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Helen of Troy (HELE) Benefits From Solid Brands, Hurt by Costs

Helen of Troy Limited HELE is dedicated to prioritizing its Leadership Brands, emphasizing innovation and optimizing distribution channels. Initiatives like Project Pegasus are geared toward enhancing efficiency and driving cost reductions. However, the company faces ongoing hurdles such as economic volatility, inflationary pressures and shifts in consumer spending habits.

Let’s delve deeper.

What’s Working in Helen of Troy’s Favor?

The Zacks Rank #3 (Hold) company’s emphasis on its Leadership Brand portfolio has proven advantageous. Brands like OXO, Hydro Flask, Vicks, Braun, Honeywell, PUR, Hot Tools, Drybar and Osprey within this portfolio are strategically positioned to boost market share. In fourth-quarter fiscal 2024, sales from leadership brands saw a marginal 1% increase to $418.9 million, driven by notable brands such as OXO, Hydro Flask, Osprey, Drybar and Braun. Continued investments in these top-performing brands are expected to yield sustained results.

In October 2023, the company introduced ‘Elevate for Growth,’ a six-year strategic plan representing a significant shift in strategy. This transformative approach prioritizes innovative portfolio management, incremental investment in brands and capabilities and exploration of new distribution channels. The aim is to ensure that HELE meets its objectives in the fiscal 2025 and beyond. Management is actively refining brand equity to better target consumers and refine brand positioning. Expanding the company's international footprint is a crucial initiative.

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Helen of Troy is actively developing a global restructuring plan known as Project Pegasus. The plan seeks to bolster operating margins through initiatives aimed at enhancing efficiency and reducing costs. Project Pegasus encompasses strategies to optimize the company's brand portfolio, streamline organizational structures, expand cost-saving projects and enhance supply chain efficiency. By optimizing indirect spending and improving cash flow and working capital, the project aims to drive sustainable growth.

Hurdles on the Way

Helen of Troy is experiencing a slowdown in its Beauty & Wellness division, impacting its revenue. This trend persisted in the fourth quarter of fiscal 2024, with segmental net sales decreasing by 2.5% to $265.9 million, primarily due to a 2.8% decline in organic business. The decrease was attributed to weak sales of air purifiers, fans, and heaters resulting from SKU rationalization and subdued consumer demand. Additionally, there was a decline in humidification sales, reflecting a lower occurrence of cough, cold, and flu illnesses compared to the previous year.

The Future Looks Challenging

HELE is grappling with declines due to persistent consumer spending pressures and uncertainties in discretionary sectors. Persistent inflation, rising interest rates and reduced household savings are prompting cautious spending behaviors. Concerns also arise from lowered growth forecasts from certain retailers.

In the fiscal 2025, the company expects consolidated net sales to range from $1.965 billion to $2.025 billion, indicating a decline of 2% to growth of 1%. This considers ongoing inflation and restrained consumer spending on non-essential items. Adjusted earnings per share (EPS) are forecast between $8.70 and $9.20, possibly declining by up to 2.4% or increasing by up to 3.3%. Adjusted EBITDA for the fiscal 2025 is projected to range from $324 million to $331 million, suggesting a decline of 3.6% to 1.6%.

In first-quarter fiscal 2025, the company anticipates a sales decline of 7% to 5%. The first half of the year is expected to witness a slight decline in adjusted EPS, with a drop of 15% to 20% in the fiscal first quarter, nearly balanced by growth in the second quarter.

HELE’s shares have moved down 16.6% in the past three months compared with the industry’s decline of 18.5%.

Solid Staple Bets

Vital Farms Inc. VITL offers a range of produced pasture-raised foods. It currently sports a Zacks Rank #1 (Strong Buy). VITL has a trailing four-quarter average earnings surprise of 102.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 22.5% and 59.3%, respectively, from the year-ago reported numbers.

Utz Brands Inc. UTZ manufactures a diverse portfolio of salty snacks, currently carrying a Zacks Rank #2 (Buy). UTZ has a trailing four-quarter earnings surprise of 2% on average.

The Zacks Consensus Estimate for Utz Brands’ current financial-year earnings suggests growth of 26.3% from the year-ago reported numbers.

Conagra Brands CAG, a consumer packaged goods food company, currently carries a Zacks Rank #2. The Zacks Consensus Estimate for CAG’s current fiscal-year earnings indicates a decline of 5.1% from the year-ago reported figure.

Conagra Brands has a trailing four-quarter earnings surprise of 6.8%, on average.

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Conagra Brands (CAG) : Free Stock Analysis Report

Helen of Troy Limited (HELE) : Free Stock Analysis Report

Vital Farms, Inc. (VITL) : Free Stock Analysis Report

Utz Brands, Inc. (UTZ) : Free Stock Analysis Report

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