What was supposed to be another fairly normal, nothing-to-see-here earnings report from Helen of Troy yesterday morning turned into a scene of chaos and…
What was supposed to be another fairly normal, nothing-to-see-here earnings report from Helen of Troy yesterday morning turned into a scene of chaos and destruction. The company lost almostafter revealing a surprise 12% drop in revenue from a year earlier, and a 72% drop in earnings per share. Wow.
It was the company's first revenue miss in more than five years, and only the second such profit miss, according to MarketWatch and FactSet. The shares--which went public more than fifty years ago--had their worst dayHelen owns a variety of well-known home and beauty brands, including Oxo, Revlon, Hot Tools, Bed Head, Vicks, Pur, and drybar. Weakness was particularly acute in beauty and wellness, where sales dropped 15% year-on-year.
"We are disappointed with the start to our fiscal year," the CEO said in their earnings release. He cited"an unusual number of internal and external challenges in the quarter," including some shipping disruptions. And perhaps there were some idiosyncratic reasons for their weakness. But investors aren't buying it.What the outsized market reaction tells you is that Helen is now perceived to be one of the more vulnerable names in a weakening consumer environment.
But it actually corroborates the slowdown certain brands are experiencing and the broader consumer slowdown we appear to be in. Jim Paulsen has been tracking the"This is happening right now. More intriguingly, it comes as corporate credit spreads have remained fairly low. Normally, in a slowdown, they'd start rising, especially on the"junkier" end of the spectrum.". In 2015-16, spreads widened but Walmart didn't break out, and sure enough we avoided recession.
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