Why Hydro Flask Maker Helen Of Troy's Shares Are Falling Today

Helen Of Troy Limited HELE reported a second-quarter FY24 sales decline of 5.7% year-on-year to $491.56 million, beating the analyst consensus estimate of $484.80 million.

The decrease in sales was primarily driven by a decrease from Organic business of $31.2 million, or 6.0%, due to lower sales of heaters, fans, and humidification products in Beauty & Wellness primarily driven by softer consumer demand, SKU rationalization efforts, and reduced orders from retail customers as they rebalance trade inventory in line with softer consumer demand in certain categories.

Total net sales revenue for the Home & Outdoor segment fell 0.2% Y/Y, and Beauty & Wellness decreased 10.4%.

Adjusted EPS of $1.74 beat the consensus estimate of $1.64.

Gross profit margin increased 420 basis points to 46.7%. The operating margin expanded 50 basis points to 9.5%, and operating income for the quarter slipped 0.2% to $46.8 million.

The company held $24.2 million in cash and equivalents as of August 31, 2023. Operating cash flow for the quarter was $36.7 million, with a free cash flow of $28 million.

Inventory was $435.7 million versus $643.2 million in Q2 FY23. Adjusted EBITDA fell 9% Y/Y to $71.7 million.

The company now estimates lower total one-time pre-tax restructuring charges of approximately $60 million to $65 million for Project Pegasus compared to the prior view of $85 million to $95 million. 

HELE announced today an agreement with Brian L. Grass to remain Chief Financial Officer (CFO), effective as of September 23, 2023. Grass has been serving as interim CFO since April 28, 2023. Grass previously served as the company's CFO from 2014 to 2022 and as Assistant CFO from 2006 to 2014.

Outlook: Helen Of Troy continues to expect FY24 revenue of $1.965 billion - $2.015 billion against the consensus of $2 billion.

The company's sales outlook, which implies a decline of 5.2% to 2.8%, reflects what it believes will be a continued slower economy and uncertainty in spending patterns, especially for some discretionary categories. 

The company continues to see FY24 adjusted EPS of $8.50 - $9.00 versus the consensus of $8.91. The forecast implies an adjusted EPS decline of 10.1% to 4.8%.

In terms of the quarterly cadence of sales, the company now expects the majority of its net sales growth to be concentrated in Q4 of fiscal 2024 and expects a decline in net sales of approximately 4% to 2% in Q3 of fiscal 2024 reflecting the expectation of more cautious retail ordering patterns in the short term. The company now expects adjusted EPS to be roughly flat in the third quarter.

Price Action: HELE shares are trading lower by 6.952% at $105.74 in premarket on the last check Wednesday.