Helen of Troy (HELE) Gains on Brand Strength & Project Pegasus
Helen of Troy Limited’s HELE solid investments in its Leadership Brands have been yielding. The company is on track with Project Pegasus, which aims to expand operating margins via improved efficiency and lower costs. HELE is benefiting from growth endeavors, including consumer-centric innovation.
Let’s delve deeper.
Focus on Leadership Brands
The Zacks Rank #2 (Buy) company benefits from its focus on a solid Leadership Brand portfolio. Brands in this portfolio, including OXO, Hydro Flask, Vicks, Braun, Honeywell, PUR, Hot Tools, Drybar and Osprey, are positioned to enhance market share. These brands account for a significant chunk of the company's sales, which generate solid margins and volumes.
In its first-quarter fiscal 2024 earnings call, management highlighted that key leadership brands like OXO, Osprey, PUR and Curlsmith outperformed. Various leadership brands saw improved share in specific categories across the United States.
Helen of Troy’s constant investments in the most productive brands have delivered robust results. In December 2021, Helen of Troy concluded the buyout of Osprey Packs, Inc., worth $414.7 million, which marks the company’s ninth Leadership Brand and yields favorable results. The company acquired Drybar Products in January 2020.
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What Else is Driving HELE’s Growth?
In the second quarter of fiscal 2023, Helen of Troy focused on developing a global restructuring plan, Project Pegasus. The plan aims to expand operating margins via initiatives designed to improve efficiency and reduce costs. Project Pegasus includes efforts to optimize the company’s brand portfolio, streamline and simplify the organization, grow the cost of goods-saving projects and improve the efficiency of the supply-chain network. The project aims to streamline indirect spending and improve cash flow and working capital.
As part of Project Pegasus, management expects to achieve annualized pre-tax operating profit improvements of $75-85 million, to be substantially generated by fiscal 2026-end. Management is on track to deliver $20 million of Project Pegasus savings during fiscal 2024.
Helen of Troy is investing in critical areas to continue driving growth. To this end, the company invests in consumer-centric innovation, digital marketing and media, new packaging, enhanced production and distribution capacity and direct-to-consumer channels.
Growing the company's international business is also integral to its Phase II transformation plan. In fiscal 2023, HELE completed its new 2 million-square-foot state-of-the-art distribution facility in Tennessee. Management had earlier highlighted that it is diversifying the geographic footprint of global sourcing across China, Southeast Asia and Mexico. In fiscal 2024, management expects to incur capital asset expenditures in the range of $45-$50 million.
Efforts to grow its Leadership Brands and other strategic initiatives will likely keep narrating HELE’s growth story.
The leading consumer products player’s shares have increased 16.5% in the past three months against the industry’s decline of 11.5%.
Other Stocks to Consider
Some other top-ranked stocks from the broader Consumer Staples space are Inter Parfums IPAR, e.l.f. Beauty ELF and Flowers Foods FLO.
Inter Parfums currently flaunts a Zacks Rank #1 (Strong Buy). IPAR has a trailing four-quarter earnings surprise of 45.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales and earnings suggests growth of 19.7% and 14.6%, respectively, from the year-ago reported numbers.
e.l.f. Beauty has a Zacks Rank #2 and an expected long-term earnings growth rate of 21.7%. ELF has a trailing four-quarter earnings surprise of 108.3%, on average.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial-year sales and earnings suggest growth of 41.2% and 42.8%, respectively, from the year-ago reported numbers.
Flowers Foods emphasizes providing high-quality baked items. The company currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 2.3%.
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales suggests growth of 6.7% from the year-ago period’s actuals. FLO has a trailing four-quarter earnings surprise of 7.6% on average.
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