EL PASO, Texas--(BUSINESS WIRE)--Jul 9, 2018--Helen of Troy Limited (NASDAQ: HELE), designer, developer and worldwide marketer of consumer brand-name housewares, health and home and beauty products, today reported results for the three-month period ended May 31, 2018. Following the divestiture of Healthy Directions on December 20, 2017, the Company no longer consolidates the Nutritional Supplements segment’s operating results. The former segment’s operating results are included in the Company’s financial statements and classified as discontinued operations for all periods presented.

Executive Summary – First Quarter of Fiscal 2019

Consolidated net sales revenue increase of 9.0%, including: An increase in Leadership Brand net sales of approximately 14.7%An increase in online channel net sales of approximately 30.3%Core business growth of 7.9% GAAP operating income of $43.3 million, or 12.2% of net sales, which includes $1.7 million in restructuring charges, compared to $30.6 million, or 9.4% of net sales, which included $4.0 million in pre-tax non-cash impairment charges, in the same period last year Non-GAAP adjusted operating income growth of 30.4% to $55.5 million, or 15.6% of net sales, compared to $42.6 million, or 13.1% of net sales, in the same period last year GAAP diluted EPS from continuing operations of $1.43, which includes $0.06 per share of restructuring charges, compared to GAAP diluted EPS from continuing operations of $1.00 in the same period last year, which included $0.13 per share of impairment charges Non-GAAP adjusted diluted EPS from continuing operations growth of 32.6% to $1.87, compared to $1.41 in the same period last year Net cash provided by operating activities declined $10.9 million primarily due to a $15 million settlement payment made during the quarter Repurchased 407,025 shares of common stock in the open market during the quarter for $37.1 million

Julien R. Mininberg, Chief Executive Officer, stated: “We continue to see excellent momentum in the business, which led to a strong performance and a great start to our new fiscal year. Our strategic choices and ongoing productivity enhancements from the transformation plan are generating healthy results, with consolidated net sales increasing 9.0% and adjusted diluted EPS from continuing operations growing 32.6%. Investing in our Leadership Brands, our infrastructure and our people continues to pay off. Our Leadership Brands grew 14.7% and our digital initiatives contributed to online sales growth of 30% in the quarter. We were particularly pleased to see healthy customer replenishment following the strong sell-through of our products in the prior quarter. This in turn helped maintain healthy inventory levels in our operation and at retail. The sweeter mix of our Leadership Brands, the timing of marketing spend, and further efficiencies generated from our shared services initiatives contributed to higher adjusted operating margins in all three of our business segments. During the quarter we also repurchased over 400,000 of our shares, the impact of which is now reflected in our revised annual EPS outlook.”

Mr. Mininberg continued: “To continue improving our shared services, Project Refuel has now expanded to include the realignment and streamlining of our supply chain structure, which we believe will help mitigate potential cost headwinds in the remainder of this fiscal year and further strengthen our profitability longer term. Our strategies are working and we remain confident in our ability to deliver growth and long-term shareholder value.”

Consolidated Operating Results - First Quarter Fiscal 2019 Compared to First Quarter Fiscal 2018

