Helen of Troy Limited Reports Third Quarter Fiscal 2022 Results
Consolidated Net Sales Decline of 2.0%; Growth of 0.4% from Core Business
GAAP Diluted Earnings Per Share (“EPS”) of $3.10
Core Adjusted Diluted EPS Growth of 3.0% to $3.72
Adjusted Diluted EPS Decline of 1.1% to $3.72
Raises Fiscal 2022 Diluted EPS and Net Sales Outlook:
Consolidated Diluted EPS to $8.25-$8.59; Core Diluted EPS to $8.08-$8.42
Consolidated Adjusted Diluted EPS to $11.73-$11.93; Core Adjusted Diluted EPS to $11.55-$11.75
Consolidated Net Sales to $2.095-$2.115 Billion; Core Net Sales to $2.060-$2.080 Billion
EL PASO, Texas–(BUSINESS WIRE)–Helen of Troy Limited (NASDAQ: HELE), designer, developer and worldwide marketer of consumer brand-name housewares, health and home, and beauty products, today reported results for the three-month period ended November 30, 2021.
Executive Summary – Third Quarter of Fiscal 2022 Compared to Fiscal 2021 and Fiscal 2020
- Consolidated net sales revenue was $624.9 million, a decrease of 2.0% from fiscal 2021 and an increase of 31.6% from fiscal 2020
- Core business net sales increase of 0.4% from fiscal 2021 and an increase of 37.7% from fiscal 2020
- Leadership Brand net sales decrease of 0.2% from fiscal 2021 and an increase of 33.6% from fiscal 2020
- Online channel net sales decrease of 7.4% from fiscal 2021 and an increase of 23.7% from fiscal 2020
- GAAP consolidated operating income of $90.0 million, or 14.4% of net sales, compared to $100.7 million, or 15.8% of net sales, for the same period last year
- Non-GAAP consolidated adjusted operating income decrease of 5.2% to $106.1 million, or 17.0% of net sales, compared to $111.9 million, or 17.6% of net sales, for the same period last year
- GAAP diluted EPS of $3.10, which includes EPA compliance costs of $0.20 per share, compared to $3.34 for the same period last year and $2.71 for fiscal 2020
- Non-GAAP Core adjusted diluted EPS of $3.72, an increase of 3.0% from fiscal 2021 and an increase of 24.8% from fiscal 2020
- Non-GAAP adjusted diluted EPS of $3.72, a decrease of 1.1% from fiscal 2021 and an increase of 19.2% from fiscal 2020
- In July 2021, the Company disclosed that it was in discussions with the U.S. Environmental Protection Agency (the “EPA”) regarding the compliance of packaging claims on certain of its products in the air and water filtration categories and a limited subset of humidifier products within the Health & Home segment that are sold in the United States. As previously disclosed in August 2021, the Company largely resolved the EPA matter with modest changes to product labeling and began executing repackaging plans for the bulk of the affected products. As of the end of the third fiscal quarter, the Company has returned to more normalized levels of shipping activity for the vast majority of affected products.
Julien R. Mininberg, Chief Executive Officer, stated: “We are pleased with our results for the third quarter, delivering Core net sales growth and Core adjusted diluted EPS growth on top of 37.1% and 21.1%, respectively, in the prior year period. All three business segments exceeded our expectations. These results are the primary driver allowing us to raise our top and bottom-line outlook for the full fiscal year. Strong consumer and retailer demand drove sales for Housewares and Beauty, with both segments growing double digits on a Core basis over major double-digit sales increases in the third quarter of last fiscal year. Health & Home declined in the quarter, but performed above our expectations due to stronger than expected demand and faster-than-expected progress reworking certain products impacted by the EPA matter. Despite the impact of inflation and the EPA matter, our Core adjusted diluted EPS grew 3.0%.”
Mr. Mininberg continued: “We are also very pleased to be able to raise our outlook for the fiscal year, reflecting the strength of our third quarter and the positive trends we see in our business during the fourth quarter. For the full fiscal year, we now expect to grow Core net sales 2% to 3% over last year’s 25.1% increase, grow Core adjusted diluted EPS 4.7% to 6.5% over last year’s 26.5% increase, and expand margins. I am proud of the hard work across our organization that puts us in a position to deliver fiscal year 2022 in line with our Phase II average annual targets on top of an elevated base despite significant headwinds from widespread inflation and the EPA matter.
