Helen of Troy (HELE) Up More Than 20% in 3 Months: Here's Why
Focus on strategic growth efforts, including Project Pegasus, is favoring Helen of Troy Limited HELE. The Zacks Rank #2 (Buy) company is making solid investments in its Leadership Brands, a market-leading brand portfolio.
The leading consumer products player’s shares have increased 23.9% in the past three months against the industry’s decline of 14%. The stock has comfortably outpaced the Zacks Consumer Staples’s growth of 0.1% during this time.
Let’s delve deeper.
Strategic Efforts on Track
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.
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Helen of Troy is investing in key areas to continue driving growth. To this end, HELE is investing 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.
Strong Leadership Brands: Key Driver
Helen of Troy has been benefiting 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 its key leadership brands like OXO, Osprey and PUR and Curlsmith outperformed. Various leadership brands see improved share in specific categories across the United States.
Helen of Troy’s constant investments in the most productive brands have been delivering 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, yielding favorable results. The company acquired Drybar Products in January 2020.
We believe that focusing on growing its Leadership Brands along with the above-mentioned strategic efforts will likely keep HELE in investors' good books.
Some Top-Ranked Staple Bets
Here, we have highlighted three top-ranked stocks, namely Post Holdings POST, Utz Brands Inc. UTZ and The J. M. Smucker Company SJM.
Post Holdings, a consumer-packaged goods holding company, currently sports a Zacks Rank #1 (Strong Buy). POST has a trailing four-quarter earnings surprise of 59.6% on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Post Holdings’ current fiscal year sales and earnings suggests growth of 13.5% and 184.5%, respectively, from the corresponding year-ago reported figures.
Utz Brands manufactures a diverse portfolio of salty snacks and has a Zacks Rank #2. UTZ’s expected EPS growth rate for three to five years is 11.4%.
The Zacks Consensus Estimate for Utz Brands’ current fiscal year sales suggests growth of 3.7% from the year-ago reported numbers. UTZ has a trailing four-quarter earnings surprise of 12.3% on average.
The J. M. Smucker, which manufactures and markets branded food and beverage products, currently carries a Zacks Rank of 2. SJM has a trailing four-quarter earnings surprise of 14%, on average.
The Zacks Consensus Estimate for The J. M. Smucker’s current financial-year earnings suggests growth of 6.8% from the year-ago reported figure.
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The J. M. Smucker Company (SJM) : Free Stock Analysis Report
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Utz Brands, Inc. (UTZ) : Free Stock Analysis Report
