Does it still look like the wreck of the Hesperus, or will consumer products maker Helen of Troy (NASDAQ:HELE) make it safely to port when it releases Q3 2007 results on Tuesday, Jan. 9?

What analysts say:

  • Buy, sell, or waffle? Of the six analysts who cover Helen of Troy, four say you should tie yourself to the mast and hold, while two rate it a buy.
  • Revenues. The only squall blowing this company's way is the one keeping revenues to a tepid 3.6% increase, to $204.6 million.
  • Earnings. Earnings, however, are expected to set sail with 18% growth, to $0.85 per share.

What management says:
As Helen of Troy tries to reorganize itself in a more orderly fashion, it faces a dual pinch. One, its costs are higher from transitioning operations around the globe and moving into a new distribution facility; and two, it's being forced to accept tighter margins as both Wal-Mart (NYSE:WMT) and Target (NYSE:TGT) command a significant portion of the company's revenues. Even management was surprised by second-quarter results, but CEO Gerald Rubin said, "We still remain somewhat cautious about the second half of our fiscal year, due to various reports of holiday retail sales estimates."

What management does:
You can see how this has affected the company's profits. While gross margins (though they are declining) are but 4% lower than they were a year ago, operating margins are down 22% and net margins are off 28% from the year-ago period. While it may mean greater efficiency later on, right now it's causing a drag on performance.

Margin %

08/05

11/05

02/06

05/06

08/06

Gross

46.7

45.2

45.2

44.8

44.7

Op.

14.8

12.5

12.1

11.3

11.5

Net

10.7

9.4

8.4

7.7

7.7
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Slumping sales, weak holiday results, high inventories, overpaid executives. All of that adds up to a company in turmoil that might find itself foundering on the shoals of another disappointing earnings report. The stock got a boost from the surprising second-quarter report, jumping up 19% on the day, but don't expect that kind of reaction when the third-quarter numbers are released. Since that time, it has traded between $23 and $25 per share as the market waits to see if it can fashion back-to-back quarterly surprises.

Management forecast revenues of $600 million to $620 million for the full year, meaning they're expecting only 5% growth at most. Last year, third-quarter sales fell 4%; they have traditionally represented one-third of the company's full-year revenues. If those trends held, you'd expect the analysts to have it right, except that Q4 would be even weaker at only 2% growth. No matter how you slice it, it looks like we may have to start searching for the lifeboats.

Competitors:

  • Alberto-Culver (NYSE:ACV)
  • Lifetime Brands (NASDAQ:LCUT)
  • Newell Rubbermaid (NYSE:NWL)
  • Spectrum Brands (NYSE:SPC)

Related Foolishness:

Helen of Troy is a two-star company at Motley Fool CAPS, the Fool's new stock-rating service. Join today to see why investors think this company might still be the belle of the ball. It's free!

Fool contributor Rich Duprey owns shares of Wal-Mart, a recommendation of Motley Fool Inside Value, but does not own any of the other stocks mentioned in this article. You can see his holdings here. Newell Rubbermaid is an Income Investor pick. The Motley Fool has a disclosure policy.