Helen of Troy Ltd. reported sales in the company’s Housewares segment, which includes Hydro Flask and OXO, jumped 13.4 percent in the company’s fourth quarter ended February 28.
Housewares sales reached $116.7 million in the period.
The gain reflects an increase in online channel sales, incremental distribution with existing customers, expanded domestic distribution, international growth and new product introductions for both Hydro Flask and OXO brands. This growth was partially offset by the unfavorable comparative impact of strong sales into the club channel in the same period last year.
Segment net sales also benefitted from the favorable impact of net foreign currency fluctuations of approximately $0.4 million, or 0.4 percent.
GAAP operating margin for the Housewares segment was 15.6 percent compared to 20.0 percent a year ago. The decrease in operating margin is primarily due to an increase in promotional programs, unfavorable channel mix, higher marketing and new product development expense, higher personnel costs and restructuring charges of $200,000.
On an adjusted basis, operating margin was 17.5 percent against 21.4 percent in the same period a year ago.
For the full year, Housewares sales reached $418.1 million, representing a year-over-year gain of 9.5 percent. GAAP operating margin eased to 19.5 percent from 21.3 percent in the same period a year ago. On an adjusted basis, non-GAAP operating margin for the Housewares segment was reduced to 21.3 percent from 22.7 percent.
The company’s businesses also include Healthy & Home and Beauty segments with major brands including Vicks, Braun, Honeywell, PUR and Hot Tools.
Companywide, consolidated net revenue in the quarter increased 12.5 percent to $390.8 million.
Operating income was $31.4 million, or 8.0 percent of net sales, compared to $41.5 million, or 11.9 percent of net sales, in the same period last year. Operating income includes pre-tax non-cash asset impairment charges of $11.4 million and pre-tax restructuring charges of $0.7 million, compared to pre-tax non-cash asset impairment charges of $0.5 million in the same period last year.
Adjusted operating income was $52.7 million, or 13.5 percent of net sales, compared to $50.5 million, or 14.5 percent of net sales.
Income from continuing operations was $8.4 million, or $0.31 per diluted share on 27.1 million weighted average shares outstanding, compared to $34.4 million, or $1.25 per diluted share, on 27.6 million weighted average diluted shares outstanding. Adjusted income from continuing operations was $45.7 million, or $1.69 per diluted share, compared to $42.7 million, or $1.55 per diluted share.
For the year, consolidated net sales revenue grew 5.9 percent, to $1.49 billion. GAAP earnings from continuing operations were $128.9 million, or $4.73, which includes a total of $1.36 per share in tax reform, impairment, TRU bankruptcy and restructuring charges, compared to GAAP diluted EPS from continuing operations of $5.17 in the same period last year, which includes a total of $0.14 per share in impairment and patent litigation charges
Non-GAAP adjusted diluted EPS from continuing operations growth of 11.6 percent to $7.24, compared to $6.49 in the same period last year.
Julien R. Mininberg, chief executive officer, stated, “I am very pleased with our results in the fourth quarter, which rounded out a particularly strong fiscal year performance, marking our fourth consecutive year of executing well against our transformational strategy. During the fourth quarter, we delivered a strong 12.5 percent increase in consolidated net sales and adjusted diluted EPS from continuing operations growth of 9 percent, both above our expectations. Better-than-expected momentum from all three of our business segments helped us achieve a 16 percent increase in our Leadership Brands’ net sales and a 28 percent increase in online channel net sales. Our Health & Home segment experienced one of its strongest quarters in years, with sales up 19.4 percent, as our products provided comfort and relief to families around the world during a particularly severe, global cough, cold and flu season and periods of unseasonably cold weather. Our Housewares segment also demonstrated excellent growth, with sales up 13.4 percent and strength across both brands, online and in brick and mortar. Sales in our Beauty segment had a less-than-expected decline of 2.1 percent, with solid growth in the online channel, partially offsetting a decline in brick and mortar.
For the fiscal year we grew net sales 5.9 percent, increased adjusted diluted EPS from continuing operations by 11.6 percent and generated a free cash flow yield of 8.9 percent, based on our current market capitalization. We improved our return on invested capital with strong income growth and the divestiture of Healthy Directions. Adhering to our strategies, we invested in our core to grow our Leadership Brands, made further efficiency gains in our shared services, initiated Project Refuel to streamline the business, opportunistically repurchased stock and paid down debt.”
Mininberg continued, “Just four years ago we began our transformation by focusing on strategies to unlock additional shareholder value. Since then, on a continuing operations basis, we increased sales at a 3.1 percent CAGR, expanded adjusted operating margin by 1.1 percentage points, improved asset efficiency, increased free cash flow at a 15.9 percent CAGR and grew adjusted diluted EPS at a 12.6 percent CAGR, while making incremental investments in the long-term health of our Leadership Brands. I am very proud of these results and of our outstanding employees all around the world who have worked tirelessly to achieve them. As I look to fiscal 2019, we are pleased to provide an outlook that reflects continued top and bottom line growth on top of a strong fiscal 2018, even as our industry faces challenges including rising commodity costs and a fast-changing retail landscape. I am very excited about our future prospects. Helen of Troy has become an organization that is even more capable of winning with digital marketing, adapting to change in our channels, and improving our operations and other shared services to capitalize on future growth opportunities. Our enhanced infrastructure is ready to add new businesses and operate all our segments with greater efficiencies.”
Fiscal 2019 Annual Outlook
For fiscal 2019, the company expects 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.
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 assumption and
- Beauty net sales decline in the low- to mid-single digits.
The company expects consolidated GAAP diluted EPS from continuing operations of $6.30 to $6.50 and non-GAAP adjusted diluted EPS from continuing operations in the range of $7.30 to $7.55, which excludes any asset impairment charges, restructuring charges, share-based compensation expense and intangible asset amortization expense.
The year-over-year comparison of adjusted diluted EPS is 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 $0.12 to $0.14 from the average cough/cold/flu assumption and approximately $0.15 from fiscal 2018 tax benefits that are not expected to repeat in fiscal 2019.
Photo courtesy Hydro Flask