Helen of Troy reports big dip in profits
dip in Q3 profits as sales also continue to dive on the back of a
highly competitive retail market and other adverse economic
conditions.
As in the second quarter, the company reported that conditions over the quarter were negatively impacted by declining consumer confidence, along with continued higher oil and energy costs. Chairman Gerald Rubin said beleived these factors had negatively impacted consumer spending, adding that this is also likely to impact fourth quarter results.
Sales for the quarter were down 4 per cent, from $205.68 million to $197.45 million, while net profit fell from $31.13 million to $22.6 million. On a nine month basis the sales figures looked better, with increasing by 0.3 per cent to $455.23 million, but net earnings were down from $64.46 million to $42.66 million.
"While we have seen some improvement in personal care sales over last quarter, it is still less of an improvement than we had hoped to see," Rubins said.
However, sales at the company's mainstay personal care division still dropped by 8.3 per cent for the year-to-date and 9.6 per cent for the quarter, in comparision to sales for the company's Houseware division where sales increased 20.7 per cent during the nine months.
As a result of the decreased sales and net profits, the company also pointed out that its gross margins had fallen as a proportion of the total turnover. Gross margins for the quarter fell from 48.0 per cent for the previous Q3 to reach 43.6 per cent this year.
The company also reported that it would probably be incurring a $1.8 million liability payment to the US Bankruptcy Court following its sale of the 55 per cent stake it held in the Tactica International beauty and homecare business back in May 2004.
Despite the many challenges the company has faced in the course of the financial year, there does remain cause for cautious optimism. Looking to the sales for the fourth and final quarter, the company is targeting a range of somewhere between $120-130 million, compared to $127.6 million the previous year, which should bring year-end sales in at $575-585 million.
For 2006 the company is targeting savings of up to $8 million on SG&A expenses, primarily in warehouse distribution and freight expense, combined with an increase of product placements with retailers should help to boost operating results.
In May last year the company announced that it was building a 1.2 million square foot distribution center in Southaven, Mississipi, aimed at expanding the company distributions needs for the OXO business. The facility is expected to be fully operational by the first quarter of 2006 and is the main reason why it is expecting that distribution costs will be reduced.
Based in El Paso, Texas, Helen of Troy sells brand names such as Vidal Sassoon, Revlon, Sea Breaze under licensing agreements. It also owns the OXO, Brut and Vitalis brand names, as well as its own ranges of hair and beauty care products