As we have demonstrated this fiscal year and in the past, Helen of Troy has a track record of delivering results in the face of obstacles. Looking ahead, we plan to use the proven combination of our inflation playbook, investing in our Leadership Brands, creating efficiencies through our global shared services platform, and harnessing the excellence of our organization and culture to address obstacles such as continued inflationary cost pressures expected next fiscal year. We also expect value creation from the recently-closed Osprey acquisition, which is expected to be immediately accretive to nearly all our consolidated financial measures. We believe our balance sheet and cash flow can be put to work on further capital allocation opportunities that could help create additional value in both the short and long-term.”
|
| Three Months Ended November 30, | ||||||||||||||||
| (in thousands) (unaudited) | Housewares |
| Health & Home |
| Beauty |
| Total | ||||||||||
| Fiscal 2021 sales revenue, net | $ | 222,400 |
|
| $ | 250,158 |
|
|
| $ | 165,179 |
|
| $ | 637,737 |
|
|
| Organic business (1) | 23,601 |
|
| (46,595 | ) |
|
| 8,943 |
|
| (14,051 | ) |
| ||||
| Impact of foreign currency | 134 |
|
| 337 |
|
|
| 727 |
|
| 1,198 |
|
| ||||
| Change in sales revenue, net | 23,735 |
|
| (46,258 | ) |
|
| 9,670 |
|
| (12,853 | ) |
| ||||
| Fiscal 2022 sales revenue, net | $ | 246,135 |
|
| $ | 203,900 |
|
|
| $ | 174,849 |
|
| $ | 624,884 |
|
|
|
|
|
|
|
|
|
|
| ||||||||||
| Total net sales revenue growth (decline) | 10.7 | % |
| (18.5 | ) | % |
| 5.9 | % |
| (2.0 | ) | % | ||||
| Organic business | 10.6 | % |
| (18.6 | ) | % |
| 5.4 | % |
| (2.2 | ) | % | ||||
| Impact of foreign currency | 0.1 | % |
| 0.1 |
| % |
| 0.4 | % |
| 0.2 |
| % | ||||
|
|
|
|
|
|
|
|
| ||||||||||
| Operating margin (GAAP) |
|
|
|
|
|
|
| ||||||||||
| Fiscal 2022 | 17.6 | % |
| 6.7 |
| % |
| 19.0 | % |
| 14.4 |
| % | ||||
| Fiscal 2021 | 16.9 | % |
| 12.2 |
| % |
| 19.7 | % |
| 15.8 |
| % | ||||
| Adjusted operating margin (non-GAAP) |
|
|
|
|
|
|
| ||||||||||
| Fiscal 2022 | 19.4 | % |
| 10.7 |
| % |
| 20.9 | % |
| 17.0 |
| % | ||||
| Fiscal 2021 | 18.4 | % |
| 14.1 |
| % |
| 21.7 | % |
| 17.6 |
| % | ||||
|
| Three Months Ended November 30, |
| % Change | ||||||||||||||
| (in thousands, except per share data) (unaudited) | 2021 |
| 2020 |
| 2019 |
| FY22/FY21 |
| FY22/FY20 | ||||||||
| Consolidated net sales revenue | $ | 624,884 |
|
| $ | 637,737 |
|
| $ | 474,737 |
|
| (2.0) | % |
| 31.6 | % |
| Core business net sales revenue (2) | 620,509 |
|
| 617,766 |
|
| 450,742 |
|
| 0.4 | % |
| 37.7 | % | |||
| Leadership Brand net sales revenue (3) | 506,982 |
|
| 508,210 |
|
| 379,604 |
|
| (0.2) | % |
| 33.6 | % | |||
