Executives at the company in charge of products for brands such as OXO, Revlon, Honeywell and Vicks had plenty of good things to say about the first quarter of their fiscal year, but rising supply chain costs and trouble with the U.S. Environmental Protection Agency (EPA) could mean a deflated fiscal year despite consumers’ return to in-store shopping.
Helen of Troy said Thursday (July 8) it saw $541 million in revenue, a 29 percent year-over-year increase driven primarily by higher brick-and-mortar sales of the company’s beauty and housewares products, including facial, skincare and haircare appliances as well as water bottles, storage containers and household cleaning products.
“Our ability to win across channels was on display as consumers coming out of lockdown rebalanced between brick-and-mortar and online,” CEO Julien Mininberg told analysts.
The $5 billion company last quarter also finalized a land purchase in Tennessee for a new 2 million square-foot distribution center with “high levels of automation and scalable direct-to-consumer capability.”
Helen of Troy said, though, that operating income was impacted by rising freight costs, container supply shortages and higher distribution expenses — supply chain issues that show little signs of slowing as gas prices continue to rise.
Environmental Trouble
The company is also in the midst of resolving compliance issues with the EPA regarding claims on the packaging of certain air and water filtration products. Helen of Troy said the EPA has not raised any product quality or safety issues, but the issue was more about the EPA’s “strict interpretation of specific regulations,” according to Mininberg.
Still, the company was forced to stop shipment of these health and home products at the end of May. Shipments of impacted water filtration products resumed this week after the EPA approved new labeling claims, but air filtration and humidification products are still on hold.
The EPA, at Helen of Troy’s request, also issued a “Stop Sale, Use or Removal Order” last week, which allows the company to move certain products among its warehouses and “will facilitate rework” of the affected packaging.
In addition to a $13.1 million write-off of obsolete packaging, Helen of Troy will likely see decreased sales as products are pulled off the shelves. Mininberg said sales were not impacted in the first quarter, but the company expects “significant headwinds” over the next several months.
Still, Helen of Troy said it has made “meaningful progress” toward a final resolution with the EPA.
The environmental issue for Helen of Troy comes at a time when brands and retailers are increasingly looking to be more environmentally friendly and implement sustainable practices in an attempt to lure eco-minded customers.
Looking Ahead
For the rest of the fiscal year, which ends in February for Helen of Troy, the company expects housewares net sales to grow by 7 percent to 9 percent, while health and home product net sales are expected to decline by 24 percent to 27 percent; between 12 and 15 percent of the decline is related to the issue with the EPA.
Overall, core net sales revenue is expected to be approximately $1.9 billion, a decline of at least 4 percent.
The forecast assumes that the severity of cold and flu season returns to pre-COVID levels, and while some have suggested that Americans continue to wear masks to reduce the likelihood of spreading respiratory-borne illnesses, infectious disease experts have already seen an uptick in seasonal viruses.
Mininberg said the company may also look for acquisition opportunities to fuel further growth.
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