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Helen of Troy (HELE) Surges 47% in Six Months: Here's Why

Zacks Equity Research
·3 min read

Helen of Troy Limited HELE is well placed on the back of strength in its Leadership Brands as well as strong digital efforts. In fact these trends continued in the second quarter of fiscal 2021 with the top and the bottom line increasing year over year and beating the Zacks Consensus Estimate.

Well, such factors have been boosting investors’ optimism. Notably, shares of Helen of Troy have surged 47% in the past six months compared with the industry’s growth of 29%.

What’s Driving Helen of Troy’s Growth?

Helen of Troy is focused on investing 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 and Drybar are positioned well to enhance market share. These brands contribute a significant chunk to the company’s sales, which generates solid margins and volumes. The company’s constant investments in these brands that are considered most productive have been delivering robust results. The company made another move in this direction, by acquiring Drybar Products in January 2020. Drybar Products, which marks the company's eighth Leadership Brand, has been yielding results and was a contributor to the top line in the second quarter of fiscal 2021.

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


 

Apart from this, the company is gaining from its consistent online sales and digital marketing efforts. Notably, online sales advanced nearly 32% year over year in the fiscal second quarter and contributed roughly 24% to the company’s top line. Consumer’s preference for online shopping as opposed to venturing into brick and mortar stores amid the coronavirus outbreak was a growth driver.

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

Wrapping Up

Helen of Troy’s international presence exposes it to risks associated with adverse currency movements. The same was in fact noticed in fiscal second-quarter, wherein unfavorable currency fluctuations affected sales in the Beauty segment.

Nevertheless, the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company stay in investors’ good books.

Some Solid Staple Picks

e.l.f. Beauty’s ELF bottom line has outpaced the consensus mark in the trailing four quarters. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

United Natural Foods UNFI, with a Zacks Rank #1, has a trailing four-quarter earnings surprise of 4.8%, on average.

Nu Skin NUS, with a Zacks Rank #1, has a long-term earnings growth rate of 6.8%.

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Zacks Investment Research