Helen of Troy (HELE 117.10, -15.88, -11.94%) opened lower by 7% today,
as the company's mixed guidance overshadows better than expected earnings
delivered before the open this morning.
The owner of a portfolio of consumer staples brands, including OXO, Braun, Honeywell Home, PUR, Vicks, and Revlon, among others, reported above-consensus third quarter earnings of $2.40 per share on a 2.4% year/year increase in revenue to $431.1 mln, which was also ahead of expectations.
The company lowered the top end of its revenue guidance for fiscal 2019 by $10 mln due to an expected unfavorable impact from pricing actions that have not been resolved with a key customer and slowing growth in eCommerce sales in China. The company expects that revenue for fiscal 2019 will be between $1.535 bln and $1.55 bln, which is just shy of market expectations. The lowered revenue guidance did not stop the company from increasing its earnings guidance, due in part to a lowered share count resulting from buybacks. The company expects fiscal 2019 earnings between $7.70 and $7.95, up from previous guidance for earnings between $7.65 and $7.90.
Returning to third quarter results, gross margin weakened by ten basis points to 42.2% due to less favorable product mix and the impact of tariffs on imports from China. Operating income decreased to $70.6 mln from $77.6 mln one year ago. Contributing to the decrease were higher advertising expenses, higher trade tariffs, higher freight expenses, and higher share-based compensation expenses.
Looking at the segment breakdown, Houseware net sales grew 11.4% to $142.94 mln. The increase was fueled by growth in online sales and in sales at physical stores but was partially offset by lower club channel sales. Adjusted segment operating margin weakened to 22.8% from 24.7%.
Health & Home net sales decreased 0.7% to $187.86 mln, mostly due to unfavorable currency translations, while core sales declined 0.2%. The decline was driven by lower online sales and weaker growth in China. Adjusted segment operating margin weakened to 13.0% from 17.0%.
Beauty net sales fell 3.0% to $100.28 mln due to lower sales at stores, a decline in the personal care group, and the discontinuation of certain brands and products. Adjusted segment operating margin improved to 13.5% from 13.3%.
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