Consolidated net sales revenue increased 9.0% to $354.7 million compared to $325.5 million, which includes a core business increase of 7.9% primarily due to growth in international sales, new product introductions, an increase in domestic brick and mortar sales, and strong growth in online sales. The net sales increase also includes an increase of 1.1% from foreign currency fluctuations. During the first quarter of fiscal 2019, the Company adopted the new revenue recognition accounting standard ASU 2014-09 “Revenue from Contracts with Customers”. As a result, the Company reclassified certain expenses from SG&A to a reduction of net sales revenue. Amounts in prior periods have been reclassified to conform with current period presentation. Please refer to Note 7 of the accompanying schedules to the press release for additional information. Consolidated gross profit margin increased 0.9 percentage points to 41.3% compared to 40.4%. The increase in consolidated gross profit margin is primarily due to favorable product mix, growth in the Company’s Leadership Brands and the favorable impact of net foreign currency fluctuations. These factors were partially offset by unfavorable channel mix and an increase in promotional programs. Consolidated SG&A as a percentage of sales decreased by 1.2 percentage points to 28.6% of net sales compared to 29.8%. The decrease is primarily due to improved distribution and logistics efficiency, lower legal expense, lower amortization expense, lower media advertising expense, and the impact that higher overall net sales had on operating leverage. These factors were partially offset by higher personnel and share-based compensation expense and the unfavorable comparative impact of foreign currency exchange and forward contract settlements. Operating income was $43.3 million, or 12.2% of net sales, compared to $30.6 million, or 9.4% of net sales, in the same period last year. Operating income for the first quarter of fiscal 2019 includes pre-tax restructuring charges of $1.7 million, compared to pre-tax non-cash asset impairment charges of $4.0 million in the same period last year. The combined effect of these items favorably impacted the year-over-year comparison of operating margin by 0.7 percentage points. The remaining improvement in consolidated operating margin primarily reflects a higher mix of Leadership Brand sales at a higher operating margin, lower media advertising expense, improved distribution and logistics efficiency, and the impact that higher overall net sales had on operating leverage. These factors were partially offset by higher personnel and share-based compensation expense and the unfavorable comparative impact of foreign currency exchange and forward contract settlements. Our effective tax rate was 6.2%, which includes tax benefits totaling $1.1 million from the lapse in the statute of limitations related to uncertain tax positions and share-based compensation settlements. This compares to an effective tax rate of (1.1)% in the same period last year, which includes tax benefits totaling $3.1 million from the lapse in the statute of limitations related to uncertain tax positions and share-based compensation settlements. Income from continuing operations was $38.2 million, or $1.43 per diluted share on 26.6 million weighted average shares outstanding, compared to $27.3 million, or $1.00 per diluted share on 27.2 million weighted average diluted shares outstanding. Income from continuing operations for the first quarter of fiscal 2019 included after-tax restructuring charges of $1.6 million ($0.06 per share). This compares to after-tax non-cash asset impairment charges of $3.6 million ($0.13 per share) in the same period last year. Loss from discontinued operations, net of tax, was ($0.4) million compared to ($21.4) in the same period last year. Diluted loss per share from discontinued operations was ($0.01) compared to ($0.79) in the same period last year. Adjusted EBITDA (EBITDA excluding restructuring charges, non-cash asset impairment charges, and non‐cash share based compensation, as applicable) increased 28.6% to $59.4 million compared to $46.2 million in the same period last year.

On an adjusted basis for the first quarters of fiscal 2019 and 2018, excluding restructuring charges, non-cash asset impairment charges, non‐cash share based compensation, and non-cash amortization of intangible assets, as applicable:

Adjusted operating income was $55.5 million, or 15.6% of net sales, compared to $42.6 million, or 13.1% of net sales. The 2.5 percentage point increase in adjusted operating margin primarily reflects a higher mix of Leadership Brand sales at a higher operating margin, lower media advertising expense, improved distribution and logistics efficiency, and the impact that higher overall net sales had on operating leverage. These factors were partially offset by higher personnel expense and the unfavorable comparative impact of foreign currency exchange and forward contract settlements. Adjusted income from continuing operations increased $11.5 million, or 30.1%, to $49.8 million, or $1.87 per diluted share, compared to $38.3 million, or $1.41 per diluted share. The 32.6% increase in adjusted diluted EPS from continuing operations primarily reflects the impact of higher adjusted operating income in all three of the Company’s business segments, lower interest expense and lower weighted average diluted shares outstanding year-over-year.

Segment Operating Results - First Quarter Fiscal 2019 Compared to First Quarter Fiscal 2018

Housewares net sales increased by 18.9% reflecting incremental distribution with existing domestic customers, an increase in online sales, new product introductions for both the Hydro Flask and OXO brands, an increase in sales into the club channel, an acceleration of Hydro Flask orders by retailers in advance of the Hydro Flask integration into the Helen of Troy ERP system, and international growth. Segment net sales also benefitted from the favorable impact of net foreign currency fluctuations of approximately $0.4 million, or 0.4%. These factors were partially offset by lower store traffic and soft consumer spending at certain traditional brick and mortar retailers. GAAP operating margin was 18.9% compared to 18.2%. The increase in operating margin is primarily due to a higher mix of Hydro Flask sales at a higher operating margin, lower overall advertising expense, improved distribution and logistics efficiency, and the favorable impact of increased operating leverage from net sales growth. These factors were partially offset by unfavorable margin impact of sales into the club channel and the impact of restructuring charges. Segment adjusted operating income increased 29.9% to $25.4 million, or 21.7% of segment net sales, compared to $19.6 million, or 19.8% of segment net sales, in the same period last year.

