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Helen of Troy Hits 52-Week High: What's Driving the Stock?

Zacks Equity Research

Helen of Troy Limited HELE hit a 52-week high of $151.54, before closing the session a tad lower at $150.86 on Jul 18. Shares of this Zacks Rank #3 (Hold) company have rallied approximately 32.8% in the past three months compared with the industry’s growth of 10%. 

Moreover, the company’s shares have gained 3.1% since it reported first-quarter fiscal 2020 results on Jul 10. This increase can be attributed to the company’s strong first-quarter results and a raised view for fiscal 2020.  

Helen of Troy now projects consolidated net sales of $1.590-$1.620 billion compared with the previous projection of $1.580-$1.611 billion. Adjusted earnings from continuing operations are projected to be $8.40-$8.65 compared with the previous view of $8.25-$8.50.

The company’s earnings and sales exceeded the Zacks Consensus Estimate in the fiscal first quarter. The top and bottom lines also improved year over year on strong performance of the Housewares unit, and growth in leadership brands and online sales. 

Notably, Helen of Troy’s Houseware unit has been experiencing sturdy growth. Net sales for the segment advanced 23.6% during the fiscal first quarter, driven by growth in point of sale, increased distribution for brick-and-mortar customers, enhanced online sales and innovation. In fact, improved brick-and-mortar business in Housewares also drove the company’s core business. During the fourth quarter of fiscal 2019, the category reflected growth of nearly 7.8%. For fiscal 2020, management expects this unit to grow 6-8%.

Why There is More Room to Run

The company concluded Phase I of its multi-year transformation plan and is now focusing on Phase II, which is expected to drive growth over the next five years. In fact, management stated that first-quarter fiscal 2020 marked a splendid start for Phase II of the transformation plan. Phase II includes continued investments in Leadership Brands, with plans to grow the same through customer-friendly innovation, international expansion and acquisitions. Leadership Brands accounts for a significant chunk of the company’s sales and generates solid margins and volumes. The company’s constant investments in Leadership Brands have been delivering robust results. 

Further, consistent online sales and digital marketing efforts bode well for the company. Notably, online sales advanced 28% year over year in the first quarter of fiscal 2020 and comprised nearly 23% of the company’s top line. 

In fact, Helen of Troy is consistently augmenting its digital presence through sophisticated marketing plans and improved content.

We believe the company’s efforts to boost the digital business and the ongoing transformation plan will help the stock reach new highs.

Key Picks

Avon Products AVP has a long-term earnings growth rate of 7.5% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Louis Vuitton LVMUY has a long-term earnings growth rate of 8% and a Zacks Rank #2.

Shiseido SSDOY has a long-term earnings growth rate of 20% and a Zacks Rank #2.

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