| Online channel net sales revenue (4) | 141,233 |
|
| 152,562 |
|
| 114,193 |
|
| (7.4) | % |
| 23.7 | % | |||
|
|
|
|
|
|
|
|
|
|
| ||||||||
| Consolidated Diluted EPS | $ | 3.10 |
|
| $ | 3.34 |
|
| $ | 2.71 |
|
| (7.2) | % |
| 14.4 | % |
| Consolidated Adjusted Diluted EPS (non-GAAP) (5) | 3.72 |
|
| 3.76 |
|
| 3.12 |
|
| (1.1) | % |
| 19.2 | % | |||
| Core Adjusted Diluted EPS (non-GAAP) (2) (5) | 3.72 |
|
| 3.61 |
|
| 2.98 |
|
| 3.0 | % |
| 24.8 | % | |||
|
| Nine Months Ended November 30, |
| % Change | |||||||||||||||
| (in thousands, except per share data) (unaudited) | 2021 |
| 2020 |
| 2019 |
| FY22/FY21 |
| FY22/FY20 | |||||||||
| Consolidated net sales revenue | $ | 1,641,335 |
|
| $ | 1,589,424 |
|
| $ | 1,265,067 |
|
| 3.3 |
| % |
| 29.7 | % |
| Core business net sales revenue (2) | 1,611,098 |
|
| 1,526,995 |
|
| 1,193,454 |
|
| 5.5 |
| % |
| 35.0 | % | |||
| Leadership Brand net sales revenue (3) | 1,329,858 |
|
| 1,288,614 |
|
| 1,012,346 |
|
| 3.2 |
| % |
| 31.4 | % | |||
| Online channel net sales revenue (4) | 369,007 |
|
| 398,175 |
|
| 299,901 |
|
| (7.3 | ) | % |
| 23.0 | % | |||
|
|
|
|
|
|
|
|
|
|
| |||||||||
| Consolidated Diluted EPS | $ | 7.52 |
|
| $ | 9.14 |
|
| $ | 6.15 |
|
| (17.7 | ) | % |
| 22.3 | % |
| Consolidated Adjusted Diluted EPS (non-GAAP) (5) | 9.85 |
|
| 10.05 |
|
| 7.42 |
|
| (2.0 | ) | % |
| 32.7 | % | |||
| Core Adjusted Diluted EPS (non-GAAP) (2) (5) | 9.67 |
|
| 9.58 |
|
| 6.98 |
|
| 0.9 |
| % |
| 38.5 | % | |||
Consistent with its strategy of focusing resources on its Leadership Brands, during the fourth quarter of fiscal 2020, the Company committed to a plan to divest certain assets within its Beauty segment’s mass channel personal care business (“Personal Care”). During the second quarter of fiscal 2022, the Company completed the sale of its Personal Care business, not including the Latin America and Caribbean regions, to HRB Brands LLC, for $44.7 million in cash and recognized a gain on the sale of $0.5 million in SG&A. The Company is continuing to negotiate the sale of the Latin America and Caribbean Personal Care businesses to HRB Brands LLC, which it expects to close no later than the end of fiscal 2022. Accordingly, the Company has continued to classify the identified net assets of the Latin America and Caribbean Personal Care businesses as held for sale. The Company defines Core business as strategic business that it expects to be an ongoing part of its operations, and Non-Core business as business or net assets (including net assets held for sale) that it expects to divest within a year of its designation as Non-Core. Sales from the Latin America and Caribbean Personal Care businesses continue to be included in Non-Core business for all periods presented.
