Helen of Troy Ltd., as part of a plan to streamline and simplify its organization, announced three major changes to the structure of its organization that it reported will result in a reduction of its global workforce by some 10%.
The company is combining its Beauty and Health & Wellness businesses into a single reportable segment that will be referred to and reported as “Beauty & Wellness.” Helen of Troy also created a North America Regional Market Organization responsible for sales and go-to-market strategies for all categories and channels in the United States and Canada.
The company also said is further centralizing certain functions under shared services, especially in operations and finance to better support the business segments and RMOs. Most workforce reductions will be completed by March 1, 2023, and remaining role reductions are expected to be completed before the end of fiscal year 2024, according to Helen of Troy.
Beginning with Helen of Troy’s fiscal 2023 Form 10-K, future disclosures will reflect the two reportable segments, Home & Outdoor (including Oxo housewares and Hydro Flask beverageware) and Beauty & Wellness (including Honeywell and Vicks home environment appliances, and Revlon and Hot Tools beauty appliances).
The restructuring moves by Helen of Troy come after a fiscal consolidated net sales revenue in its fiscal third quarter of $558.6 million, a decrease of 10.6% from fiscal Q3 2022, a decrease of 12.4% from fiscal Q3 2021, and an increase of 17.7% from fiscal Q3 2020. Core business net sales at Helen of Troy in the quarter registered a 10% decrease from fiscal Q3 2022, a decrease of 9.6% from fiscal Q3 2021, and an increase of 23.9% from fiscal Q3 2020.
Julien R. Mininberg, Helen of Troy CEO, said, “While the operating environment remained difficult, our third quarter financial performance exceeded our expectations. Gross margin and cash flow improved significantly during the quarter, and our efforts to reduce inventory have resulted in inventory levels that are now below where we finished last fiscal year. On a fiscal year-to-date basis, core net sales are up 33.1% on a three-year stack vs. the pre-COVID base of fiscal year 2020. Over those same nine months, core adjusted diluted EPS is up 6.6% on a three-year stack despite the negative impacts this fiscal year from inflation, higher interest rates, and lower operating leverage.”
“Consumption remains soft in certain of our categories, and some retailers are continuing to reduce their orders as they sell down their inventory, Mininberg continued. “We are, however, encouraged to see trade inventory at some key retailers start to better align with sell through, as well as stabilization and modest improvement in market share for certain categories such as Beauty appliances.”
Mininberg added, “Consistent with our strategic choices throughout the transformation, our business segments will be even more focused on brand development, consumer-centric innovation and marketing. The RMOs will execute on go-to-market strategies and shared services will be even more centralized. We believe these and the other Pegasus workstreams will increase our effectiveness and the savings will provide fuel to reinvest in returning to growth under our value creation flywheel.”
Helen of Troy reported its “organic” business decrease primarily reflects lower sales in all segments due to lower consumer demand, shifts in consumer spending patterns, reduced orders from retail customers due to higher trade inventory levels, the unfavorable comparative impact of approximately $15 million from earlier-than-typical customer orders in the third quarter of fiscal 2022 as retailers accelerated orders to try to avoid supply chain disruptions during the prior year holiday season and a net sales revenue decline of $4.4 million in non-core business due to the sale of its Personal Care business. These factors were partially offset by the favorable impact of customer price increases related to rising freight and product costs, higher closeout channel sales in the Home & Outdoor segment and an increase in sales of humidification products in the Health & Wellness segment. The organic business decline was partially offset by the contribution from the acquisitions of Osprey of $43.3 million and Curlsmith of $13.1 million, or 9% to consolidated net sales revenue.
Consolidated third-quarter operating income by Helen of Troy was $77.2 million, compared to $90 in the year-earlier period. The company cited unfavorable operating leverage, restructuring charges of $10.5 million, the unfavorable impact of less Beauty segment sales within consolidated net sales revenue, a less favorable product mix within the Home & Outdoor segment due to the acquisition of Osprey, higher salary and wage costs, an increase in outbound freight costs, increased amortization expense, and higher share-based compensation expense. These factors were partially offset by a gain from insurance recoveries on damaged inventory of $9.7 million, reduced annual incentive compensation expense, a decrease in EPA compliance costs of $2.8 million, the favorable comparative impact of acquisition-related expense incurred in connection with the Osprey transaction during the prior year period, a more favorable customer mix within the Home & Outdoor segment, and a more favorable product mix within the Beauty segment primarily due to the acquisition of Curlsmith.
Helen of Troy’s net income in Q3 was $51.8 million, compared to $75.7 million a year earlier.