Helen of Troy (HELE) Struggles as Beauty and Wellness Segment Weakens Further
Helen of Troy's latest quarterly report reveals a challenging environment, as ongoing weakness in its Beauty and Wellness segment weighs heavily on the consumer products company. While the company managed to exceed earnings per share expectations for the second consecutive quarter, revenue fell short, and a slight downgrade to the full-year sales outlook added to investor concerns. The stock has already lost significant ground, falling by 25 percent since December.
The key issue lies within the Beauty and Wellness segment, which reported a year-over-year revenue decline of over 9 percent to $284.6 million. The segment, home to brands like Vicks, Revlon, Braun, and Hot Tools, has been hit hard by weak consumer demand for hair appliances and a disappointing winter illness season. Helen of Troy described the illness season in the United States as the weakest in eight years, excluding the COVID-19 years, significantly impacting sales of its Vicks products.
To counter these challenges, the company is banking on its recent acquisition of Olive & June, a nail care brand, for $240 million. This acquisition is expected to add $17-$18 million in high-margin sales to fiscal year 2025 results and contribute to adjusted earnings. However, it remains uncertain whether this addition will be enough to offset broader weakness in the segment.
On a more positive note, the Home and Outdoors segment delivered growth, with revenue rising 4.3 percent year-over-year to $246.1 million. The Hydro Flask brand, known for its insulated beverageware, continues to perform well, supported by an expanded product assortment at Costco and strong international sales. This segment remains a bright spot amid an otherwise challenging landscape.
There was also some good news on the margin front. Helen of Troy's adjusted operating margin expanded by 30 basis points year-over-year to 16.6 percent, a welcome improvement following a significant decline in the previous quarter. This progress can be attributed to "Project Pegasus," the company’s restructuring initiative launched in October 2022. The program aims to optimize the brand portfolio, streamline operations, and cut costs, with projected savings of $26-$30 million by the end of fiscal year 2025.
Despite these positives, Helen of Troy faces a tough path forward. The persistent softness in discretionary spending continues to create headwinds, particularly in its Beauty and Wellness segment. While the Hydro Flask brand provides some stability, the company’s overall performance remains under pressure, and the stock is unlikely to see a sustained recovery until signs of a turnaround emerge in its key segments. Investors will be closely watching for updates on the success of Olive & June and the ongoing impact of Project Pegasus as the company navigates this challenging period.