|
| Three Months Ended November 30, | |||||||||||||||||
| (in thousands) (unaudited) | Housewares |
| Health & Home |
| Beauty |
| Total | |||||||||||
| Fiscal 2021 sales revenue, net | $ | 222,400 |
|
| $ | 250,158 |
|
|
| $ | 165,179 |
|
|
| $ | 637,737 |
|
|
| Core business (2) | 23,735 |
|
| (46,258 | ) |
|
| 25,266 |
|
|
| 2,743 |
|
| ||||
| Non-Core business (Personal Care) (2) | — |
|
| — |
|
|
| (15,596 | ) |
|
| (15,596 | ) |
| ||||
| Change in sales revenue, net | 23,735 |
|
| (46,258 | ) |
|
| 9,670 |
|
|
| (12,853 | ) |
| ||||
| Fiscal 2022 sales revenue, net | $ | 246,135 |
|
| $ | 203,900 |
|
|
| $ | 174,849 |
|
|
| $ | 624,884 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
| Total net sales revenue growth (decline) | 10.7 | % |
| (18.5 | ) | % |
| 5.9 |
| % |
| (2.0 | ) | % | ||||
| Core business | 10.7 | % |
| (18.5 | ) | % |
| 15.3 |
| % |
| 0.4 |
| % | ||||
| Non-Core business (Personal Care) | — | % |
| — |
| % |
| (9.4 | ) | % |
| (2.4 | ) | % | ||||
Consolidated Results – Third Quarter Fiscal 2022 Compared to Third Quarter Fiscal 2021
- Consolidated net sales revenue decreased $12.9 million, or 2.0%, to $624.9 million compared to $637.7 million. The decline was driven by a decrease from Organic business of $14.1 million, or 2.2%, primarily due to a decrease in sales in the Health & Home segment as a result of the EPA packaging compliance matter and related stop shipment actions, stronger COVID-19 driven demand for healthcare and healthy living products, primarily in thermometry and air filtration, in the comparative prior year period, and a net sales revenue decline in Non-Core business primarily due to the sale of the North America Personal Care business during the second quarter of fiscal 2022. These factors were partially offset by higher brick and mortar and online channel sales in the Beauty and Housewares segments due primarily to strong consumer demand, earlier than typical customer orders as retailers accelerated orders into the third quarter to try to avoid supply chain disruptions during the holiday season, the impact of customer price increases related to rising freight and product costs, higher sales in the club and closeout channels, and the favorable comparative impact of COVID-19 reduced store traffic and a soft back to school season in the prior year period.
- Consolidated gross profit margin decreased 1.3 percentage points to 43.8%, compared to 45.1%. The decrease in consolidated gross profit margin was primarily due to the net unfavorable impact of higher inbound freight expense and related customer price increases, EPA compliance costs recognized in cost of goods sold in the Health & Home segment of $0.3 million, and a less favorable channel mix within the Housewares segment. These factors were partially offset by a more favorable product mix within the Housewares and Beauty segments and a favorable mix of more Housewares and Beauty sales within consolidated net sales revenue.
- Consolidated SG&A ratio increased 0.1 percentage points to 29.4%, compared to 29.3%. The increase in the consolidated SG&A ratio was primarily due to higher personnel expense, unfavorable operating leverage, higher distribution expense, EPA compliance costs of $4.6 million in the Health & Home segment, and higher acquisition-related expense in connection with the acquisition of Osprey Packs, Inc. (“Osprey”). These factors were partially offset by lower royalty expense, reduced annual incentive compensation expense, lower marketing expense, lower amortization expense, a decrease in bad debt expense, and the favorable leverage impact of customer price increases related to rising freight and product costs.
- Consolidated operating income was $90.0 million, or 14.4% of net sales revenue, compared to $100.7 million, or 15.8% of net sales revenue. The 1.4 percentage point decrease in consolidated operating margin was primarily due to the net unfavorable impact of higher inbound freight expense and related customer price increases, increased personnel expense, higher distribution expense, unfavorable operating leverage, EPA compliance costs of $4.9 million in the Health & Home segment, a less favorable channel mix within the Housewares segment, and higher acquisition-related expense in connection with the Osprey transaction. These factors were partially offset by a favorable product mix within the Housewares and Beauty segments and a favorable mix of more Housewares and Beauty sales within consolidated net sales revenue, lower royalty expense, reduced annual incentive compensation expense, lower marketing expense, lower amortization expense, and a decrease in bad debt expense.
- Income tax expense as a percentage of income before tax was 12.9% compared to 14.0% for the same period last year, primarily due to increases in liabilities related to uncertain tax positions in the prior year period, partially offset by shifts in the mix of income in the Company’s various tax jurisdictions.
- Net income was $75.7 million, compared to $84.2 million. Diluted EPS was $3.10 compared to $3.34. Diluted EPS decreased primarily due to lower operating income in the Health & Home segment and higher interest expense, partially offset by higher operating income in the Housewares and Beauty segments, a decrease in the effective income tax rate, and lower weighted average diluted shares outstanding.
- Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) decreased 4.5% to $111.8 million compared to $117.0 million.
