Helen of Troy (HELE) Poised on Leadership Brands, Strategies
Helen of Troy Limited HELE looks well placed, courtesy of strength in its Leadership Brands. The company’s focus on strategic growth efforts, including Project Pegasus is yielding. Shares of this Zacks Rank #2 (Buy) company have increased 34.6% in the past three months against the industry’s decline of 8.2%.
Let’s take a closer look at the factors yielding results.
Focus on Leadership Brands
Helen of Troy is focused on making solid investments in its Leadership Brands, which is a portfolio of market-leading brands. 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.
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Project Pegasus Holds Promise
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 at streamlining indirect spending and improving 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.
Strategic Efforts on Track
Helen of Troy is investing in key areas to continue driving growth. To this end, the company is focused on investing in consumer-centric innovation, digital marketing and media, new packaging, enhanced production and distribution capacity, and direct-to-consumer channels, among others.
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.
All said, we believe that focus toward such growth endeavors is likely to help Helen of Troy keep its growth story going.
Other 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, which manufactures a diverse portfolio of salty snacks, currently has a Zacks Rank #2. UTZ’s expected EPS growth rate for three to five years is 10.4%.
The Zacks Consensus Estimate for Utz Brands’ current fiscal year sales suggests growth of 3.5% from the year-ago reported numbers. UTZ has a trailing four-quarter earnings surprise of 16.9% 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 6.7% from the year-ago reported figure.
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