Helen of Troy Limited HELE appears to be in a good spot amid all the pandemic-led frenzy. This consumer products provider has seen its shares rally as much as 16.5% so far this year against the industry’s decline of 25.1%. Notably, Helen of Troy has been benefiting from the strength of its Leadership Brands as well as strong digital efforts. In fact, the company’s online sales have been rising amid the coronavirus-induced social distancing. Also, its Health & Home segment saw solid demand trends amid the pandemic during the first quarter of fiscal 2021.
On that note, let’s delve deeper into the Zacks Rank #2 (Buy) company’s growth drivers. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Factors Sketching Helen of Troy’s Growth Story
Helen of Troy has been focused on making solid investments in its “Leadership Brands,” which have been delivering robust results. To this end, the company acquired Drybar Products in January 2020, which made favorable contributions to the company during the first quarter of fiscal 2021. During the quarter, sales from the company’s eight Leadership Brands grew 15.7%, largely driven by double-digit improvements in all Health & Home leadership brands. We note that, as part of its strategy of maintaining focus on Leadership Brands, the company had decided to divest some assets from the mass-market personal care business (Personal Care) during the fourth quarter of fiscal 2020. The company expects the divestiture to close in fiscal 2021.
The Health & Home unit remained strong in the first quarter due to higher demand amid the pandemic. Net sales in the segment advanced 29.1%, thanks to organic business growth of 30.2%. Organic sales were backed by burgeoning demand for healthy living and healthcare products across domestic and international markets, both in stores and online. The store closure impact was lesser in this segment as core retail giants like Walmart WMT, Target TGT and Amazon AMZN, to name a few, and the drug store channel remained operational and saw high traffic. Encouragingly, management noted that growth at OXO continued in the second quarter of fiscal 2021. Also, sales at Hydro Flask improved strongly since early May via robust online growth and gradual customer store reopenings.
Apart from this, solid online sales and contributions from Drybar Products’ acquisition were drivers for Helen of Troy. Notably, online sales advanced 33% year over year in the first quarter and contributed 28% to the company’s top line, up from around 24% in the preceding quarter. Management remains on track to make continued investments in this arena, in an attempt to keep pace with the evolving consumer environment. In fact, the company is persistently augmenting its digital presence through sophisticated marketing plans and improved content. The company stated that online development has been a key area of focus for its transformation plan — both Phase 1 and 2.
All said, we expect Helen of Troy to retain its splendid momentum.
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