Helen of Troy Torpedoed

Helen of Troy (Nasdaq: HELE  ) , the consumer products maker, was the toast of the town last quarter, but was a bit cautious about extending the good times into the second half of the year. That caution was warranted, but company execs still ended up with egg on their face as they had to take down guidance significantly for the full year this quarter -- guidance they only reaffirmed last quarter. The lowered numbers are significant, as earnings per share are now estimated to come in at $1.53 to 1.58, versus the $1.70 to 1.80 expected previously.

I'm not surprised; as the Foolish Forecast shows, results have been deteriorating for a while. Management hasn't shown much skill in being able to leverage its results in the wake of the OXO acquisition. It has all added up to uneven results and shareholder disappointment. Granted, the stock is now value-priced, but with sales up only 8% to $213.4 million and net income essentially flat year over year, it is clear that some type of discount is warranted.

The culprit once again was margins, as pressures in the personal care and the housewares segments, as well as expenses associated with the OXO warehouse transition, had a negative impact this quarter. On the flip side, inventory management has improved, reversing what has long been a thorn in management's side, as inventories were only $146.2 million this time around, versus $184.7 million last year. Still, that one small bright spot isn't enough to offset what has been apparent for some time: The ship is struggling, presumably as both Wal-Mart (NYSE: WMT  ) and Target (NYSE: TGT  ) are putting tremendous pressure on margins.

Perhaps realigning operations globally will help in 2007 and 2008, as management is starting the gate fairly optimistic, calling for earnings per share in excess of $2.00 for the full year. However, color me skeptical, as management hasn't shown much propensity for getting the numbers in the ballpark recently.

Granted, forecasting is a tough business, and I'd be much happier if none of the companies I owned even gave earnings guidance, as it really doesn't matter a whit to long-term shareholders. It just gives ample opportunity for management to screw up, and forces far too much attention on short term results. With that in mind, though, Helen of Troy has quite a road ahead of it to regain both Wall Street's and shareholders' trust, as well as turn around its wrinkly business. I don't hold out much hope for this one.

For more Helen of Troy Foolishness:

Wal-Mart is a Motley Fool Inside Value recommendation. You can try a 30-day trial of the newsletter for free.

Fool contributor Stephen Ellis does not own shares in any companies mentioned. You can view the stocks he owns and check out his99th percentile ranking in Motley Fool CAPS, the Fool's new stock-rating community. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 519782, ~/Articles/ArticleHandler.aspx, 10/25/2016 1:16:47 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 4 hours ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 4:00 PM
HELE $82.10 Up +1.20 +1.48%
Helen of Troy CAPS Rating: ****
TGT $68.26 Up +0.03 +0.04%
Target CAPS Rating: ***
WMT $69.19 Up +0.85 +1.24%
Wal-Mart Stores CAPS Rating: ***