By Thomas J. Ryan
<span style="color: #969696;">Hydro Flask churned out high double-digit growth in both the fourth quarter and fiscal year ended February 29, according to the quarterly report of its parent, Helen of Troy.
“Hydro Flask has had simply a fantastic fiscal ’20, said Julien Mininberg, the CEO of Helen of Troy, on a conference call with analysts. “Its distribution continues to expand as it did itself resulting in high double-digit growth for the quarter and the year.”
Mininberg noted that according to third-party syndicated data for the 52-week period ending in February, Hydro Flask added incremental market share gains to further expand its position as the number one player in the U.S. metal beverage bottle market.
Hydro Flask in the quarter continued to grow the brand internationally. Domestically, the brand began to see high-volume customers strategically expand Hydro Flask shelf space to meet growing consumer demand.
Overall, sales in Helen of Troy’s Housewares segment, which includes Hydro Flask and OXO, increased 15.0 percent, to $126.1 million.
The gains were primarily due to point-of-sale growth with existing domestic brick & mortar customers, an increase in online sales and revenue from new product introductions. These factors were partially offset by lower club channel sales, a decline in international sales and lower closeout channel sales.
Operating income in the segment decreased 31.5 percent to $14.0 million, or 9.6 percent of segment net sales, compared to $20.4 million, or 16.2 percent of segment net sales in the same period last year. The 6.6 percentage point decrease was primarily due to higher advertising and new product development expense to support strategic initiatives, higher freight and distribution expense to support increased retail customer shipments and higher restructuring charges. The quarter included a charge of $1.35 million in conjunction with the company’s Project Refuel restructuring plan that’s focusing on supply chain efficiencies. These factors were partially offset by the impact of a more favorable product mix and increased operating leverage from sales growth.
Adjusted operating income in the Housewares segment in the quarter decreased 24.8 percent to $17.1 million, or 11.8 percent of segment net sales, compared to $22.8 million, or 18.1 percent of segment net sales.
For the year, the Houseware segment sales reached $641 million against $523.8 million, representing a gain of 22.4 percent. On a GAAP basis, operating earnings in the Houseware segment increased to $123.1 million from $100.7 million. On an adjusted basis, earnings improved 19.9 percent to $133.8 million from $111.6 million.
<span style="color: #969696;">Mininberg said that in February, Hydro Flask began shipping its 2020 spring collection. The lineup includes the Trail Series, which is 25 percent lighter with no reduction in thermal performance. The series also added new colors and a textured finish. Hydro Flask’s spring collection further expands Hydro Flask beyond the bottle with new lunch boxes.
The brand has also benefitted from a “Just One More” strategy that encourages fans of the brand to try new colors, shapes, sizes or categories. Mininberg added, “The ‘Just One More’ strategy for Hydro Flask continues to produce results in the quarter with loyal customers and consumers adding new sizes, colors, caps and accessories to their collection.”
Looking ahead, Hydro Flask is expected to continue to benefit from multiple long-term growth drivers. These include further expanding distribution and shelf space, the ‘‘Just One More’ strategy, new innovation in existing categories, new entries beyond the bottle, further growth and expansion internationally, more direct-to-consumer opportunities in the collegiate channel, and more customization. Said Mininberg, “Net, we think Hydro Flask has a wide array of white space opportunities.”
Companywide, consolidated sales revenue increased 14.9 percent to $442.4 million. Among its other segments, sales in Health & Home, including Vicks, Braun, Honeywell and PUR, increased 10.5 percent. Beauty, including Drybar and Hot Tools, jumped 23.1 percent.
The loss from continuing operations came to $3.2 million, or 13 cents per share, due to asset impairment charges, restructuring charges and acquisition-related expenses totaling $1.55 per share. Much of the non-recurring items related to the planned divestiture of Helen of Troy’s mass channel liquids, powder and aerosol products under brands such as Pert, Brut, Sure, and Infusium names. The company said it expects the divestiture to occur sometime this fiscal year.
On an adjusted basis, income from continuing operations increased 2.7 percent, to $47.8 million, or $1.88 per share, from $46.6 million, or $1.82, a year ago.
For the year, consolidated sales revenue increased 9.2 percent to $1.71 billion. GAAP diluted EPS from continuing operations reached $6.02 against $6.62 a year ago with both periods including charges. On an adjusted basis, EPS from continuing operations saw growth of 15.4 percent to $9.30 compared to $8.06.
Helen of Troy said that due to the evolving COVID-19 pandemic and the related business uncertainty, the company is not providing an outlook for fiscal 2021 at this time.
<span style="color: #969696;">As expected, Mininberg spent much of the call detailing Helen of Troy’s response to COVID-19 and its impact.
In response, steps taken by the company have included work-from-home policies, social distancing measures at distribution centers, and elevated cleaning protocols to safeguard employees.
The company temporarily reduced salaries and wages across almost all parts of the company, effective April 6 in a bid to avoid “widespread layoffs.” Hiring freezes and suspension of merit increases and promotions have also been employed. At distribution centers, external temporary labor has been let go and some full-time employees have been furloughed to match demand.
The company also is delaying discretionary spending in “brand and product spend, travel and certain capital expenditures” at some major brands until later this year or fiscal 2022. Said Mininberg, “For some initiatives, spending has been reduced while for others, a meaningful portion will be delayed until we have better visibility on demand and recovery. For those brands that are extremely relevant right now, we will continue to spend.”
Regarding the impact, Helen of Troy’s revenue are being adversely impacted by the effect of brick and mortar store closures, limited hours of operation, and lower store traffic, but favorable demand is being seen for some products. Strength is being seen from online sales and stores that can remain open.
Mininberg said Helen of Troy’s health-related products, Braun, Vicks and Honeywell, are seeing “high demand” with the value of thermometers, humidifiers and air purifiers gaining more media attention. Wellness is another trend strengthening amid the pandemic and drawing attention to the company’s PUR Pitcher and Faucet Mount water purifiers.
The OXO brand is selling elevated demand online for its cleaning products as well as for its food prep, baking home organization and storage containers serving many home-bound Americans. The volumizer products in Helen of Troy’s Beauty category are also seeing strong demand, driven by stay-at-home needs.
Mininberg also implied that some of Helen of Troy’s brands were being restricted in the earlier days of the pandemic because they weren’t deemed to be “essentials” by Amazon and other large online players but the company has benefited as more items have been increasingly added to “essential” listings, including Hydro Flask.
Mininberg said that “broadly,” Helen of Troy has seen demand improving in recent weeks online and at stores that are open, listing for Hydro Flask, its volumizer offerings and OXO. He said “probably 90 percent” of Hydro Flask is now listed online at major sites as an essential and that’s “helped us considerably.” Sales at “oxo.com and hydroflask.com, etc., has been very active,” he said.
Mininberg feels the arrival of stimulus checks are making consumers “feel more comfortable” with purchases versus two to three weeks ago. Asked by an analyst how demand was for Hydro Flask as a less-discretionary brand, Mininberg said he feels Hydro Flask and its “Let’s Go” messaging appeals to consumers restless after being cooped up for weeks.
“’Let’s Go’ probably is about the best two word summary of how seven billion people on the planet earth feel, which is ‘Let’s get outside and do some stuff,’” said Mininberg. “And I think, it’s springtime in the Northern hemisphere, the weather is improving, the restrictions are loosening and people are chomping at the bit.”
Photo courtesy Hydro Flask