Story Stocks^®

Helen of Troy (HELE +19%) had the Midas touch in Q2 (Aug), reversing its considerable earnings miss from Q1 (May) and returning to delivering revenue upside as early benefits from its "Reset and Revitalize" restructuring plan deployed last quarter began to roll in. HELE, the parent company of household and personal care brands like Oxo and Vicks, has also been amid an additional restructuring plan dubbed "Project Pegasus," which remains on track to deliver $26-30 mln in savings this year and $75-80 mln total by FY27 (Feb). HELE also announced today that following active discussions of whether to divest certain aspects of its business, it has paused the process as the offers it received did not meet the perceived value of HELE or its potential.

• HELE operates two segments, Home & Outdoor and Beauty & Wellness, each comprising around half its total revenue. While Home & Outdoor sales ticked about 1% higher yr/yr, Beauty & Wellness contracted by nearly 8%, bringing total revenue down by 3.5% yr/yr to $474.2 mln. However, this was still well above analyst forecasts and represented a roughly 14% jump sequentially.
  • In Home & Outdoor, HELE's international performance took center stage, a recurring trend over the past few quarters. Oxo and Hydro Flask were two highlights. Oxo continues to benefit from its expansion into over 3,000 Walmart (WMT) locations and robust demand in the EMEA region. Hydro Flask has recently undergone a brand revitalization, launching a new travel bottle and new options at Costco (COST) during the quarter.
  • The beauty component of Beauty & Wellness remained below HELE's expectations, enduring softening trends like others in the industry, including Ulta Beauty (ULTA) and L'Oreal (LRLCY). However, the wellness side exceeded HELE's expectations, supported by Braun and Vicks brands, as illness rates in the U.S. started to pick up through July and most of August.
• Adjusted operating margins continued to compress, down 270 bps yr/yr to 15.0%. Higher expenses from previous quarters seeped into Q2, including promotional allowance programs and marketing campaigns, taking a piece off HELE's margins. Also, fallout effects from automation start-up issues at the company's Tennessee plant in Q1 continued to clip margins. However, this disruption has since been largely resolved. Additionally, HELE's margins were still better than analysts feared, resulting in a double-digit earnings beat in Q2.

One hang-up from the quarter stems from HELE's FY25 guidance. The company left its EPS and revenue forecasts of $7.00-7.50 and $1.89-1.94 bln unchanged despite registering healthy top and bottom-line upside in Q2. Management mentioned that ongoing headwinds, including increased promotional activity and softer retail replenishment, keep it on its toes. HELE added that while declining interest rates should provide relief, it may take time to cycle through to most of its consumers.

However, investors are shrugging off this minor blemish. Instead, they are cheering the swift snap back after a disastrous Q1 report in July. While the road ahead remains bumpy, HELE's portfolio of highly recognizable brands should help prevent a broader comeback from being a Herculean task.