Helen of Troy (HELE, Financial) saw its stock drop significantly following a disappointing 3Q25 earnings report. Despite exceeding EPS expectations for the second consecutive quarter, revenue fell short, and the company slightly lowered its FY25 sales outlook. Persisting inflation and a promotional retail environment have pressured sales, particularly in the Beauty & Wellness segment.
- Beauty & Wellness sales dropped over 9% year-over-year in Q3 to $284.6 million. The segment, which includes brands like Vicks, Revlon, Braun, and Hot Tools, suffered from a weak winter and illness season and reduced demand for hair appliances. The illness season was deemed the weakest in the U.S. in the past eight years, excluding 2020 and 2021, affecting Vicks product sales.
- HELE's recent $240 million acquisition of Olive & June, a nail care brand, is expected to boost the Beauty & Wellness segment. Olive & June is projected to contribute $17-$18 million in high-margin sales to FY25, enhancing adjusted EPS.
- The Home & Outdoors segment performed better, with a 4.3% revenue increase to $246.1 million, driven by strong sales of Hydro Flask insulated beverageware products. An expanded Hydro Flask product range at Costco (COST, Financial) and robust international sales supported this growth.
- HELE's adjusted operating margin improved, expanding by 30 basis points year-over-year to 16.6%, after a 270 basis point drop last quarter. This recovery is attributed to the "Project Pegasus" restructuring plan initiated in October 2022, aimed at optimizing the brand portfolio, streamlining operations, and enhancing cost savings. The plan is on track to deliver $26-$30 million in savings by FY25's end.
The main takeaway is that Helen of Troy faces mixed business conditions, with the slowdown in discretionary spending impacting the Beauty & Wellness segment. While there are positives, such as the Hydro Flask brand, the stock may remain under pressure until the Beauty & Wellness segment shows significant improvement.
