Helen of Troy's Q4 Earnings & Revs Miss Ests. - Analyst Blog

Helen of Troy Limited HELE recently reported its fourth quarter and fiscal 2014 results. Adjusted earnings of 84 cents lagged the Zacks Consensus Estimate of 88 cents by 4.5% and the prior-year quarter by 14.3%. Weaker-than-expected revenues, currency headwinds and margin contraction led to the decline in earnings.

Revenues and Margins

Helen of Troy, a designer and marketer of consumer products, reported sluggish revenues in the fourth quarter of fiscal 2014. Revenues of $312.5 million declined 4.1% from the year-ago quarter and also missed the Zacks Consensus Estimate by 0.5% due to weak performance by all the three segments in the quarter.

Gross margin shrank 20 basis points (bps) to 40.2% due to product cost increase, unfavorable product mix, higher promotional programs and unfavorable foreign exchange translation. Adjusted operating income margin declined 100 bps to 11.2% due to higher selling, general and administrative expense ratio during the quarter.

Segment Details

Housewares: Sales in the Housewares category declined 0.6% to $66.0 million compared with the year-ago period, reflecting soft reorder volume due to a decline in retail traffic. However, the company expects a strong demand for new product introductions in fiscal 2015.

Personal Care: Sales in this category slipped 8.2% year over year to $102.8 million in the quarter due to a challenging retail environment primarily in the hair care solutions product category where competition resulted in pricing and promotional discounts and loss of distribution. Foreign currency negatively impacted segment sales by approximately $1.1 million.

Healthcare/Home Environment:This category plummeted 2.7% year over year to $143.7 million in the reported quarter due to a severe cold and flu season, which came early and persisted for a long time.

Fiscal 2014 Results

In fiscal 2014, Helen of Troy reported adjusted earnings of $3.54 per share, which lagged the Zacks Consensus Estimate of $3.56 by 0.6% and the prior-year earnings by 2.2%. Earnings declined due to currency fluctuations and increase in costs. Earnings were within management's guided range of $3.50 to $3.60 per share. Revenues of $1.317 billion, however, increased 2.2% from the prior-year. It was in line with the Zacks Consensus Estimate and towards the higher end of the company's guided range of $1.29 billion to $1.32 billion.

Other Financial Details

Cash and cash equivalents at the end of the fourth quarter of fiscal 2014 stood at $70 million compared with $28.8 million in the third quarter. Total debt was $192.6 million at the end of fourth quarter as against $194.0 million in the prior quarter.

Fiscal 2015 Outlook

For fiscal 2015, the company expects earnings in the range of $4.30 to $4.40 per share and sales in the range of $1.325 billion to $1.375 billion. The Zacks Consensus Estimate is pegged at $4.02, which is well below management's guidance range. It also expects capital expenditures in the range of $8 million to $10 million for fiscal 2015.

Helen of Troy expects to deliver sustainable organic growth by making investments in talent and resources, solid innovation program, brand building advertising and increasing its market positions. The company is also focused on driving productivity and paying dividends in the future years. However, the company continues to expect higher product costs and a difficult retail environment in the coming quarters.

Helen of Troy currently holds a Zacks Rank #1 (Strong Buy).

Other Stocks to Consider

Some other players in the consumer staples sector worth considering include B&G Foods Inc. BGS, McCormick & Co, Inc. MKC and Treehouse Foods, Inc. THS. While B&G Foods holds a Zacks Rank #1, McCormick and Treehouse hold a Zacks Rank #2 (Buy).