Beauty & Wellness Woes: Helen Of Troy's Stock Dives After Disappointing Q1 And Gloomy Forecast

Helen Of Troy Ltd HELE shares are plunging after the company reported worse-than-expected first-quarter FY25 earnings and lowered the outlook.

The company reported a first-quarter sales decline of 12.2% year-on-year to $416.85 million, missing the analyst consensus estimate of $445.85 million.

The decrease in sales was primarily driven by a decline in sales of hair appliances, prestige hair care products and humidifiers in Beauty & Wellness, and a decline in Home & Outdoor primarily due to lower replenishment orders from retail customers and the impact of the shipping disruption at the company’s Tennessee distribution facility due to automation startup issues affecting some of the segment’s small retail customer and direct-to-consumer orders.

Total net sales revenue for the Home & Outdoor segment declined 8.6% and Beauty & Wellness plunged 15.2%. Adjusted EPS of $0.99 missed the analyst consensus estimate of $1.59. 

Gross profit margin increased 330 basis points to 48.7%. The operating margin contracted 120 basis points to 7.4%, and operating income for the quarter decreased 24% to $30.8 million.

Non-GAAP adjusted EBITDA decreased 27.6% to $52.4 million, with the margin down to 12.6% compared to 15.2%.

The company held $16.1 million in cash and equivalents as of May-end. Net cash provided by operating activities for the quarter was $25.3 million, with a free cash flow of $16.2 million.

“We are disappointed with the start to our fiscal year. We battled an unusual number of internal and external challenges in the quarter, which resulted in net sales and adjusted EPS below our outlook,” said CEO Noel M. Geoffroy.

“Many of these challenges became more pronounced toward the end of the first quarter and some continue to evolve.”

Inventory was $444.7 million versus $433.9 million in the first quarter of 2024. Helen Of Troy reaffirmed a one-time pre-tax restructuring charges of approximately $50 million – $55 million over the duration of Project Pegasus, expected to be completed during fiscal 2025.

Outlook: Helen Of Troy lowered the FY25 revenue outlook from $1.965 billion – $2.025 billion to $1.885 billion – $1.935 billion against an estimate of $1.99 billion.

HELE slashed its FY25 adjusted EPS outlook from $8.70 – $9.20 to $7.00 – $7.50 versus an estimate of $8.93.

It lowered FY25 adjusted EBITDA guidance from $324 million-$331 million to $287 million-$297 million.

Price Action: HELE shares are trading lower by 30.3% at $62.08 at last check Tuesday.

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