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Factors That Make Helen of Troy (HELE) a Solid Pick for 2021

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Zacks Equity Research
·4 min read
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Helen of Troy Limited HELE appears to be in a good spot, courtesy of robust growth efforts. Notably, this Zacks Rank #1 (Strong Buy) stock has rallied 24.3% over a year against the industry’s decline of 11.7%. Moreover, the stock has comfortably outperformed the Zacks Consumer Staples sector’s rise of 0.9% during the same period. Let’s discuss the factors that are likely to keep the company in a good shape for 2021.

Strength in Leadership Brands

Helen of Troy has been focused on making solid investments in its ‘Leadership Brands,’ which is a portfolio of market leading brands. Brands in this portfolio are positioned well to enhance market share. These brands account for a significant chunk of the company’s sales, which generate solid margins and volumes. Its constant investments in these brands that are considered most productive have been helping it deliver robust results. The company made another move in this direction by acquiring Drybar Products in January 2020. Drybar Products, which marks its eighth Leadership Brand, has been yielding impressive results and was a contributor to the top line in second-quarter fiscal 2021.

For the fiscal second quarter, sales from the company’s eight Leadership Brands grew 30.3%, including 3.2% growth from Drybar. Also, as part of its strategy of maintaining focus on Leadership Brands, the company decided to divest some assets in mass channel personal care business (Personal Care). It expects the divestiture to close in fiscal 2021.

 

What Else is Driving Helen of Troy’s Growth?

Helen of Troy is gaining from consistent online sales and digital marketing efforts. Notably, online sales advanced nearly 32% year over year for the fiscal second quarter and contributed roughly 24% to the top line. Consumer preference for online shopping as opposed to venturing into brick and mortar stores amid the coronavirus pandemic was a growth driver.

In fact, management is on track to make consistent investments in the digital arena to keep pace with an evolving consumer environment. The company is persistently augmenting digital presence through sophisticated marketing plans and improved content. Earlier, it stated that online development has been a key area of focus for its transformation plan — both Phase 1 and 2.

In addition to this, Helen of Troy has been bolstering the Beauty business and strengthening brand portfolio. Recently, the company unveiled that via its subsidiaries, it has entered into an extended and altered Trademark License Agreement with Revlon to license the trademark for hair care appliances and tools of the latter (the "Revlon License"). The extension of Revlon will be an addition to the company’s owned brands such as HOT TOOLS, Drybar and Gold ‘N Hot, and is likely to fuel growth of global hair appliances.

We believe that the aforementioned upsides are likely to help Helen of Troy remain on growth trajectory going into 2021.

More Solid Consumer Staple Bets

B&G Foods, Inc. BGS, sporting a Zacks Rank #1 at present, has a trailing four-quarter earnings surprise of 9.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Hain Celestial HAIN, currently holding a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 24.6%, on average.

Sysco Corporation SYY, also a Zacks Ranked #2 stock, has a long-term earnings growth rate of 11%.

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The Hain Celestial Group, Inc. (HAIN) : Free Stock Analysis Report
 
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