Helen Of Troy Falls Despite Strong Guidance 

Helen Troy reports strong momentum in the third quarter

Helen of Troy (NASDAQ: Healey) It reported a truly astonishing quarter relative to analyst estimates and proved one thing if not another; The company navigates the supply chain and inflationary headwinds with style and elegance. Not only are revenue coming in much higher than expectations, but margins are coming in stronger than expected and leading to very strong bottom line results. Those results are amplified by growth efforts as well, the company used its cash to buy Osprey refills at the end of December, a move that is expected to increase once the current quarter.

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Helen Troy Blows Up Previous Consensus, Higher Evidence

Helen of Troy had a quarter blowout even as tailwinds in the ventilation/filtration sector subsided and the impact of product disruptions related to EPA issues last year. The company, whose brands include OXO, Good Grips, Vicks and Revlon, reported $624.88 million in consolidated revenue, down 2.0% from last year. We’re not happy to see a net decline in revenue, but the company reported a 34% increase last year and the company’s record, so giving back isn’t that bad. In fact, revenue also beat the Marketbeat.com consensus estimate by 1,200 basis points, so it’s much stronger than expected.

Underlying sales, and adjusted sales of liquidations and acquisitions, were up 0.4% and 31.6% year over year with strength in most segments. The core beauty sector led with a gain of 15.3% and the household appliances sector grew by 10.7% while the health and home sector declined by 18.5%. E-commerce, the driver of growth, decreased by -7.4% but increased by 23.7% compared to 2019.

Turning to margins, the company saw a 130 basis point decline in adjusted gross margin and a 140 basis point decrease in adjusted operating margin but both were lower than expected. Operating margin came in at 14.4% which allowed the company to capitalize on revenue strength to bottom line as well. Both GAAP and adjusted EPS were down from a year ago, but $3.10 in GAAP EPS outperformed by $0.33, and $3.72 in adjusted EPS by $0.54.

Helen of Troy also upped the guidance and in a way that makes us believe margins will continue to climb in the fourth quarter period. The company raised its core revenue guidance to a range of $2,060 to $2,080 billion versus $2.07 in the Marketbeat.com consensus with EPS in the $11.55 to $11.75 range versus $11.36 analysts had expected.

Helen Of Troy’s balance sheet remains strong

Helen of Troy’s balance sheet remains strong allowing the company to fund a large portion of its growth. The Osprey purchase with cash on hand and some credit left the cash balance slightly lower than last year, about $115 million to $44.3 million, but there is a balancing factor. The balancing factor is inventory that increased by $200 million to $585 million which put the company in a very strong position in the fourth quarter.

Technical prospects: Helen from Troy Falls for her support

Helen of Troy shares fell in the wake of the third quarter report but the support appears to hold above the $235 level. This corresponds to the previous resistance and should be able to maintain prices. If not, this stock could drop to $230 or $220 before finding steady support. Assuming $235 holds, we see this stock moving sideways within the recently defined range for the near-to-short-term at least.
Helen of Troy falls despite strong guidance

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