HELE - Helen of Troy plummets after paring full-year outlook (update)

Helen of Troy ( NASDAQ: HELE ) tempered its outlook for 2023 citing a shift in consumer behavior, sparking a stark slide for the stock.

The Texas-based consumer brands company posted narrow beats on top and bottom lines for Q2, notching $2.27 in adjusted EPS alongside $521.4M in revenue. Analysts had anticipated about a 17% year over year decline in EPS to $2.21 and a 9.2% jump in revenue to $519.07M.

Despite the above consensus quarterly report, management forecasts for the remainder of the fiscal year were reeled in significantly. In particular, a double-digit sales decline is expected in both the third and fourth fiscal quarters.

“Although we reported results in-line with our expectations for the quarter, we see consumers increasingly adjusting their spending patterns in response to rising inflation and the impact of higher interest rates, particularly in our premium segments in some categories,” CEO Julien R. Mininberg said. “Additionally, retailers continue to adjust their inventories to better align with their updated sales forecasts. We expect the current external operating environment to remain highly challenging, causing us to lower our fiscal year 2023 outlook.”

The company now expects consolidated net sales to range from $2B to $2.05B from a prior forecast of $2.15B to $2.2B while adjusted diluted EPS guidance was reduced to a $9.00 to $9.40 range from a prior $9.85 to $10.35 expectation. Analyst consensus for revenue and EPS had stood at $2.16B and $10.06, respectively.

To mitigate the impacts of increased costs, the company outlined a global restructuring plan, entitled  “Project Pegasus”,  aimed at reducing costs and increasing efficiency in the company’s supply chain. Annualized pre-tax operating profit improvements of about $75M to $85M are expected to be garnered via the project starting in 2024, with gradual improvement through 2026.

“All of the Company's operating segments and shared services will be impacted by the plan. In addition, the Company has implemented plans to reduce inventory levels, increase inventory turns, and improve cash flow and working capital,” a company statement read. “The Company expects improvements related to these initiatives to begin in the second half of fiscal 2023 and to continue into fiscal 2024.”

Shares of Helen of Troy ( HELE ) plummeted 17% on Wednesday's market open, before paring losses to about 8.9% early in the trading session.

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