A global consumer products company, Helen of Troy
Limited ( HELE ) posted
better-than-expected earnings of $1.18 per share in the third
quarter of fiscal 2013, topping the Zacks Consensus Estimate of
$1.13 by 4.4% and the prior-year earnings of $1.04 per share by
13.5%. Despite sluggish retail sales environment, the company
managed to generate strong earnings owing to higher sales, product
innovation and gains from acquisitions.
During the quarter, total sales increased 10.6% year over year
to $374.6 million. The increase was attributable to higher sales in
the Healthcare segment, driven by sales increase from the
acquisition of the PUR water filtration business (December, 2011).
Total sales however lagged the Zacks Consensus Estimate of $377
Gross margin expanded 30 basis points to 39.6% due to improved
product mix following the addition of the PUR filtration business.
Operating margin also increased 30 basis points to 12.6%, driven by
higher sales growth and relatively flat selling, general and
administrative (SG&A) expenses.
Housewares: Sales in the Housewares category
climbed 10.7% to $67.8 million compared with the previous year
period, reflecting double-digit organic sales growth due to the
addition of new products under the OXO brand.
Personal Care: Sales in this category declined
marginally by 0.2% to $148.6 million in the third quarter of fiscal
2013. However, it contributed positively to earnings.
Healthcare Environment: This category witnessed
highest sales growth with an increase of 23.0% to $158.2 million in
the reported quarter, reflecting favorable weather conditions. The
acquisition of PUR water filtration business contributed about
$28.1 million to sales.
Other Financial Details
Helen announced its decision to purchase 84 acres of land and
construct a new 1.3 million square foot distribution center in
Olive Branch, Mississippi, for a total estimated cost of
approximately $37 million. Helen expects the new distribution
center to be ready for operation in the third fiscal quarter of
With this new distribution center, Helen will have a total of
2.5 million square feet of owned and operated distribution capacity
in DeSoto County, Mississippi.
Even with strong third quarter earnings, the company expects
uncertain consumer spending behavior due to pending domestic tax
changes and federal legislation in the coming quarters. Helen has
thus reduced its fiscal 2013 net sales guidance to a range of
$1.275 billion to $1.3 billion from its previous range of $1.3
billion to $1.325 billion. However, the company has maintained its
earnings guidance for fiscal 2013 in the range of $3.50 to $3.60
We have a Neutral recommendation on Helen over the long term.
Both Helen and its peer Procter & Gamble
Company ( PG
) hold a Zacks Rank #3 (Hold).HELEN OF TROY (HELE): Free Stock Analysis
ReportPROCTER & GAMBL (PG): Free Stock Analysis
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