Helen of Troy reported fiscal fourth-quarter net sales for its Home & Outdoor segment, which includes the OXO, Osprey and Hydroflask businesses, increased 5.4 percent to $223.3 million for the three-month period ended February 29, 2024, compared to $211.9 million in the prior-year comparative period.

The increase for the quarter was driven by 5.1 percent growth from its Organic business (primarily from the rise in home category sales in the brick-and-mortar and club channels), higher insulated beverageware sales (driven by its new travel tumbler) and international growth (primarily driven by strong demand for travel packs.) These factors were partially offset by the unfavorable impact of the Bed, Bath & Beyond bankruptcy and a decrease in online channel sales in the travel pack and home categories.

Home & Outdoor operating income was $35.0 million, or 15.7 percent of segment net sales revenue, compared to $31.3 million, or 14.8 percent of segment net sales revenue. The 90 basis-point increase in segment operating margin was primarily due to lower commodity and inbound freight costs, decreased restructuring charges of $2.6 million, lower trade discount and program expense, and reduced inventory obsolescence expense. These factors were partially offset by an increase in depreciation and distribution expense primarily due to a new distribution facility, higher share-based compensation expense, an increase in annual incentive compensation expense, and a less favorable customer and product mix.

Segment-adjusted operating income increased 15.3 percent to $41.7 million, or 18.7 percent of segment net sales revenue, compared to $36.2 million, or 17.1 percent of segment net sales revenue.

Consolidated Results
Consolidated net sales revenue for Helen of Troy increased 1.0 percent to $489.2 million, compared to $484.6 million in the prior-year period, primarily driven by a 0.7 percent increase from Organic business. 

The Organic business increase was primarily due to growth in the consolidated online channel (led by the travel tumbler in Home & Outdoor), hair appliances in Beauty & Wellness, international gains driven by thermometry, hair appliances and demand for travel packs, an increase in the club and closeout channels in Home & Outdoor, and prestige hair care growth in Beauty & Wellness.

Consolidated net income was $42.7 million, or $1.79 per diluted share, in Q4, compared to $36.2 million, or $1.50 per diluted share, in the prior-year Q4 period.

Fiscal 2025 Annual Outlook
The company expects consolidated net sales revenue in the range of $1.965 billion to $2.025 billion, which implies a decline of 2.0 percent to growth of 1.0 percent. The sales outlook reflects the company’s view of lingering inflation and further consumer spending softness, especially in specific discretionary categories. 

In the aggregate, the company believes on-hand retail inventory is healthy and expects sell-in to be generally in line with sell-through during fiscal 2025.

The company’s fiscal year net sales outlook reflects the following expectations by segment:

  • Home & Outdoor net sales growth of 1.0 percent to 4.0 percent
  • Beauty & Wellness net sales to decline 4.5 percent to 1.5 percent ( which includes a year-over-year headwind of approximately 1.0 percent related to the expiration of an out-license relationship in Wellness)

The company expects:

  • GAAP diluted EPS of $6.68 to $7.45 and non-GAAP adjusted diluted EPS in the range of $8.70 to $9.20 (which implies an adjusted diluted EPS decline of 2.4 percent to growth of 3.3 percent),
  • Adjusted EBITDA of $324 million to $331 million (which implies a decline of 3.6 percent to 1.6 percent, as benefits from Project Pegasus and other gross profit improvements are reinvested for growth)
  • The company’s outlook reflects a year-over-year increase in growth investment spending of approximately 100 basis points, a year-over-year headwind of approximately 50 basis points from the expiration of an out-license relationship in Wellness, and some margin compression from incremental operating expense related to enterprise technology initiatives included in the Elevate for Growth strategic plan that are beginning in fiscal 2025.
  • Free cash flow is in the range of $255 million to $275 million, and its net leverage ratio(1)(3), as defined in its credit agreement, is to end fiscal 2025 at 1.25x to 1.00x.

Regarding the quarterly sales cadence, the company expects a decline of approximately 7 percent to 5 percent in the first quarter of fiscal 2025 and a range of flat to 3 percent growth for each of the remaining quarters. 

The company expects a slight decline in adjusted diluted EPS for the first half of fiscal 2025, with a decline of approximately 15 percent to 20 percent in the first quarter and nearly offsetting growth in the second quarter. The company expects an adjusted EPS range of flat to 5 percent growth in the second half of fiscal 2025.

The company’s consolidated net sales and EPS outlook also reflect the following assumptions:

  • the severity of the cough/cold and flu season will align with pre-COVID historical averages;
  • April 2024 foreign currency exchange rates will remain constant for the remainder of the fiscal year;
  • expected interest expense in the range of $34.0 million to $36.0 million;
  • a reported GAAP effective tax rate range of 19.0 percent to 21.0 percent for the full fiscal year 2025 and an adjusted effective tax rate range of 17.2 percent to 18.3 percent; and
  • an estimated weighted average diluted shares outstanding of 23.7 million for the full year.

The company said that the likelihood, timing and potential impact of a significant or prolonged recession, any fiscal 2025 acquisitions and divestitures, future asset impairment charges, future foreign currency fluctuations, additional interest rate increases, or share repurchases are unknown and cannot be reasonably estimated; therefore, the company did not include them in its outlook.

Image courtesy Hydro Flask