On an analyst call, Julien Mininberg, CEO, said Hydro Flask’s sales declined in the fiscal fourth quarter ended February 28 in large part due to a shift in consumer preference from insulated bottles to tumblers. Osprey, acquired December 30, 2021, outperformed expectations.
“Hydro Flask faced pressure in the quarter from overall softness in the insulated bottles category,” Mininberg said on the call. “Consumer preferences shifted away from bottles where Hydro Flask is by far the leader to tumblers where the brand has a smaller presence.”
Hydro Flask’s growth in recent quarters had been impacted by elevated inventory levels across the marketplace, but Mininberg said “inventory in the trade is now healthier” and Hydro Flask has a number of opportunities to drive growth in the current year.
He said the automation in a new DC gives Hydro Flask “significantly more capabilities” to customize Hydro Flask bottles, mugs and other items for direct-to-consumer (DTC) as well as corporate promotion and gifting. Mininberg added, “Consumers were also seeing new collections as well as new colors and limited-edition bottles.”
The Soft Coolers category, introduced in 2020, also continues to offer a growth opportunity for the brand. Mininberg said, “We are leveraging the strong consumer reception to Hydro Flask in that category to gain additional distribution key retailers and expect us to drive incremental sales in fiscal 2024.”
Osprey, best known for its outdoor backpacks, “outperformed our expectations” for both the fiscal fourth quarter and year with the aid of improved in-stock levels.
“The brand benefited from strong e-commerce replenishment after the holiday period, the rebound in travel, and good international growth compared to the prior year period,” said Mininberg. “We caught up on inventory and are now much more able to meet demand compared to the fourth quarter of last year when COVID-related factory closures curtailed our supply.”
Mininberg said POS trends for Osprey were positive in the quarter and the better inventory position is expected to positively impact the brand’s performance in the three key categories of technical packs, travel packs and everyday packs in fiscal 2024.
Overall, 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, to $211.9 million.
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.
Mininberg said OXO continued to see POS at brick-and-mortar below peak prior year levels as the overall home category continued to slow. Key drivers of this were the normalization of demand from COVID highs and inflationary shifts in consumer spending toward necessities and services.
The CEO added, “Importantly, total POS for OXO remains solidly ahead of pre-pandemic levels, highlighting the continued desirability of the brand. Inventory in the trade is healthier with weeks on hand down significantly from a year ago for those retailers where we have visibility.”
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.
Helen of Troy 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.
Photo courtesy Hydro Flask
