Hydro Flask’s sales were down in the first quarter ended May 31, but sales have rebounded steadily since May as stores reopened. Officials at Helen of Troy, the brand’s parent, also see heightened interest in outdoor activities due to COVID-19 as a new driver for Hydro Flask’s growth.
On a conference call with analysts, Julien Mininberg, Helen of Troy’s CEO, said Hydro Flask’s sales, while down, was better than expected and arrived on top of a 23 percent gain from the year-ago first quarter.
Sales were impacted by store closures such as Dick’s Sporting Goods and REI who were deemed non-essential retailers, and Hydro Flask’s sales are heavily-weighted in the sports and outdoor channels. Sales were also hurt when Amazon stopped selling non-essential items for a large part of the quarter to improve the delivery of essential goods. Strong online and international growth for Hydroflask.com was unable to offset those two factors.
However, Hydro Flask has seen a “significant rebound” toward the end of the fiscal first quarter and into the second quarter as stores began reopening. Amazon has also restarted delivery of “non-essential products” and Hydro Flask “responded beautifully” on the platform.
Going forward, Helen of Troy officials expect Hydro Flask could benefit from the increased preference toward outdoor activities that promote social distancing such as camping, hiking, biking, and running.
“In the Northern Hemisphere, it’s summertime,” said Mininberg. “People are outside more.” But he also said there’s a trend toward “solitary adventurism,” or people wanting to go out but “preferring to stay away from others” to support activities such as camping, biking and hiking. Said Mininberg, “All those things are good for Hydro Flask, they’re good for people’s souls and as the stores are open, they’re good for sales.”
For the quarter, highlights for Hydro Flask included a “sharp” increase in online sales and double-digit growth internationally, led by Europe and Asia. Mininberg also noted that consumer research, social listening and online search trends confirm Hydro Flask’s popularity remains “very strong.” The brand continues to sustain its number one market share position with a “large lead over competitors” in insulated hydration vessels according to syndicated point-of-sale data.
“Looking ahead, recent shipments and tracking in retail stores and locations that have reopened are showing encouraging trends [for Hydro Flask],” the CEO added. “We continue to feel optimistic about the key drivers we outlined for Hydro Flask in our April call.”
Helen of Troy’s Housewares Segment Sales Decline 3 Percent
Overall, sales of Helen of Troy’s Housewares segment, which includes Hydro Flask and OXO, were down 3.0 percent in the quarter, to $140.6 million.
The OXO brand, which sells in the mass channel, grew as consumers spent more time at home cooking, cleaning, organizing, and pantry loading. OXO also benefited as mass-market stores such as Walmart, Target and Costco were deemed essential retailers and remained open amid the pandemic.
Growth in online sales and in stores that were open was strong for both brands. Overall international sales were down for the segment due to a drop at OXO.
Operating income in the Housewares segment decreased 25.5 percent to $23.2 million, reducing operating margins to 16.5 percent from 21.5 percent in the year-ago period.
The 5.0 percentage point decrease in operating margins was primarily due to a less favorable product mix, the net unfavorable impact of tariffs and related pricing actions, higher bad debt expense, higher customer chargeback activity, higher freight and distribution expense to support strong direct-to-consumer demand, and the unfavorable impact that lower sales had on operating leverage. These factors were partially offset by the impact of cost reduction initiatives including temporary personnel, advertising and travel expense reductions due to the uncertainty of COVID-19. Adjusted operating income decreased 20.3 percent to $27.4 million, or 19.5 percent of sales, from 23.7 percent in the prior year.
Helen of Troy’s Companywide Results Surpass Targets
Companywide, Helen of Troy reported results that were well above expectations due to outperformance by its Health and Home segment which includes Vicks, Braun, Honeywell, and PUR.
Consolidated sales revenue increased 11.8 percent to $420.8 million, easily above Wall Street’s consensus target of $347.0 million. The gains were driven by an 11.1 percent increase in organic sales plus a minor contribution from the acquisition of Drybar Products.
Among its two other segments, Health and Home jumped 29.1 percent to $154.9 as COVID-19-related demand surged for healthcare and healthy living products. Beauty segment sales increased 5.0 percent to $76.5 million as the Drybar Products acquisition offset organic sales decline.
Helen of Troy said that during the first quarter it took a number of temporary precautionary measures to preserve its cash flow and adjust its cost structure to lower expected revenue in response to the uncertainty from COVID-19. Based on the strong Q1 performance, the company lifted some of these measures and is making selective investments in key Phase II Transformation initiatives and key hires. These include, effective August 1, restoring all wages, salaries and director compensation to pre-COVID-19 levels.
Brian Grass, the company’s CFO, said on the call, “We plan to slowly resume our normalized brand spending and selectively invest in key initiatives that are critical to delivering our Phase II transformation goals.”
However, Helen of Troy won’t provide an outlook for fiscal 2021 at this time due to the uncertainty continuing with COVID-19. The company did note that it expected moderation of the first quarter demand surge in the Health and Home segment along with improved trends in the Housewares and Beauty segments.
Said Mininberg, “Despite the uncertainty, we are generally encouraged by the current trends and prospects for our business and are therefore using the strength from the first quarter to lean back in on many of the key initiatives chosen to further help us deliver on our Phase II Transformation goals. We believe we have struck the right balance between the uncertainties of the external environment and our strong commitment to doing what is bold and right for executing the strategic choices underlying our multi-year trajectory of transformation.”
Photo courtesy Helen of Troy/Hydro Flask