Helen Of Troy Falls Despite Strong Guidance Helen Of Troy (NASDAQ: HELE) reported a truly astonishing quarter relative to the analyst's estimates and has proven one thing if nothing else; the company is navigating the supply chain...

Helen Of Troy Reports Strong Momentum In Q3

Helen Of Troy (NASDAQ: HELE) reported a truly astonishing quarter relative to the analyst's estimates and has proven one thing if nothing else; the company is navigating the supply chain and inflationary headwinds with grace and style. Not only is revenue coming in far above expectations but margins are stronger than expected and driving very strong results on the bottom line. Those results are being amplified by growth efforts as well, the company used its cash to buy Osprey packs at the end of December which is a move expected to be accretive as soon as the current quarter.

Helen Of Troy Blows Past Consensus, Guides Higher

Helen of Troy had a blowout quarter even with diminished tailwinds in the ventilation/filtration segment and the impact of product disruptions related to last year's EPA issues. The company, whose brands include OXO, Good Grips, Vicks, and Revlon reported $624.88 million in consolidated revenue for a decline of 2.0% versus last year. We're not happy seeing a net decline in revenue but the company reported a 34% increase last year and a company record so the give-back isn't that bad. In fact, the revenue also beats the Marketbeat.com consensus estimate by 1200 basis points so is much stronger than expected.

Core sales, sales adjusted for divestitures and acquisitions, are up 0.4% and 31.6% over last year with strength in most segments. The core Beauty segment led with a gain of 15.3% and the Housewares segment grew by 10.7% but Health and Home fell -18.5%. eCommerce, a driver of growth, fell -7.4% but is up 23.7% over 2019.

Moving on to the margins, the company experienced a 130 basis point decline in adjusted gross margin and a 140 basis point decline in the adjusted operating margin but both were less than expected. The operating margin came in at 14.4% allowing the company to leverage is revenue strength to the bottom line as well. The GAAP and adjusted EPS both fell versus last year but the $3.10 in GAAP EPS beat by $0.33 and the $3.72 in adjusted EPS beat by $0.54.

Helen of Troy also raised guidance and in a way that makes us believe margins will continue to hold up in the Q4 period. The company upped its guidance for core revenue to a range of $2.060 to $2.080 billion versus the $2.07 Marketbeat.com consensus with EPS in a range of $11.55 to $11.75 versus the $11.36 expected by the analysts.

Helen Of Troy's Balance Sheet Remains Strong

Helen of Troy's balance sheet remains strong allowing the company to fund much of its own growth. The purchase of Osprey was made with cash on hand and some credit leaving the cash balance down a bit from last year, about $115 million to $44.3 million, but there is an offsetting factor. The offsetting factor is inventory which increased by $200 million to $585 million setting the company up for a very strong Q4 period.

The Technical Outlook: Helen of Troy Falls To Support

Shares of Helen of Troy fell in the wake of the Q3 report but support appears to be holding above at the $235 level. This is consistent with previous resistance and should be able to maintain prices. If not, this stock may fall to the $230 or the $220 level before finding firm support. Assuming that $235 does hold up, we see this stock moving sideways within its recently set range for the near to short-term at least.