Helen of Troy Limited HELE is one of the several consumer staples companies, which appears to be poised amid an otherwise jeopardized economic landscape. The company, focusing on Leadership Brands and digital efforts, is gaining on solid demand in its Health and Home unit amid the pandemic.
Markedly, the Zacks Rank #2 (Buy) stock has rallied 37.5% in the past six months compared with the industry’s growth of 16.6%. Also, the company has comfortably outdone the Zacks Consumer Staples sector and the S&P 500’s respective gains of 10.6% and 26.1%. Let’s delve deeper into the factors, which are likely to continue aiding this consumer products provider. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Health & Home Unit Gains on Solid Demand
Helen of Troy’s first-quarter fiscal 2021 results benefited from strength in the Health and Home unit, thanks to higher demand amid the pandemic. Also, solid online sales and contributions from Drybar Products’ acquisition were drivers. During the quarter, the top and the bottom line increased year over year and beat the Zacks Consensus Estimate. Net sales in the Health & Home segment advanced 29.1%, owing to Organic business growth of 30.2%. Organic sales were backed by burgeoning demand for healthy living and healthcare products across domestic and international markets, both in stores and online. The store closure impact was lesser in the segment as core retail giants like Walmart WMT, Target TGT and Amazon AMZN, to name a few, and the drug store channel remained operational and saw high traffic.
Strength in Leadership Brands
The company is focused on making solid investments in its “Leadership Brands,” which have been delivering robust results. To this end, the company acquired Drybar Products in January 2020, which made favorable contributions to the company during the first quarter of fiscal 2021. During the quarter, sales from the company’s eight Leadership Brands increased 15.7%, primarily driven by double-digit improvements in all Health & Home leadership brands. We note that, as part of its strategy of maintaining focus on Leadership Brands, the company had decided to divest some assets from the mass-market personal care business (Personal Care) during the fourth quarter of fiscal 2020. The company expects the divestiture to close in fiscal 2021.
Transformation Plan Underway
Helen of Troy is on track with Phase II of its multi-year transformation plan, which includes continued investments in Leadership Brands, with plans to grow the same through customer-friendly innovations, international expansion and acquisitions. In this context, the company recently completed the acquisition of Drybar Products, which is driving the Beauty segment. Also, the company aims to enhance its operating efficiency and shared service facility. Long-term goals of Helen of Troy’s transformation plan include better organic sales growth, continued margin expansion and efficient capital allocation.
Digital Efforts on Track
Helen of Troy is likely to keep gaining from its consistent online sales and digital marketing efforts. Notably, online sales advanced 33% year over year in the first quarter of fiscal 2021 and contributed 28% to the company’s top line, up from around 24% in the preceding quarter. Management is on track to make continued investments in this arena, in an attempt to keep pace with the evolving consumer environment. In fact, the company is persistently augmenting its digital presence through sophisticated marketing plans and improved content. The company stated that online development has been a key area of focus for its transformation plan — both Phase 1 and 2.
Without a doubt, Helen of Troy is set to sustain its stellar performance.