Helen of Troy Limited HELE is focused on growing its leadership brands, which constitute a portfolio of eight market-leading brands. As part of its strategy to focus more on leading brands, the company has divested its mass market personal care business (excluding Latin America and Caribbean regions) to a care company leading independent brand staff – HRB Brands LLC. We note that the transaction was valued at $ 44.7 million on a cash basis. Under the agreement, HRB Brands LLC also has the right to purchase personal care businesses in Latin America and the Caribbean before the end of fiscal 2022.
Helen of Troy anticipates that the proceeds of the transaction will be used to increase shareholder value, including debt repayment, strategic share buybacks as well as the completion of prudent buybacks. Well, the aforementioned divestiture is in line with Helen of Troy’s focus on accelerating her leadership brands. These brands, including OXO, Hydro Flask, Vicks, Braun, PUR, Honeywell, Drybar as well as HOT Tools, generate strong cash flow. They also strengthen the company’s presence globally. These brands, which generate impressive volume and margin, contributed over 80% of Helen of Troy’s global sales in fiscal 2021.
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The company’s constant investments in these brands considered to be the most productive have long yielded solid results. Clearly, Leadership Brands’ net sales increased 20.2% in the fourth quarter of fiscal 2021. In fiscal 2022, the company expects its Leadership Brands to continue to serve customers well. clients.
Helen of Troy, who shares space with Coty Inc. COTY, has benefited from online sales and digital marketing efforts. Notably, online sales grew nearly 30% year-over-year in the fourth quarter of the year. Management is on track to continue investing in this area to keep pace with the changing consumer environment.
Zacks Rank # 5 (Strong Sell) has been struggling with a smoothly adjusted operating margin for some time now. In the fourth fiscal quarter, Helene of Troy adjusted operating income fell 20.5% while adjusted operating margin contracted 3.8 points to 8.4%. The decrease was triggered by increased costs for marketing and new product development, high transportation and distribution costs as well as an unfavorable product mix in the Housewares business. In addition, rising legal, patent defense and other professional fees have been a drag.
Incidentally, the company’s adjusted profit decreased by 16.5% mainly due to the unfavorable impacts of winter storm Uri (to the tune of around 20 cents per share) as well as lower operating profit from the Health & Home unit in the fourth fiscal quarter. Additionally, traffic drops caused by the pandemic at some retail stores have been a concern for the company.
That being said, we believe that the divestiture of the personal care business in the mass market will improve the performance of the company in terms of revenue and profit, while also allocating funds to its allocation strategy. of capital.
Shares of Helen of Troy have fallen 3.6% in the past three months compared to industrygrowth of 8.2%.
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