Helen of Troy Ltd. reported sales in its Housewares segment, which includes Hydro Flask and OXO, increased 21.4 percent in the third quarter ended November 30.

Revenues reached $222.4 million, compared to $183.2 million a year ago. Growth was driven by an Organic business increase of $38.8 million, or 21.2 percent, primarily due to higher demand for OXO brand products as consumers spent more time at home cooking, cleaning, organizing, and pantry loading in response to COVID-19, which resulted in increases in brick & mortar, online and international sales. These factors were partially offset by the COVID-19-related impact of reduced store traffic at certain retail brick & mortar stores, a soft back-to-school season due to COVID-19, lower closeout channel sales, and increased competitive activity.

Operating income in the Housewares segment was $37.7 million, or 16.9 percent of segment net sales revenue, compared to $42.3 million, or 23.1 percent of segment net sales revenue. The 6.2 percentage point decrease in segment operating margin was primarily due to a less favorable product mix, higher marketing expense, increased freight and distribution expense to support strong demand, higher royalty expense, and increased legal and other professional fees. These factors were partially offset by the favorable impact that higher overall net sales revenue had on operating leverage, a more favorable channel mix, and travel expense reductions due to COVID-19. Adjusted operating income decreased 8.3 percent to $40.9 million, or 18.4 percent of segment net sales revenue compared to $44.6 million, or 24.3 percent of segment net sales revenue.

Companywide, earnings and sales were ahead of Wall Street’s targets.

Consolidated net sales revenue increased 34.3 percent, to $637.7 million compared to $474.7 million.  Wall Street’s consensus estimate was $560.13 million.

The growth was driven by an Organic business increase of $143.8 million, or 30.3 percent, primarily reflecting growth in consolidated brick and mortar, online, and international sales. The Drybar products acquisition also contributed $17.5 million, or 3.7 percent to consolidated net sales revenue growth. These factors were partially offset by reduced store traffic at certain retail brick & mortar stores, a soft back-to-school season due to COVID-19 related school closures and a decline in Non-Core business.

Health & Home net sales revenue increased 34.6 percent, to $250.2 million, compared to $185.8 million. The increase was primarily driven by an Organic business increase of $62.9 million, or 33.8 percent, primarily due to strong consumer demand for healthcare and healthy living products in domestic and international markets, primarily in thermometry and air purification, in both brick and mortar and online channels, mainly attributable to COVID-19. These factors were partially offset by declines in non-strategic categories. Operating income was $30.5 million, or 12.2 percent of segment net sales revenue, compared to $24.4 million, or 13.1 percent of segment net sales revenue. The 0.9 percentage point decrease in segment operating margin was primarily due to increased marketing expense, higher performance-based annual incentive compensation expense, higher royalty expense, and the unfavorable impact of foreign currency exchange and forward contract settlements year-over-year. These factors were partially offset by the favorable impact that higher overall net sales revenue had on operating leverage and the impact of a more favorable product mix. Adjusted operating income increased 22.5 percent to $35.3 million, or 14.1 percent of segment net sales revenue, compared to $28.8 million, or 15.5 percent of segment net sales revenue.

Beauty net sales revenue increased $59.5 million, or 56.2 percent, to $165.2 million, compared to $105.7 million. The increase was driven by an Organic business increase of $42.1 million, or 39.8 percent, as well as the net sales revenue contribution of $17.5 million, or 16.6 percent growth, from the acquisition of Drybar products. The Organic business increase primarily reflects growth in the appliance category in both online and brick and mortar channels driven by the strength of the One-Step family of products, a shift to greater and more aggressive early season retail holiday promotions during the third quarter, expanded distribution, primarily in the club channel, and an increase in international sales. These factors were partially offset by reduced store traffic at certain retail brick and mortar stores due to COVID-19 and a net sales revenue decline in non-core business. Operating income was $32.6 million, or 19.7 percent of segment net sales revenue, compared to $12.6 million, or 11.9 percent of segment net sales revenue. The 7.8 percentage point increase in segment operating margin was primarily due to the favorable impact that higher overall net sales revenue had on operating leverage, the margin impact of a more favorable product mix, the favorable comparative impact of acquisition-related expenses for the purchase of Drybar products incurred in the prior-year period and travel expense reductions due to COVID-19. These factors were partially offset by higher personnel expense related to the acquisition of Drybar products, increased marketing expense, higher performance-based annual incentive compensation expense, higher bad debt expense, and higher legal and other professional fees. Adjusted operating income increased 111.7 percent to $35.8 million, or 21.7 percent of segment net sales revenue, compared to $16.9 million, or 16.0 percent of segment net sales revenue.

