By Charlie Lunan
Even at a multiple approaching 12 times the expected calendar year 2016 earnings, the price Helen of Troy Ltd. paid to acquire Hydro Flask in March is looking like a bargain.
Helen of Troy (Nasdaq:HELE), which owns dozens of brands in the housewares, health and home, nutritional and beauty categories, October 6 lifted its fiscal 2017 sales forecast for Hydro Flask by more than 40 percent.
Helen of Troy reported Hydro Flask sales reached $29.1 million in the fiscal second quarter ended August 31, up 36.8 percent from a year earlier. The performance nearly offset a $30 million, or 8.1 percent, decline in revenues from the rest of Helen of Troy’s brands, helping the company to report a 17 percent increase in adjusted earnings per share, despite a decline in revenues and margins at many of its other businesses.
Hydro Flask single-handedly drove up revenue and operating margin at Helen of Troy’s Housewares segment by 34.4 percent and 420 basis points, respectively, compared with the second quarter of fiscal 2016. It accounted for 160 of a 420-basis-point improvement of the parent company’s consolidated gross margin, which reached 44.3 percent during the quarter.
Sales Could Hit $90 Million
Helen of Troy, which paid $210 million for Hydro Flask in March, now expects the brand will generate $85 million to $90 million in revenue for its coffers in fiscal 2017 compared with its original expectations of $60 million to $65 million.
“Hydro Flask’s brand popularity continues to heighten with outdoor enthusiasts and also with retailers,” Helen of Troy CEO Julien R. Mininberg said of the brand, which is based in Bend, OR. “It is a key contributor to the growth of the market for high-performance insulated hydration vessels, and continues to gain market share.”
Officials said the brand’s growth has been driven by strong reorders, given high sell-through rates at retail and online; the introduction of new colors across its hydration, coffee, beer and food lines; and expanded distribution in the active sports and other specialty markets, including natural foods, where retailers continue to broaden their hydration offerings.
Helen of Troy has begun working to expand the brand outside the U.S. with a focus on Canada, Europe and Japan. “Several key retailers in the U.K. and Germany are first movers,” Mininberg said.
Weaker Than Expected Retail Environment
Excluding Hydro Flask, the Housewares segment’s net sales declined 2.4 percent, and operating margins slipped due to expansion into lower-margin appliance categories. The company said successful new product introductions were offset by lower traffic at U.S. stores, prompting key retailers to make smaller and less frequent replenishment orders.
Helen of Troy reported consolidated net sales declined 0.3 percent to $368.2 million compared with a year earlier, as growth at its Housewares and Health & Home segments more than offset significantly softer sales at its Beauty and Nutritional Supplements segments.
Citing a weaker than expected retail environment and softness in Beauty and Nutritional Supplements, the company lowered its net sales expectations for the full fiscal year while maintaining its consolidated full-year adjusted EPS outlook.
Photo courtesy Hydro Flask/Helen of Troy