Health & Home net sales increased 10.2% reflecting expanded international distribution and higher online sales. Segment net sales also benefitted from the favorable impact of net foreign currency fluctuations of approximately $2.8 million, or 1.9%. These factors were partially offset by the unfavorable comparative impact from the retail fill-in of a new product introduction in the same period last year. GAAP operating margin was 12.0% compared to 9.6%. The increase in operating margin reflects a favorable margin mix, improved distribution and logistics efficiency, and increased operating leverage from net sales growth. These factors were partially offset by higher personnel and share-based compensation expense, the unfavorable comparative impact of foreign currency exchange and forward contract settlements, restructuring charges, and higher product liability expense. Segment adjusted operating income increased 37.9% to $25.0 million, or 15.3% of segment net sales, compared to $18.2 million, or 12.2% of segment net sales, in the same period last year.

Beauty net sales decreased 5.8% primarily reflecting a decline in brick and mortar, which more than offset continued momentum in the online channel. Segment net sales were also impacted by the unfavorable comparison from the retail fill-in of new product introductions in the same period last year, as well as the impact from the rationalization of certain brands and products. Segment net sales were favorably impacted by net foreign currency fluctuations of approximately $0.3 million, or 0.4%. GAAP operating margin was 2.0% compared to (2.0)%. The first quarter of fiscal 2019 includes restructuring charges of $0.6 million, compared to asset impairment charges of $4.0 million in the same period last year, which had a combined favorable impact on the year-over-year comparison of operating margin of 4.3 percentage points. The remaining decline in operating margin is primarily due to less favorable sales mix, lower operating leverage, higher share-based compensation expense, and the unfavorable comparative impact of foreign currency exchange and forward contract settlements, partially offset by improved distribution and logistics efficiency, lower media advertising expense and cost savings from Project Refuel. Segment adjusted operating income improved 3.9% to $5.0 million, or 6.8% of segment net sales, compared to $4.9 million, or 6.2% of segment net sales, in the same period last year.

Balance Sheet and Cash Flow Highlights - First Quarter Fiscal 2019 Compared to First Quarter Fiscal 2018

Cash and cash equivalents totaled $16.9 million, compared to $17.1 million Total short- and long-term debt was $300.1 million, compared to $453.8 million, a net decrease of $153.7 million Accounts receivable turnover was 62.6 days, compared to 60.4 days Inventory was $256.3 million, compared to $304.9 million, a net decrease of 16.0%. Inventory turnover was 3.1 times compared to 2.8 times Net cash provided by operating activities declined $10.9 million to $28.9 million primarily due to a settlement payment of $15 million made during the first quarter of fiscal 2019

Fiscal 2019 Annual Outlook

For fiscal 2019, the Company continues to expect consolidated net sales revenue in the range of $1.485 to $1.510 billion, which implies consolidated sales growth of 0.4% to 2.1% after accounting for the expected impact from the adoption of ASU 2014-09 “Revenue from Contracts with Customers” (Revenue Recognition Standard) in fiscal 2019 with conforming reclassifications to fiscal 2018. Please refer to the table entitled “Fiscal Year 2019 Outlook for Net Sales Revenue After Adoption of Revenue Recognition Standard” in the accompanying tables to this press release for additional information.

The Company’s net sales outlook assumes the severity of the cough/cold/flu season will be in line with historical averages, which unfavorably impacts the year-over-year comparison by 1.1%. The Company’s net sales outlook also assumes that June 2018 foreign currency exchange rates will remain constant for the remainder of the fiscal year. Finally, the Company’s net sales outlook reflects the following expectations by segment:

Housewares net sales growth in the mid-single digits; Health & Home net sales growth in the low-single digits, with an unfavorable impact of approximately 2.5% from the average cough/cold/flu season assumption; and Beauty net sales decline in the low- to mid-single digits.

