Helen of Troy Lowers FY View on Weak Retail Conditions

Consumer product retailer Helen of Troy Limited HELE lowered its fiscal 2015 outlook ahead of the Barclays Back-To-School conference. Weak retail environment and sluggishttph growth in the Personal care segment prompted the company to lower its outlook.

Helen of Troy now expects fiscal 2015 sales in the range of $1.275 to $1.30 billion down from $1.325 to $1.375 billion expected previously during the first quarter fiscal 2015 conference call. Earnings per share are now expected in the range of $4.55 to $4.65 lower than $5.15 to $5.25 as expected earlier. The guidance excludes the impact of Healthy Directions acquisition related expenses and non cash asset impairment charges.

On Jul 1, 2014, Helen of Troy acquired the U.S.-based retailer and health publisher Healthy Directions, LLC and its subsidiaries for a cash transaction of $195 million. This takeover will facilitate Helen of Troy's entry into the vitamins, minerals and supplements (VMS) category.The Healthy Directions business is expected to contribute approximately $100 million to $105 million in sales and 12 cents to 16 cents in earnings for the fiscal year.

Helen of Troy also issued guidance for second-quarter fiscal 2015. The company expects net sales in the range of $291 to $294 million and earnings per share in the range of 79 to 82 cents. Healthy Directions is expected to contribute approximately $22 to $24 million to second-quarter sales and 6 to 8 cents to earnings.

The Zacks Rank #4 (Sell) company has been witnessing soft earnings and sales for the past few quarters due to tough retail conditions, slower store traffic and mass market retail sales in the large retail outlets. The Personal Care segment has experienced soft results and its decline has accelerated recently particularly in the commoditized part of the business.

In the recently reported first quarter fiscal 2015 too, the company posted disappointing revenues due to soft sales in the Personal Care segment. Earnings of 83 cents also lagged the Zacks Consensus Estimate by 12.6% due to lower-than-expected revenues. (Read: Helen of Troy Misses Q1 Earnings & Revs Ests)

Management has taken several strategic initiatives to improve sales in the Personal segment. However, the initiatives are expected to take some time to yield results.

Some better-ranked stocks to consider in the apparel industry include Crocs, Inc. CROX, Perry Ellis International Inc. PERY and Michael Kors Holding Limited KORS. All these stocks carry a Zacks Rank #2 (Buy).