Will this quarter begin a long-awaited turnaround for troubled Helen of Troy (NASDAQ:HELE), the potentially value-priced consumer-products maker? Let's find out, Fools.

What the analysts say:

  • Buy, sell, or waffle?: Six analysts cover Helen, and all six rate it a hold.
  • Revenues: Revenues are expected to rise 5%, to $136.6 million.
  • Earnings: Earnings per share are expected to drop slightly year over year, from $0.30 to $0.28.

What management says:
Helen of Troy's management has been struggling for a while to grow sales in a substantial fashion, and last quarter was no different. CEO Gerald Rubin commented in the last quarter that the company continued to transition its housewares products to a new companywide resource-planning system and a new distribution center in Mississippi. Also, like many consumer-goods companies, the company is struggling with pricing pressures and the increased costs of basic product inputs. That's no small worry when penny-pinching Wal-Mart (NYSE:WMT) is a large part of your business.

On a more positive note, inventories declined about $10 million year over year, to $164 million. But with sales for the quarter at $130 million, inventories are still quite high. Of course, this is not new; Zeke Ashton pointed out similar issues years ago.

What management has done:

2/02

2/03

2/04

2/05

2/06

Sales

447.3

379.8

474.9

581.6

589.8

Inventory

100.3

100.8

104.1

137.5

168.4

Net Income

29.3

38.8

60.5

76.5

49.3
All numbers in millions of dollars. All data from the Helen of Troy website.

As you can see, Helen's financial results over the past few years have been rocky. Inventory levels have remained stubbornly high as a percentage of sales, ranging from 21% to 28%, despite Helen's sale of its Tactica brand, and its purchase of the OXO portfolio of brands. In contrast, Procter and Gamble (NYSE:PG) had much lower inventory levels (around 9% of sales) in the last fiscal year.

If inventory issues were the only nit to pick on this stock, I'd be quite interested. But as Stephen Simpson pointed out, management is overpaid, and there remains some lingering tax overhang from a Hong Kong tax dispute, with approximately $18.6 million in limbo for 2004 and 2005. The company had previously negotiated settlements with the Hong Kong review board for $32.1 million, covering taxes from 1995 to 2003.

One Fool says:
The company clearly has some issues to work through, and resolving them won't be easy. While the stock certainly is cheap on a P/E and a P/S basis, the business performance has to improve for the stock to be valued much higher than it is now. While there's something to be said for hoping for a turnaround from a troubled stock like this, I don't think its current management team is going to do the job.

Related companies:

  • Spectrum Brands (NYSE:SPC)
  • Church and Dwight (NYSE:CHD)
  • Unilever (NYSE:UL)
  • Alberto-Culver (NYSE:ACV)

Related Foolishness:

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Fool contributor Stephen Ellis doesn't hold shares in any companies mentioned. You can see his holdings for yourself . The Motley Fool has a carefully groomed disclosure policy .