Net income increased 22.6 percent to $84.2 million, compared to $68.7 million. Diluted EPS was $3.34 compared to $2.71. Diluted EPS increased primarily due to higher operating income in the Beauty and Health & Home segments, partially offset by lower operating income in the Housewares segment and higher income tax expense.

Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) increased 24.0 percent to $117.0 million compared to $94.4 million.

On an adjusted basis for the third quarter of fiscal 2021 and 2020, excluding non-cash asset impairment charges, acquisition-related expenses, restructuring charges, tax reform, amortization of intangible assets, and non-cash share-based compensation, as applicable:

Adjusted operating income increased $21.6 million, or 24.0 percent, to $111.9 million, or 17.6 percent of net sales, compared to $90.3 million, or 19.0 percent of net sales. The 1.4 percentage point decrease in adjusted operating margin primarily reflects increased marketing expense, increased freight and distribution expense, an unfavorable product mix in the Housewares segment, higher royalty expense, increased legal and other professional fees, and higher bad debt expense. These factors were partially offset by the favorable impact that higher overall net sales revenue had on operating leverage, a favorable product mix within Health & Home and the Organic Beauty business, a favorable channel mix within the Housewares segment, and travel expense reductions due to COVID-19.

Adjusted income increased $15.7 million, or 19.8 percent, to $94.8 million, compared to $79.1 million for the same period last year. Adjusted diluted EPS increased 20.5 percent to $3.76 compared to $3.12. Wall Street’s consensus estimate was $3.11. The increase in adjusted diluted EPS was primarily due to higher operating income in the Beauty and Health & Home segments, partially offset by lower operating income in the Housewares segment and higher income tax expense.

Julien R. Mininberg, chief executive officer, stated: “Our business delivered an exceptional third quarter in what is shaping up to be another year of outstanding results for Helen of Troy. We delivered 34.3 percent growth in consolidated net sales behind continued momentum across each of our business segments, our Leadership Brands, the online channel, brick and mortar, organic business, core business, and international. During the quarter, adjusted EPS grew 20.5 percent, even as we invested in key initiatives designed to continue driving our value creation flywheel for the next fiscal year and for the back half of Phase II. Year to date, we have outstanding momentum, with consolidated net sales growth of 25.6 percent, adjusted EPS growth of 35.4 percent, and growth in cash flow from operations of 146.3 percent to $249.7 million. We are very pleased to deliver these results and now provide full fiscal year guidance projecting that Helen of Troy will cross the $2 billion sales milestone for the first time and grow its adjusted EPS by $2.20 per share or more this year. This is tremendous progress in our second year of Phase II, and well ahead of the five-year glide path we laid out during our May 2019 Investor Day. The strength of our execution is a testament to our exceptional associates around the world who continue to thrive as we rise together to overcome the many challenges of COVID-19, live our culture and build for the future.”

Mininberg concluded: “We are excited to be in a position this fiscal year to use the strength of our results and balance sheet to make long-term investments needed to catch up with our rapid growth over the past several years and to invest in the building blocks and capabilities we believe will create incremental revenue and earnings growth during the rest of Phase II. We like our chosen initiatives, remain clearly focused on leveraging our diversified portfolio and expect to continue to develop additional opportunities to further supplement future earnings growth as we head into fiscal 2022.”

Fiscal 2021 Annual Outlook
Helen of Troy reinstated guidance after not providing guidance since the pandemic began due to uncertainty created by the crisis.

For fiscal 2021, the company expects consolidated net sales revenue in the range of $2.075 to $2.1 billion, which implies consolidated sales growth of 21.5 percent to 23.0 percent.

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

  • Housewares net sales growth of 12.0 percent to 12.5 percent;
  • Health & Home net sales growth of 27.5 percent to 30.0 percent; and
  • Beauty net sales growth of 27.0 percent to 28.0 percent.

The company expects consolidated GAAP diluted EPS of $10.29 to $10.46 and non-GAAP adjusted diluted EPS in the range of $11.50 to $11.70, which excludes any asset impairment charges, restructuring charges, tax reform, share-based compensation expense, and intangible asset amortization expense.

Photo courtesy Hydro Flask