Helen of Troy reported sales in the Home & Outdoor segment, which includes OXO, Hydro Flask and Osprey, increased 0.5 percent in the fiscal fourth quarter ended February 28, to $211.9 million. Helen of Troy also gave soft guidance for the segment in the current fiscal year, expecting sales to range from a decline of 1.7 percent to a growth of 1.0 percent.

The quarterly gain in the segment was primarily due to the contribution from the acquisition of Osprey of $10.8 million, or 5.1 percent to segment net sales revenue growth. On an organic basis, sales in the fourth quarter were down 4.0 percent.

Helen of Troy said the organic decrease in the Home & Outdoor segment was primarily driven by lower consumer demand, shifts in consumer spending patterns, reduced orders from retail customers due to higher trade inventory levels, and the unfavorable comparative impact of accelerated retailer orders in the fourth quarter of fiscal 2022. These factors were partially offset by an increase in organic sales revenue from Osprey, the impact of customer price increases related to rising freight and product costs, and higher sales in the closeout channel.

Home & Outdoor’s operating income increased 38.5 percent in the quarter to $31.3 million.

The income increase was primarily due to lower inventory obsolescence expense, lower share-based compensation expense, the favorable comparative impact of acquisition-related expense incurred in the prior year, and the net impact of inflationary costs and related customer price increases. These factors were partially offset by the impact of the acquisition of Osprey, which has a lower operating margin than the rest of the Home & Outdoor segment, unfavorable organic operating leverage, restructuring charges of $3.1 million, a less favorable channel mix, and an increase in marketing expense.

Adjusted operating income increased 31.3 percent in the quarter to $36.2 million, or 17.1 percent of segment revenue, compared to $27.5 million, or 13.1 percent, a year ago.

For the full year, sales in the Home & Outdoor segment totaled $915.7 million, up 5.8 percent on a reported basis due to the addition of Osprey. Organic sales were down 10.8 percent. On a reported basis, operating earnings in the Home & Outdoor segment were about flat at $134.1 million against $134.9 million a year ago. On an adjusted basis, operating earnings rose 4.0 percent to $160.6 million from $154.4 million.

Companywide Sales Drop 17 Percent
Companywide, sales and earnings in the fiscal fourth quarter topped analyst consensus estimates but soft guidance was provided for the current fiscal year.

Companywide sales in the fourth quarter reached $484.6 million, a decrease of 16.7 percent from fiscal 2022, a decrease of 4.9 percent from fiscal 2021, and an increase of 9.5 percent from fiscal 2020. Wall Street’s consensus estimate had been $457.7 million.

In the Beauty & Wellness segment, sales fell 26.5 percent year-over-year, to $272.7 million. The Beauty & Wellness segment includes Vicks, Braun, Honeywell, PUR, Hot Tools, and Drybar. Organic sales were off 28.7 percent, primarily due to lower sales of hair appliances, thermometry, air filtration, humidification, and seasonal products. Adjusted operating income decreased 32.4 percent to $30.5 million.

Helen of Troy’s net income was $36.2 million, or $1.50 a share, compared to $39.8 million, or $1.64, a year ago. Adjusted income decreased 20.2 percent, to $48.5 million, or $2.01 a share, topping Wall Street’s consensus of $1.88. The decrease in adjusted earnings was primarily due to lower adjusted operating income and higher interest expense.

Adjusted earnings exclude acquisition-related expenses, EPA compliance costs, restructuring charges, amortization of intangible assets and non-cash share-based compensation.

Helen of Troy also announced that Julien Mininberg, the company’s CEO, intends to retire on February 29, 2024, and to be succeeded by Noel Geoffroy, currently COO.

Outlook
For the current year, Helen of Troy expects revenue in the range of $1.965 billion to $2.015 billion, which implies a decline of 5.2 percent to 2.8 percent. Sales guidance was slightly below Wall Street’s consensus target of $2.05 billion.

Home & Outdoor segment sales are expected to range from a decline of 1.7 percent to growth of 1.0 percent. Beauty & Wellness net sales are expected to range between a decline of 8.0 percent to 5.8 percent.

Helen of Troy said its guidance reflects a year-over-year decline of $35 million, or 1.7 percent, from the removal of revenue of Bed, Bath & Beyond, which filed for bankruptcy, from its outlook, and a similar sized reduction from its Pegasus SKU rationalization initiative. The outlook reflects what Helen of Troy believes will be a continued slower economy and uncertainty in spending patterns, especially for discretionary categories. It also reflects the company’s belief that consumers seek to prioritize value in the current environment of inflation and higher interest rates. The company has seen some reduction of trade inventory on a sequential basis as many key retailers have lowered their inventory on hand and expects that sell-in will more closely match sell-through in fiscal 2024.

Adjusted EPS is projected in the range of $8.50 to $9.00, which implies an adjusted diluted EPS decline of 10.1 percent to 4.8 percent. Wall Street’s consensus had been $9.31. The additional year-over-year expense from the restoration of annual incentive compensation expense to target levels, as well as higher interest and depreciation expense, totaling approximately $1.79, net of tax.

Consolidated adjusted EBITDA is expected in the range of $338 million to $348 million, which implies growth of 3.2 percent to 6.3 percent.

Julien R. Mininberg, CEO, stated: “I am pleased to report that our fourth quarter financial performance, including our sales and adjusted EPS, was better than expected in what has been one of the most unpredictable and challenging years in memory. We expanded our adjusted operating margin and generated strong free cash flow. We used that cash flow and faster-than-expected progress on the inventory reduction initiative to accelerate our debt paydown in the quarter. Our ending inventory is now below fiscal year 2021 despite recent retailer inventory corrections and our Osprey and Curlsmith acquisitions. Operationally, we also made significant progress. We began shipping from our new state-of-the-art Tennessee distribution facility, which has already been instrumental in consolidating several ancillary facilities and is a key part of our multi-year plan to optimize our distribution footprint and efficiency. With Fiscal 2023 marking the fourth year of Phase II, our Core net sales grew at a 9.1 percent CAGR, well ahead of the target set at the Phase II starting point in fiscal year 2019, and Core adjusted EPS grew at a 6.8 percent CAGR despite the many challenges to profitability in our industry and the macro environment.”

Mininberg continued: “Looking at fiscal year 2024, the outlook we are providing today reflects our expectation that we will deliver operational earnings growth, strong free cash flow, expand gross and adjusted operating margins, and deliver adjusted EPS growth in the back half of the fiscal year. Our sales outlook reflects our expectation that the economy, consumers, and several of our categories will continue to experience macro financial pressure. We expect operating margin expansion from lower cost of goods sold and savings from capturing lower freight costs. We also expect Fiscal 2024 gross margins to expand, driven primarily by the early benefits of SKU rationalization under Pegasus, and a more favorable sales mix from growing Hydro Flask, Vicks inhalants, and prestige beauty brands. We are pleased with the progress of the Pegasus workstreams and we remain on track to achieve our savings targets.”

Mininberg concluded: “As detailed in our separate announcement today regarding CEO succession, after what will be ten years as Helen of Troy’s CEO and 34 years in the consumer products industry, I intend to retire upon the conclusion of my employment agreement on February 29, 2024. The Board has unanimously appointed our COO, Noel Geoffroy, to become CEO effective March 1, 2024. Noel brings outstanding experience, fresh eyes and a winning attitude that have already fueled significant contributions. I believe the company will be in excellent hands under her leadership, and I look forward to working with her to deliver fiscal 2024 and a smooth transition.”

Photo courtesy Osprey