Last week global consumer products company Helen of Troy Limited (HELE) posted flat year-over-year earnings of 72 cents per share in the second quarter of fiscal 2014 as higher sales were offset by decline in margins during the quarter. Earnings, however, missed the Zacks Consensus Estimate of 73 cents by a penny.
During the quarter, total sales increased 11.1% year over year to $319.4 million. The increase was driven by 20.4% year-over-year improvement in the Healthcare/Home Environment segment backed by Helen’s aggressive promotion and marketing strategy and favorable weather conditions in Europe. Total sales also exceeded the Zacks Consensus Estimate of $310 million.
Gross margin shrank 210 basis points (bps) to 38.6% due to product cost increase and unfavorable product mix. Operating income margin shrank 120 basis points due to higher selling, general and administrative expenses during the quarter.
Housewares: Sales in the Housewares category climbed 8.7% to $70.2 million compared with the year-ago period, backed by innovation in product and design.
Personal Care: Sales in this category climbed 3.4% year over year to $116.2 million in the quarter driven by new product distribution arrangement in Europe and higher sales in the company’s professional appliance business.
Healthcare Environment: This category climbed 20.4% year over year to $133.0 million in the reported quarter, reflecting higher promotional and marketing measures to boost sales.
Other Financial Details
Cash and cash equivalents at the end of the second quarter of fiscal 2014 stood at $10.1 million compared to $12.1 million in the prior quarter. Total debt reduced to $108.4 million from $224.8 million in the prior quarter.
Helen of Troy expects higher product costs and a difficult retail condition in the coming quarters. The company maintained its earnings guidance range of $3.50 to $3.60 for fiscal 2014. It also maintained its fiscal 2014 net sales guidance range of $1.29 billion to $1.32 billion.
Other Stocks to Consider
Currently, Helen of Troy holds a Zacks Rank #3 (Hold). Others players in the same industry that look attractive at the current levels include Nu Skin Enterprises Inc. (NUS), Elizabeth Arden Inc. (RDEN), Avon Products Inc. (AVP). While Nu Skin carries a Zacks Rank #1 (Buy), Elizabeth Arden and Avon Products carry a Zacks Rank #2 (Buy).