Strong performance in the beauty and housewares merchandise categories helped Helen of Troy beat Wall Street first-quarter financial estimates.
The company posted net income of $57 million, or $2.31 per diluted share, versus $60.3 million, or $2.37 per diluted share, in the year-before period.
Adjusted for extraordinary charges, net income was $85.8 million, or $3.48 per diluted share, compared to $64.2 million, or $2.53 per diluted share in the quarter a year previous.
Helen of Troy adjusted diluted earnings per share topped a MarketBeat-published analyst average estimate of $2.63. The company beat a revenue estimate of $438.91 million as well.
Net sales were $541.2 million versus $420.8 million in the year-earlier quarter, according to Helen of Troy. Operating income was $64.8 million versus $57 million for the period in the prior year.
The company also noted it is in discussions with the United States Environmental Protection Agency regarding concerns that packaging claims on certain products in its U.S. water and air filtration and a limited subset of humidifier products are not compliant with the agency’s strict interpretation of specific regulations. On May 27, Helen of Troy voluntarily implemented a temporary stop shipment action while it continues to work with the EPA to resolve outstanding concerns on the affected products, it indicated. The EPA has not raised any product quality, safety or performance issues.
The company has already addressed the EPA’s concerns on the water filtration products by making modest changes to packaging and has resumed shipping those products. The company expects to similarly resolve the EPA’s concerns on air and humidification packaging and then resume shipping of those products as soon as operationally possible.
During the first quarter of fiscal 2022, Helen of Troy recorded a $13.1 million charge to reflect the costs of its compliance plans with respect to inventory on hand at the end of the period, the company reported.
In announcing the financial results, Julien Mininberg, Helen of Troy’s CEO, said. “We delivered an outstanding first quarter, with even higher sales growth and stronger profitability than we expected. The 28.6% sales growth was broad based, with beauty and housewares leading the way as re-openings drove store traffic and our brands continued to distinguish themselves with consumers. Health and home also grew, surpassing the very large COVID-related first quarter base laid down a year ago. International sales grew even faster than the fleet average as this strategic focus area benefited from prior flywheel investments. We grew adjusted EPS by 37.5%, as the very strong sales growth more than offset normalized spending versus last year and headwinds from widespread inflation affecting nearly all input costs including materials, labor and transportation.”
In fiscal 2022 to date, he said, “we have continued to take actions intended to drive long-term value for shareholders. We divested our personal care business in line with our long-term strategy to focus on our leadership brands, finalized a land purchase in Gallaway, TN, to build a state-of-the-art distribution center which will have high levels of automation and scalable direct-to-consumer capability, and re-purchased just under 2% of our stock. We also secured more inventory ahead of the more recent cost increases in the market, positioning us well to continue to meet demand and better manage the current period of inflation and global supply chain disruption.
For the full year, Mininberg said, Helen of Troy offered an outlook that envisioned overcoming short-term challenges and returning to a more normal operational dynamic.
“Our housewares and beauty segments are each projecting healthy growth in revenue and profitability on top of their strong growth last year,” he said. “Our projection in health and home includes the estimated impact of lost sales volume related to the EPA matter. Our rapid response team is working to bring this to resolution as quickly as possible. Excluding the impact of the EPA matter, we were on track to achieve growth in both core net sales and core adjusted EPS, which is in line with the thinking we communicated in April.
“Longer term, we remain committed to our Phase II Transformation Plan and expect to return to our Phase II targets of average annual organic revenue growth of 3% and adjusted EPS growth of 8% in fiscal 2023 and fiscal 2024. We also remain actively focused on acquisition opportunities to further accelerate long-term value creation.”