Reflecting the impact of share repurchases in the first quarter of fiscal 2019, the Company now expects consolidated GAAP diluted EPS from continuing operations of $6.27 to $6.42 and non-GAAP adjusted diluted EPS from continuing operations in the range of $7.45 to $7.70, which excludes any asset impairment charges, restructuring charges, share-based compensation expense and intangible asset amortization expense.

The Company continues to expect the year-over-year comparison of adjusted diluted EPS from continuing operations to be impacted by an expected increase in growth investments in support of the Company’s Leadership Brands of 14% to 18% in fiscal 2019. The year-over-year comparison is also unfavorably impacted by approximately $0.12 to $0.14 from the average cough/cold/flu season assumption and approximately $0.15 from fiscal 2018 tax benefits that are not expected to repeat in fiscal 2019.

The Company’s diluted EPS from continuing operations outlook assumes that June 2018 foreign currency exchange rates will remain constant for the remainder of the fiscal year. The diluted earnings per share outlook is based on an updated estimated weighted average diluted shares outstanding of 26.6 million.

The Company continues to expect net cash provided by operating activities growth in the range of 10% to 12% for fiscal 2019. The Company expects capital expenditures in the range of $30.0 million to $35.0 million, which includes approximately $15.0 million in expected leasehold improvements from multiple office relocations not expected to repeat in the near future.

As previously announced, the Company has initiated Project Refuel, which is now targeting annualized profit improvement of approximately $8.0 million to $10.0 million over the duration of the plan. During the first quarter of fiscal 2019, the Company expanded Project Refuel to include the realignment and streamlining of its supply chain structure. The plan is estimated to be completed by the first quarter of fiscal 2020, and the Company now expects to incur total cumulative restructuring charges in the range of $4.0 million to $5.5 million over the period of the plan.

The Company continues to expect a reported GAAP effective tax rate range of 8.9% to 10.9%, and an adjusted effective tax rate range of 8.3% to 10.3% for the full fiscal year 2019. The Company’s outlook assumes that tax benefits of approximately $4.1 million recorded in fiscal 2018 will not repeat in fiscal 2019, which unfavorably impacts the year over year tax rate comparison by approximately 2.1 percentage points. Please refer to the schedule entitled “Effective Tax Rate (GAAP) and Adjusted Effective Tax Rate (Non-GAAP)” in the accompanying tables to this press release.

The likelihood and potential impact of any fiscal 2019 acquisitions and divestitures, future asset impairment charges, future foreign currency fluctuations, or further share repurchases are unknown and cannot be reasonably estimated; therefore, they are not included in the Company’s sales and earnings outlook.

Conference Call and Webcast

The Company will conduct a teleconference in conjunction with today’s earnings release. The teleconference begins at 9:00 a.m. Eastern Time today, Monday, July 9, 2018. Investors and analysts interested in participating in the call are invited to dial (800) 239-9838 approximately ten minutes prior to the start of the call. The conference call will also be webcast live at: http://investor.hotus.com/. A telephone replay of this call will be available at 12:00 p.m. Eastern Time on July 9, 2018 until 11:59 p.m. Eastern Time on July 16, 2018 and can be accessed by dialing (844) 512-2921 and entering replay pin number 5493473. A replay of the webcast will remain available on the website for one year.

Non-GAAP Financial Measures

The Company reports and discusses its operating results using financial measures consistent with accounting principles generally accepted in the United States of America (“GAAP”). To supplement its presentation, the Company discloses certain financial measures that may be considered non-GAAP financial measures, such as Leadership Brand net sales, adjusted operating income, adjusted operating margin, adjusted effective tax rate, adjusted income, adjusted diluted earnings per share, EBITDA and adjusted EBITDA, which are presented in accompanying tables to this press release along with a reconciliation of these financial measures to their corresponding GAAP-based measures presented in the Company’s condensed consolidated statements of income. All references to our continuing operations exclude the Nutritional Supplements segment.

About Helen of Troy Limited

Helen of Troy Limited (NASDAQ: HELE) is a leading global consumer products company offering creative solutions for its customers through a strong portfolio of well-recognized and widely-trusted brands, including OXO, Hydro Flask, Vicks, Braun, Honeywell, PUR, and Hot Tools. All trademarks herein belong to Helen of Troy Limited (or its affiliates) and/or are used under license from their respective licensors.

For more information about Helen of Troy, please visit

Forward Looking Statements

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