HELE Tops Q3 Earnings Estimates, Narrows Sales & Profit Guidance

Helen of Troy Limited HELE posted third-quarter fiscal 2025 results, wherein both the top and bottom lines beat the Zacks Consensus Estimate while declining year over year amid a tough consumer spending landscape.

The Zacks Rank #2 (Buy) company advanced its long-term strategic goals and near-term "Reset and Revitalize" initiatives. Efforts to enhance brand health and operational performance led to growth in the Home & Outdoor segment and International markets. However, the Beauty & Wellness segment faced headwinds from a globally weak illness season and continued softness in the beauty category.

Year to date through November, seven key categories either increased or retained market share in the United States, with additional gains in several core international markets. These improvements were fueled by increased distribution, innovation, enhanced marketing efforts and higher growth investments. The ongoing Project Pegasus initiative remains on schedule, driving substantial gross margin expansion and providing resources to invest further in brands and operations. Following the third quarter, Helen of Troy strengthened its portfolio with the Olive & June buyout, which is expected to immediately contribute positively to the company’s financials.

Helen of Troy Limited Price, Consensus and EPS Surprise

Helen of Troy Limited price-consensus-eps-surprise-chart | Helen of Troy Limited Quote

HELE’s Quarter in Detail

Adjusted earnings of $2.67 per share surpassed the Zacks Consensus Estimate of $2.61. However, the bottom line declined 4.3% year over year from the $2.79 reported in the year-ago period, due to reduced adjusted operating income (in Beauty & Wellness) and a higher adjusted tax rate. These were somewhat countered by increased adjusted operating income in Home & Outdoor lower interest expenses and shares outstanding.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Consolidated net sales of $530.7 million fell 3.4% from the year-ago quarter’s tally on account of reduced sales in the Beauty & Wellness unit, partly compensated by growth in the Home & Outdoor segment. The Zacks Consensus Estimate for net sales was pegged at $530 million.

The consolidated gross profit margin expanded 90 basis points (bps) to 48.9% due to reduced commodity and product costs partly resulting from Project Pegasus initiatives.

The consolidated SG&A ratio increased 620 basis points (bps) to 34% on account of elevated marketing expense and adverse operating leverage, somewhat made up by reduced overall personnel costs.

The adjusted operating income declined 2.1% to $87.9 million, while the adjusted operating margin expanded 30 bps to 16.6%. Our model suggested an adjusted operating margin to remain flat year over year.

HELE’s Segmental Performance

Net sales in the Home & Outdoor segment rose 4.3% to $246.1 million, backed by strength in all three brands. The growth was fueled by net gains in retailer distribution within the insulated beverageware and home categories, increased international sales, robust demand for technical packs and higher club channel sales for insulated beverageware. This was partly negated by weaker overall consumer demand, reduced replenishment orders from retail customers, a decline in club channel sales for the home category and ongoing competition in the insulated beverageware market.

Net sales in the Beauty & Wellness segment declined 9.3% to $284.6 million. The decline was primarily attributed to the impact of a mild winter and a weaker illness season, reduced sales of hair appliances due to subdued consumer demand, heightened competition, a year-over-year net decrease in distribution and a drop in water filtration resulting from the previously announced expiration of an out-licensing agreement and category softness. However, these were partially made up by growth in prestige hair liquids and an increase in fan sales. We had expected Beauty & Wellness net sales to decline 6.9% in the third quarter.

Other Details

Helen of Troy ended the quarter with cash and cash equivalents of $40.8 million and total short- and long-term debt of $733.9 million. Net cash provided by operating activities for the first nine months of fiscal 2025 was $78.2 million. The free cash flow for the same period was $56.1 million.

What to Expect From HELE in FY25?

For fiscal 2025, HELE now anticipates consolidated net sales revenues to range between $1.888 billion and $1.913 billion, indicating a decline of 5.8% to 4.6% year over year. The company earlier expected consolidated net sales revenues to decline 6%-3.5% year over year. The updated view includes an anticipated additional net sales contribution of $17-$18 million from the Olive & June buyout. It also includes adverse effects from the company’s updated expectations for a sluggish winter and illness season globally.

Apart from this, the sales outlook continues to reflect concerns about lingering inflation and continued softness in consumer spending, particularly in certain discretionary product categories. The guidance accounts for heightened macroeconomic uncertainty, a more financially strained consumer, a greater promotional marketplace and tighter inventory management by retailers.

The sales outlook incorporates the impact of operational challenges at the company's Tennessee distribution facility, which affected sales during the first quarter of fiscal 2025. However, following the remediation efforts for the automation system, management anticipates reaching the targeted efficiency levels by the end of fiscal 2025.

In the Home & Outdoor segment, net sales growth is now expected to range between a 0.7% decline and an increase of 0.6%, compared to the earlier view of a 2.3% decline and 1.4% growth range (which included the earlier unveiled adverse impact of shipping disruptions at the company's Tennessee distribution facility).

For the Beauty & Wellness segment, net sales are projected to decline 10.3-9% now, compared with a 9-7.5% decline expected before.

HELE’s Profit Guidance for FY25

The company now envisions fiscal 2025 adjusted EPS in the band of $7.15-$7.40, indicating a 19.8-16.9% year-over-year decline. The bottom line was earlier guided in the range of $7.00 to $7.50, suggesting a decline of 15.8% to 21.4%. The revised guidance includes an addition of 5-7 cents in the fourth quarter from the Olive & June acquisition.

Management now expects adjusted EBITDA in the range of $292-$295 million, compared with the earlier view of $287-$297 million.

The free cash flow is expected in the band of $145-$155 million now, down from the earlier view of $180-$200 million.

Shares of HELE have dropped 4.5% in the past six months compared to the industry’s decline of 28.7%.

Some Solid Staple Bets

We have highlighted three better-ranked stocks from the Consumer Staples sector, namely e.l.f. Beauty, Inc. ELF, United Natural Foods, Inc. UNFI and Freshpet FRPT.

e.l.f. Beauty, a cosmetic and skin care products company, currently sports a Zacks Rank #1 (Strong Buy). ELF delivered a trailing four-quarter earnings surprise of 45.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for e.l.f. Beauty’s current financial year sales and earnings indicate growth of 30.4% and 13.5%, respectively, from the year-ago reported number.

United Natural currently sports a Zacks Rank of 1. UNFI delivered a trailing four-quarter earnings surprise of 553.1%, on average.

The consensus estimate for United Natural’s current financial-year sales and earnings suggest growth of 0.3% and 442.9%, respectively, from the year-ago period’s reported figure.

Freshpet, a pet food company, presently carries a Zacks Rank #2 (Buy). FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings suggest growth of 27.2% and 228.6%, respectively, from the year-ago period’s reported figure.

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