Helen of Troy, the owner of Osprey Packs, Hydro Flask, and myriad other consumer brands, recorded softer than expected quarterly results, with a significant portion of the weakness coming in the outdoor category, specifically the Osprey Packs business, the company said.
Helen of Troy faced other headwinds, including problems with implementing a new ERP system and with getting a new distribution center up and running, a drop in demand in certain beauty and wellness categories, in addition to general consumer spending softness.
However, the Osprey slowdown in the outdoor channel caught the company off guard, executives indicated.
“The biggest surprise was really the acceleration of the outdoor slowdown,” CFO Brian Grass said on an earnings conference call Tuesday. “That was something we were not expecting. Osprey was growing. Osprey was gaining share. By the way, it continues to gain share. The category is down, but it’s gaining share as the category declines. And then we did see a fairly sudden and abrupt adjustment in order patterns with two key retailers. So those were big adjustments that we were not expecting.”
Osprey has been a major bright spot for Helen of Troy since the company acquired the brand in late 2021 for $414 million. The brand has benefitted from the return of travel post pandemic and general strength in the category.
There were bright spots for Osprey in the quarter as well.
“The spring introduction of our Escapist on-bike collection was well received and gained immediate traction with bike and outdoor media outlets like Gear Junkie, Bicycle Retailer and Bike Groomer,” Helen of Troy CEO Noel Geoffroy said on the earnings call. “Also, recent additions to our extended fit collection generated standout engagement on social media in the quarter.”
Hydro Flask Expands Beyond Outdoor
Hydro Flask was not as impacted by the outdoor slowdown, in part because it has broadened its distribution and its product range to appeal to a wider customer base, Geoffroy said.
“Hydro Flask has embraced the shift in the category with new on-trend content that depicts young people in a range of activities extending beyond our traditional positioning,” she said. “We have launched new designs that appeal to more consumers, such as the popular Sugar Crush line with a waterfall of pastel colors and the two-tone Ombre design that both tap into the fashion sense of our target consumer. We also have the timely Limited Edition USA water bottles for Americans to use as they cheer on our athletes this summer.”
In response to a question from an analyst, Geoffroy elaborated on how Hydro Flask is expanding its aesthetic beyond outdoors.
“These are very, very different looking designs than you would have seen from Hydro Flask probably just six months ago, where everything was more of an earthy tone and very focused on hiking and outdoor activities,” she said. “Now it’s a much broader view of where the category is and we’re seeing positive traction from that. As I mentioned, we’re now growing shares in the tumbler section. And in May, we’re starting to see a share trend uptick across the entire insulated beverage category and I think we’ll continue to see that momentum and we’ll continue to see a broadening distribution footprint that’s going to help us get back on track for this brand.”
While Hydro Flask performed below expectations in the U.S. during the quarter, the brand grew sales in all international markets.
Hydro Flask is also expanding its distribution in general, including to premium grocery stores, executives said.
Helen of Troy Q1 Results
Net sales: down 12.2%, to $416.8 million
Net income: down 72% to $6.2 million
Reducing Full Year Outlook
As a result of the softer than expected quarter, Helen of Troy reduced its outlook for the full year.
The company now expects revenue to range from $1.885 billion to $1.935 billion, a drop of 6% to 3.5%. Previously, Helen of Troy had forecast a decline of 2% to growth of 1%.
“New headwinds emerged in the first quarter and some existing headwinds became more pronounced since we spoke to you last,” CFO Grass told analysts on the earnings call. “These include a combination of executional challenges, a global outdoor slowdown, increased promotional activity, softer and more variable retail replenishment, and greater macro pressure and uncertainty. Many of these became more pronounced towards the end of the first quarter and some continued to evolve.”
