Helen of Troy (HELE 115.92, +13.97, +13.70%) is trading nicely higher (+14%) this morning after reporting 1Q19 (May) earnings last night. If you're not familiar, Helen of Troy is a consumer products company offering a wide variety of goods. It has three business segments:
- Housewares: Provides a broad range of products to help with food preparation, cooking, cleaning, organization, beverage service, and other tasks to ease everyday living for families. Sales for the segment are primarily to retailers, with some direct-to-consumer product distribution. Owned brands for the segment include OXO, Good Grips, Hydro Flask, Soft Works, and OXO tot.
- Health & Home: Provides healthcare and home environment products. Sales for this segment are also primarily to retailers, with some direct-to-consumer product distribution. Products include thermometers, humidifiers, blood pressure monitors, and heating pads; water filtration systems; and small home appliances such as portable heaters, fans, air purifiers, and insect control devices. Owned brands include PUR; licensed brands include Honeywell, Braun, and Vicks.
- Beauty: Provides personal care and beauty appliance products, including hair styling appliances, grooming tools, decorative haircare accessories, and liquid-, solid-, and powder-based personal care products. This segment sells primarily to retailers and beauty supply wholesalers. Owned brands include Hot Tools, Brut, Pert, Sure, Infusium, and Pro Beauty Tools; licensed brands include Revlon and Bed Head.
- Note: HELE also had a Nutritional Supplements segment (Healthy Directions LLC), but it sold that in December 2017 to Direct Digital. The sale allows HELE to focus on its other segments, which are higher margin.
HELE has seven Leadership Brands: OXO, Honeywell, Braun,
PUR, Hydro Flask, Vicks, and Hot Tools. These are the company’s most productive
brands and offer the best prospects for long-term profitable growth. Its
Leadership Brands represented 77% of FY18 sales from continuing operations.
Also, as indicated in the above segment descriptions, HELE offers products from
both company-owned brands and licensed brands. For the latter, HELE pays a
license fee in order to put the brand owner's name on the product. The brands
within the Housewares segment are all owned by HELE.
Turning to the MayQ earnings results, non-GAAP EPS rose 33% year/year to $1.87, which was much higher than market expectations. Revenue rose 9.0% year/year to $354.7 mln, which was also well above market expectations. In terms of guidance for FY19, HELE increased non-GAAP EPS guidance to $7.45-7.70 from $7.30-7.55. HELE reaffirmed revenue guidance of $1.485-1.510 bln.
Housewares was its fastest growing segment; sales increased by 18.9%, reflecting incremental distribution with existing domestic customers, an increase in online sales, introductions of new products from both the Hydro Flask and OXO brands, an increase in sales into the club channel, an acceleration of Hydro Flask orders by retailers in advance of the Hydro Flask integration into the Helen of Troy ERP system, and international growth. Health & Home sales increased 10.2%, reflecting expanded international distribution and higher online sales. Beauty sales decreased 5.8%, primarily reflecting a decline in brick and mortar sales, which more than offset continued momentum in the segment’s online channel.
This was the company’s first full quarter without the Nutritional Supplements segment, and HELE reported big upside for EPS and revenue. It seems sell side analysts may have underestimated how the company would perform without the NS segment. Investors are now able to see what HELE can achieve without that segment dragging down its margins. What stands out to us is how well HELE's Housewares segment did despite weaker foot traffic at brick & mortar stores, particularly names like Bed Bath & Beyond (BBBY). Investors seem to be similarly impressed. Today's MayQ report has propelled the stock to all-time highs.