Helen of Troy Exclusive (Helle – Free Report) appears to be plagued by escalating cost concerns and a soft beauty segment. These negative effects are showing up in the company’s third-quarter fiscal 2023 results, which saw year-over-year declines in sales and earnings.
Management has raised the floors of its revenue and adjusted earnings per share (EPS) guidance for fiscal 2023, implying year-over-year declines. Zacks Consensus estimates for EPS for fiscal 2023 have fallen from $9.59 to $9.21 over the past 30 days. Additionally, the share price of this Zachs-ranked 5th (strong sell) company has fallen 11.7% over the past six months, against his 0.8% growth in the industry.
Let’s take a closer look at the third quarter and the aspects that act as downsides for Helen of Troy.
Soft Q3 & View
A challenging operating environment, including inflation, rising interest rates and declining operating leverage, was a downside to the third quarter of fiscal 2023. Also, consumption remained low in certain categories.
Adjusted earnings of $2.75 per share decreased 26.1% year-over-year. The metric was hit by lower adjusted operating income, higher interest expense and higher effective income tax rates.
Consolidated net sales were $558.6 million, down 10.6% from the third quarter of fiscal 2022. This downside is a result of his 18.5% decline in organic business.
The organic business was hit by lower sales across all segments due to lower consumer demand, lower orders from retail customers and changes in spending patterns. Declining non-core net sales following the sale of the personal care business were also hurdles.
Management now expects consolidated net sales to be $2.025 billion to $2.05 billion, representing a decline of 8.9% to 7.8% and a decline of 7.5% to 6.4% in core businesses To do. The company currently expects adjusted EPS to be in the range of $9.20 to $9.40. This represents a 25.6-23.9% decline in consolidated adjusted EPS and a 24.5-22.8% decline in core adjusted EPS.
main deterrent
Cost inflation has been a headwind for some time. In the third quarter, HELE’s consolidated gross margin was hit by an unfavorable product mix in the Home & Outdoor segment and the net impact of inflation charges and resulting higher customer prices. Consolidated operating margin decreased by 0.6 points to 13.8%. This was due to factors such as unfavorable operating leverage, higher outbound transportation costs, and higher salaries and wages costs.
Management expects adjusted operating margin to decline 100 to 120 basis points in fiscal 2023. This was due to unfavorable operating leverage, the net impact of pricing, unfavorable product mix in health and wellness and the dilutive impact of the Osprey acquisition in Home and Outdoors. The company also expects to see some cost-related headwinds in fiscal 2024.
Additionally, Helen of Troy has seen softness in the beauty segment. Beauty segment net sales fell 14.7% to $149.2 million in the third quarter. On the downside, organic business dropped to 20.7% of his. This was mainly due to the overall decline in the beauty appliance category.
Beauty core net sales are expected to decline 18.5% to 17.5% in fiscal 2023. The strength of the leadership brand and focus on Project Pegasus bodes well for Helen of Troy, but the above barriers cannot be ignored, at least in the short term.
Major Stocks of Major Consumers
Some better-ranked stocks are interparfum (IPAR – free report), Elf Beauty Co., Ltd. (fairy – free report) and campbell soup (CPB – free report).
Inter Parfums, which manufactures, sells and distributes a wide range of fragrances and fragrance-related products, currently boasts the #1 Zacks Rank (strong buy). IPAR underperformed Q4 guidance by 27.8% on average.you can see See the full list of Zacks #1 Rank stocks for today here.
Inter Parfums’ Zacks Consensus forecasts for 2023 sales and profits suggest growth of 5.8% and 5.3%, respectively, from the corresponding previous year’s reported figures.
Campbell Soup, which manufactures and sells food and beverage products, currently holds Zacks Rank 2 (Buy). CPB expects earnings to average 8.7% in the fourth quarter.
Zacks Consensus estimates for Campbell’s Soup’s sales and earnings for the current fiscal year suggest growth of 8.3% and 4.6%, respectively, from the corresponding previous year’s reported figures.
elf Beauty, which offers cosmetics and skin care products, currently boasts the #1 Zacks Rank. ELF underperformed Q4 guidance by 92.8% on average.
Elf Beauty’s Sachs Consensus forecasts for sales and EPS for the current fiscal year suggest increases of 24.8% and 33.3%, respectively, from the previous year’s reported numbers.
