Release Date: January 08, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Helen Of Troy Ltd (HELE, Financial) reported third-quarter results within the outlook range despite cautious consumer spending and a weak cough, cold, and flu season.
- The company's tenancy distribution facility is operating efficiently, handling high volumes during the busiest quarter.
- Project Pegasus is on track, with lower product and commodity costs positively impacting gross profit margins.
- The acquisition of Olive & June is expected to be immediately accretive, enhancing the beauty portfolio with high-growth and high-margin consumables.
- Home & Outdoor segment showed growth across all three brands, with significant distribution gains and market share improvements.
Negative Points
- The Beauty & Wellness segment faced challenges, with a weak illness season impacting wellness sales and continued softness in beauty product sales.
- The company experienced a decline in consolidated net sales by 3.4%, primarily due to weaker-than-expected winter and illness season.
- GAAP operating margin decreased to 14.2% from 19.5% in the same period last year, partly due to a gain on the sale of a facility in the previous year.
- Inventory levels are higher than expected, partly due to strategic inventory builds and weaker demand in thermometry.
- The macroeconomic environment remains challenging, with a bifurcation in consumer spending between higher and lower-income households affecting sales.
Q & A Highlights
Q: Can you remind us of the benefits expected from the Iron Giant distribution center and how the Olive & June acquisition impacts it?
A: The Iron Giant, or Tennessee distribution center, is a major investment providing capabilities for both full case volume and direct-to-consumer business. The automation issues have been resolved, and we expect efficiency gains. Olive & June's integration into this system is not yet assumed but could offer future productivity benefits. (Noel Geoffroy, CEO; Brian Grass, CFO)
Q: How do you plan for potential tariffs when their specifics are uncertain?
A: We focus on diversification outside of China, ensuring any changes make sense even without tariffs. This strategy helps mitigate risks and aligns with our broader goal of reducing concentration in any single region. (Noel Geoffroy, CEO; Brian Grass, CFO)
Q: What are the key drivers for the fourth quarter's top-line performance, and what could influence the range of outcomes?
A: Continued strength in Home & Outdoor is expected, with growth in brands like Hydro Flask and OXO. However, the low global illness season impacts Wellness. The variability in consumer and retailer performance also contributes to the wide range. (Noel Geoffroy, CEO; Brian Grass, CFO)
Q: Are the long-term growth targets from the Investor Day still achievable, and what should we expect for fiscal '26?
A: The long-term targets remain unchanged. We are in the budgeting process and will provide more details in April. Home & Outdoor and International are progressing well, while Wellness and Beauty require more work. (Noel Geoffroy, CEO; Brian Grass, CFO)
Q: How are the new distribution gains for OXO and Hydro Flask performing in terms of velocity?
A: OXO's expansion at Walmart has led to double-digit household penetration growth and increased market share. Hydro Flask's distribution at Target and Costco is still early, but initial results at Costco are promising. (Noel Geoffroy, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