On an adjusted basis for the third quarters of fiscal 2022 and 2021, excluding acquisition-related expenses, EPA compliance costs, restructuring charges, amortization of intangible assets, and non-cash share-based compensation, as applicable:
- Adjusted operating income decreased $5.8 million, or 5.2%, to $106.1 million, or 17.0% of net sales revenue, compared to $111.9 million, or 17.6% of net sales revenue. The 0.6 percentage point decrease in adjusted operating margin is primarily driven by the net unfavorable impact of higher inbound freight expense and related customer price increases, increased personnel expense, higher distribution expense, unfavorable operating leverage, and a less favorable channel mix within the Housewares segment. These factors were partially offset by a favorable product mix within the Housewares and Beauty segments and a favorable mix of more Housewares and Beauty sales within consolidated net sales revenue, lower royalty expense, reduced annual incentive compensation expense, lower marketing expense, and a decrease in bad debt expense.
- Adjusted income decreased $4.1 million, or 4.4%, to $90.6 million, compared to $94.8 million for the same period last year. Adjusted diluted EPS decreased 1.1% to $3.72 compared to $3.76. The decrease in adjusted diluted EPS was primarily due to lower adjusted operating income in the Health & Home segment and higher interest expense, partially offset by higher adjusted operating income in the Housewares and Beauty segments, a decrease in the effective income tax rate, and lower weighted average diluted shares outstanding.
Segment Results – Third Quarter Fiscal 2022 Compared to Third Quarter Fiscal 2021
Housewares net sales revenue increased $23.7 million, or 10.7%, to $246.1 million, compared to $222.4 million. Growth was driven by an increase from Organic business of $23.6 million, or 10.6%, primarily due to an increase in brick and mortar and online channel sales driven by strong consumer demand, earlier than typical customer orders as retailers accelerated orders into the third quarter to try to avoid supply chain disruptions during the holiday season, the impact of customer price increases related to rising freight and product costs, higher sales in the club and closeout channels, growth in international sales, and the favorable comparative impact of COVID-19 reduced store traffic and a soft back to school season in the prior year period. Operating income was $43.2 million, or 17.6% of segment net sales revenue, compared to $37.7 million, or 16.9% of segment net sales revenue. The 0.7 percentage point increase in segment operating margin was primarily due to favorable operating leverage, favorable product mix, and reduced annual incentive compensation expense. These factors were partially offset by the net unfavorable impact of higher inbound freight expense and related customer price increases, a less favorable channel mix, an increase in marketing expense, and higher acquisition-related expense in connection with the Osprey transaction. Adjusted operating income increased 16.7% to $47.7 million, or 19.4% of segment net sales revenue compared to $40.9 million, or 18.4% of segment net sales revenue.
Health & Home net sales revenue decreased $46.3 million, or 18.5%, to $203.9 million, compared to $250.2 million. The decline was driven by a decrease from Organic business of $46.6 million, or 18.6%, primarily due to a decrease in sales due to stronger COVID-19 driven demand for healthcare and healthy living products, primarily in thermometry and air filtration, in the comparative prior year period and a decrease in sales of air filtration products as a result of the EPA packaging compliance matter. These factors were partially offset by an increase in sales of humidification products and new product introductions. Operating income was $13.6 million, or 6.7% of segment net sales revenue, compared to $30.5 million, or 12.2% of segment net sales revenue. The 5.5 percentage point decrease in segment operating margin was primarily due to unfavorable operating leverage, the net unfavorable impact of higher inbound ocean freight expense and related customer price increases, EPA compliance costs of $4.9 million, higher distribution expense, and increased inventory obsolescence expense. These factors were partially offset by a decrease in marketing expenses, lower inbound air freight expense, reduced amortization expense, and decreased annual incentive compensation expense. Adjusted operating income decreased 38.3% to $21.8 million, or 10.7% of segment net sales revenue, compared to $35.3 million, or 14.1% of segment net sales revenue.
