purifiers, fans and heaters due to SKU rationalization and weaker consumer demand and a decline in humidification sales, reflecting a below-average incidence of cough, cold and flu illnesses compared with the previous year’s figure. In the fiscal 2025, Beauty & Wellness net sales are projected to decline 1.5-4.5%.
Road Ahead Seems Challenging
Helen of Troy is battling declines on account of the ongoing consumer spending pressure and uncertainties in discretionary categories. Persistent inflation, increased interest rates and lower levels of household savings are causing people to be prudent with their money. Reduced growth projections from specific retailers are concerning.
In the fiscal 2025, the company expects consolidated net sales to range from $1.965 billion to $2.025 billion, indicating a decline of 2% to growth of 1%. This considers ongoing inflation and restrained consumer spending on non-essential items. Adjusted earnings per share (EPS) are forecasted to be between $8.70 and $9.20, possibly decreasing by up to 2.4% or increasing by up to 3.3%. Adjusted EBITDA for fiscal 2025 is projected to range from $324 million to $331 million, showing a decrease of 3.6% to 1.6%.
In the first quarter of fiscal 2025, the company anticipates a sales decline of 7% to 5%. The first half of the year is expected to witness a slight decline in adjusted EPS, with a drop of 15% to 20% in the fiscal first quarter, nearly balanced by growth in the second quarter.
The company’s shares have declined 10.5% in the past three months compared with the industry’s fall of 9.6%.
Stocks to Consider
McCormick & Company, Inc. MKC is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors. It currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The Zacks Consensus Estimate for McCormick & Company’s current fiscal-year sales and earnings indicates advancements of 0.3% and 5.6%, respectively, from the year-ago reported figures. MKC has a trailing four-quarter earnings surprise of 5.4%, on average.
The J. M. Smucker Company SJM, a branded food and beverage product company, currently carries a Zacks Rank #2. SJM has a trailing four-quarter earnings surprise of 7.5%, on average.
The Zacks Consensus Estimate for J. M. Smucker’s current fiscal year earnings indicates growth of 7.6% from the year-ago reported figure.
Utz Brands Inc. UTZ manufactures a diverse portfolio of salty snacks, currently carrying a Zacks Rank #2. UTZ has a trailing four-quarter earnings surprise of 2% on average.
The Zacks Consensus Estimate for Utz Brands’ current financial-year earnings suggests growth of 24.6% from the year-ago reported numbers.
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The J. M. Smucker Company (SJM) : Free Stock Analysis Report
McCormick & Company, Incorporated (MKC) : Free Stock Analysis Report
Helen of Troy Limited (HELE) : Free Stock Analysis Report
Utz Brands, Inc. (UTZ) : Free Stock Analysis Report
