By Eric Smith
Shares of Helen of Troy Ltd. soared $24.93, or 21.6 percent, to $140.29 at market close Friday after the company earlier in the day reported sales in its housewares segment, which includes Hydro Flask, increased 7.8 percent to $126.1 million in the fourth quarter ended February 28.
The El Paso, TX-based company said gains in housewares were primarily due to growth in the online channel, higher club channel sales, new product introductions and growth in international sales, factors that were partially offset by lower closeout channel sales.
Hydro Flask was clearly a product leader for the company, whose consolidated net sales in the quarter decreased 0.7 percent to $384.8 million compared to $387.6 million in the year-ago period. Sales did top Wall Street’s consensus target of $364.7 million.
“Hydro Flask delivered excellent sales growth for the quarter and full fiscal year,” CEO Julien Mininberg said on Friday morning’s earnings call with analysts. “Sell-through rates continue to climb and, according to third-party syndicated data, added further market share growth to its No. 1 position in metal beverage bottles.”
Mininberg continued: “Sales continue to track in line with customer order replenishment and trade inventory remains healthy. Consumer demand in the holiday season and throughout the quarter remained strong. Hydro Flask’s robust growth in the fourth quarter reflects our efforts to increase distribution, particularly in the Eastern United States. The brand has become much more widely available in the East, is rapidly increasing its awareness and is well loved by consumers. Hydro Flask continues to introduce new products and grow internationally.”
When Mininberg was asked during the Q&A session to expand on Hydro Flask’s distribution runway, he was more than happy to discuss, first touching on the brand’s growth story of recent years and then forecasting where it’s going from here and why.
Although Hydro Flask started in Hawaii and initially had strong brand recognition primarily in the West, the parent company has made a concerted effort to establish it in new markets and work to take share.
“Our efforts in the Midwest and Southwest went far during the last couple of years and we’ve been working on the East, Mininberg said. “As the brand got a lot of traction, reception from the trade became big and between our push to build the East and a couple of really big customers who themselves leaned in and said, we prefer and want this product across our chains, across the country, including in the East, and things moved very quickly over the last year. We’re not finished yet.”
Specifically, he added, as Helen of Troy ramps up Hydro Flask’s product mix—moving beyond bottles and into new categories, for example—and also expands distribution, there is ample growth opportunity for the brand to further grow mind and market share, especially on the East Coast but also in Europe and other global markets.
“In terms of going beyond the United States … international growth has been significant for Hydro Flask,” Mininberg said. “We don’t break out the percentage on the business, but I can say when we bought Hydro Flask a few years ago, that number was close to zero, and it’s now a meaningful percentage of the total sales, and the total sales have multiplied since we bought it. So we like that aspect.”
Mininberg said the company is also elevating its message of how Hydro Flask promotes sustainability by reducing single-use waste, and that environmental message is also helping the brand further entrench itself with new legions of consumers.
“It’s becoming very uncool to walk around with a single-use plastic water bottle, just like straws became evil a year or so ago,” he said. “The idea of walking around with a single-use plastic water bottle is seen by many people as irresponsible and inappropriate behavior. Why would you do that when there are so many good alternatives?”
Looking at the rest of the company’s performance from Q4, adjusted income from continuing operations increased $0.9 million, or 1.9 percent, to $46.6 million, or $1.82 per diluted share, compared to $45.7 million, or $1.69 per diluted share. EPS of $1.82 easily topped Wall Street’s consensus target of $1.58.
The 7.7 percent increase in adjusted diluted EPS from continuing operations was primarily due to higher adjusted operating income and the impact of lower weighted average diluted shares outstanding. These factors were partially offset by higher interest expense.
Companywide (other brands include Vicks, Braun, Honeywell, PUR, and Hot Tools), operating margin was 16.2 percent compared to 15.6 percent. The increase was primarily due to the margin impact of a more favorable product mix and lower product costs, factors that were partially offset by higher rent expense related to new office space, an increase in advertising expense and higher freight expense.
Housewares adjusted operating income increased 11.8 percent to $22.8 million, or 18.1 percent of segment net sales, compared to $20.4 million, or 17.4 percent of segment net sales.
For fiscal 2020, the company expects consolidated net sales revenue in the range of $1.580 to $1.611 billion, which implies consolidated sales growth of 1 percent to 3 percent.
The company’s net sales outlook reflects the following expectations by segment:
- Housewares net sales growth of 4 percent to 6 percent;
- Health & Home net sales growth of 2 percent to 3 percent; and
- Beauty net sales decline in the low-single digits.
Photo courtesy Helen of Troy Ltd.