Beauty Core business net sales revenue increased $25.3 million, or 15.3%, primarily reflecting growth in appliance sales due to higher brick and mortar and online channel sales driven by strong consumer demand, earlier than typical customer orders as retailers accelerated orders into the third quarter to try to avoid supply chain disruptions during the holiday season, new product introductions, higher international sales, expanded distribution primarily in the club channel, and the favorable comparative impact of COVID-19 reduced store traffic in the prior year period. Total Beauty segment net sales revenue increased $9.7 million, or 5.9%, to $174.8 million, compared to $165.2 million primarily due to Core business growth partially offset by the sale of the Non-Core North America Personal Care business during the second quarter of fiscal 2022. Net sales revenue was favorably impacted by net foreign currency fluctuations of approximately $0.7 million, or 0.4%. Operating income was $33.2 million, or 19.0% of segment net sales revenue, compared to $32.6 million, or 19.7% of segment net sales revenue. The 0.7 percentage point decrease in segment operating margin was primarily due to the net unfavorable impact of higher inbound freight expense and related customer price increases, higher marketing expense, an increase in personnel expense, and the unfavorable impact of foreign currency exchange fluctuations. These factors were partially offset by a more favorable product mix, reduced royalty expense as a result of the amended Revlon trademark license, a decrease in outbound freight costs, lower bad debt expense, lower inventory obsolescence expense, and favorable operating leverage. Adjusted operating income increased 2.4% to $36.6 million, or 20.9% of segment net sales revenue, compared to $35.8 million, or 21.7% of segment net sales revenue.
Balance Sheet and Cash Flow Highlights – Third Quarter Fiscal 2022 Compared to Third Quarter Fiscal 2021
- Cash and cash equivalents totaled $44.3 million, compared to $156.7 million.
- Accounts receivable turnover was 76.4 days, compared to 70.0 days.
- Inventory was $585.8 million, compared to $383.4 million. Trailing twelve-month inventory turnover was 2.3 times compared to 3.6 times.
- Total short- and long-term debt was $447.5 million, compared to $440.4 million.
- Net cash provided by operating activities for the third quarter fiscal of 2022 was $53.3 million. Net cash used by operating activities for the first nine months of the fiscal year was $5.1 million, compared to net cash provided of $249.7 million for the same period last year.
Subsequent Event
On December 29, 2021, the Company completed the acquisition of Osprey, a longtime U.S. leader in technical and everyday packs. The total purchase consideration was $414.7 million in cash, including the impact of a $5.3 million favorable customary closing net working capital adjustment. The acquisition was funded with cash on hand and borrowings from the Company’s existing revolving credit facility. The Company incurred acquisition-related expenses of $1.6 million during the third quarter of fiscal 2022, which were recognized in SG&A within its condensed consolidated statements of income.
Updated Fiscal 2022 Annual Outlook
Due to the sale of the majority of the Personal Care business during the second quarter of fiscal 2022 and the expected continued classification of the remaining Latin America and Caribbean Personal Care business as Non-Core for fiscal 2022, the Company is providing its updated outlook on both a consolidated and Core business basis in order to provide comparability between historical and future periods.
The expected impact of the Osprey acquisition for the period from the date of closing to the end of fiscal year 2022 is estimated to provide approximately $20 million of net sales revenue and approximately $0.05 and $0.07 of diluted EPS and adjusted diluted EPS, respectively. The expected impact of the Osprey acquisition is included in both the updated consolidated and Core business outlook provided.
The Company’s updated outlook includes the current estimated impact of the duration of time required to repackage the remaining inventory affected by the EPA compliance concerns and considers anticipated customer demand. The Company’s updated outlook includes an improvement in the estimated unfavorable sales revenue impact to approximately $60 million and an improvement in the unfavorable adjusted diluted EPS impact to approximately $0.30 related to lost sales volume and earnings due to the EPA matter. The adjusted diluted EPS impact is net of the favorable impact of cost reduction actions being taken in the Health & Home segment, which include reductions in personnel, marketing and select new product development costs.
The Company incurred $13.1 million, $3.0 million and $4.9 million of EPA compliance costs during the first, second and third quarters of fiscal 2022, respectively. These costs were included in the Company’s GAAP operating results but were excluded from non-GAAP adjusted operating results.
Contacts
Investor Contact:
Helen of Troy Limited
Anne Rakunas, Director, External Communications
(915) 225-4841
ICR, Inc.
Allison Malkin, Partner
(203) 682-8200
