Helen of Troy Limited reported Housewares segment net sales increased by 18.9 percent in the first quarter ended May 31.

The gains reflected incremental distribution with existing domestic customers, an increase in online sales, new product introductions for both the Hydro Flask and OXO brands, an increase in sales into the club channel, an acceleration of Hydro Flask orders by retailers in advance of the Hydro Flask integration into the Helen of Troy ERP system and international growth. Segment net sales also benefitted from the favorable impact of net foreign currency fluctuations of approximately $0.4 million, or 0.4 percent.

These factors were partially offset by lower store traffic and soft consumer spending at certain traditional brick-and-mortar retailers.

GAAP operating margin in the Housewares segment was 18.9 percent compared to 18.2 percent. The increase in operating margin is primarily due to a higher mix of Hydro Flask sales at a higher operating margin, lower overall advertising expense, improved distribution and logistics efficiency and the favorable impact of increased operating leverage from net sales growth. These factors were partially offset by unfavorable margin impact of sales into the club channel and the impact of restructuring charges.

Segment adjusted operating income increased 29.9 percent to $25.4 million, or 21.7 percent of segment net sales, compared to $19.6 million, or 19.8 percent of segment net sales, in the same period last year.

Companywide, first-quarter highlights include:

  • Consolidated net sales revenue increase of 9.0 percent, including:
  • An increase in Leadership Brand net sales of approximately 14.7 percent
  • An increase in online channel net sales of approximately 30.3 percent
  • Core business growth of 7.9 percent
  • GAAP operating income of $43.3 million, or 12.2 percent of net sales, which includes $1.7 million in restructuring charges, compared to $30.6 million, or 9.4 percent of net sales, which included $4.0 million in pre-tax non-cash impairment charges, in the same period last year
  • Non-GAAP adjusted operating income growth of 30.4 percent to $55.5 million, or 15.6 percent of net sales, compared to $42.6 million, or 13.1 percent of net sales, in the same period last year
    GAAP diluted EPS from continuing operations of $1.43, which includes $0.06 per share of restructuring charges, compared to GAAP diluted EPS from continuing operations of $1.00 in the same period last year, which included $0.13 per share of impairment charges
  • Non-GAAP adjusted diluted EPS from continuing operations growth of 32.6 percent to $1.87, compared to $1.41 in the same period last year
  • Net cash provided by operating activities declined $10.9 million primarily due to a $15 million settlement payment made during the quarter
  • Repurchased 407,025 shares of common stock in the open market during the quarter for $37.1 million

Julien R. Mininberg, chief executive officer, stated: “We continue to see excellent momentum in the business, which led to a strong performance and a great start to our new fiscal year. Our strategic choices and ongoing productivity enhancements from the transformation plan are generating healthy results, with consolidated net sales increasing 9.0 percent and adjusted diluted EPS from continuing operations growing 32.6 percent. Investing in our Leadership Brands, our infrastructure and our people continues to pay off. Our Leadership Brands grew 14.7 percent and our digital initiatives contributed to online sales growth of 30 percent in the quarter. We were particularly pleased to see healthy customer replenishment following the strong sell-through of our products in the prior quarter. This in turn helped maintain healthy inventory levels in our operation and at retail. The sweeter mix of our Leadership Brands, the timing of marketing spend and further efficiencies generated from our shared services initiatives contributed to higher adjusted operating margins in all three of our business segments. During the quarter we also repurchased over 400,000 of our shares, the impact of which is now reflected in our revised annual EPS outlook.”

Mininberg continued: “To continue improving our shared services, Project Refuel has now expanded to include the realignment and streamlining of our supply chain structure, which we believe will help mitigate potential cost headwinds in the remainder of this fiscal year and further strengthen our profitability longer term. Our strategies are working and we remain confident in our ability to deliver growth and long-term shareholder value.”

Fiscal 2019 Annual Outlook

For fiscal 2019, the company continues to expect consolidated net sales revenue in the range of $1.485 to $1.510 billion, which implies consolidated sales growth of 0.4 percent to 2.1 percent after accounting for the expected impact from the adoption of ASU 2014-09 “Revenue from Contracts with Customers.”

The company’s net sales outlook assumes the severity of the cough/cold/flu season will be in line with historical averages, which unfavorably impacts the year-over-year comparison by 1.1 percent. The company’s net sales outlook also assumes that June 2018 foreign currency exchange rates will remain constant for the remainder of the fiscal year. Finally, the company’s net sales outlook reflects the following expectations by segment:

  • Housewares net sales growth in the mid-single digits;
  • Health & Home net sales growth in the low-single digits, with an unfavorable impact of approximately 2.5 percent from the average cough/cold/flu season assumption and
  • Beauty net sales decline in the low- to mid-single digits.

Reflecting the impact of share repurchases in the first quarter of fiscal 2019, the company now expects consolidated GAAP diluted EPS from continuing operations of $6.27 to $6.42 and non-GAAP adjusted diluted EPS from continuing operations in the range of $7.45 to $7.70, which excludes any asset impairment charges, restructuring charges, share-based compensation expense and intangible asset amortization expenses.

The company continues to expect the year-over-year comparison of adjusted diluted EPS from continuing operations to be impacted by an expected increase in growth investments in support of the company’s Leadership Brands of 14 percent to 18 percent in fiscal 2019. The year-over-year comparison is also unfavorably impacted by approximately 12 to 14 cents from the average cough/cold/flu season assumption and approximately 15 cents from fiscal 2018 tax benefits that are not expected to repeat in fiscal 2019.

Helen of Troy’s brands include OXO, Hydro Flask, Vicks, Braun, Honeywell, PUR and Hot Tools.