Helen of Troy reports strong sales, but costs hit profits

By Simon Pitman

- Last updated on GMT

Related tags Sales Generally accepted accounting principles Revenue

Texas-based Helen of Troy has reported a strong increase in sales,
but costs associated with upgrading the company's distribution and
warehousing operations keep net profits down.

The company said third quarter sales increased 8 per cent to reach $213.43m, against sales of $197.45m in the corresponding period last year.

However, the increase in sales was not reflected in the company's net profits, which only increased one per cent to reach $22.8m during the period.

The company said that the reason for profits not increasing in line with sales was down to gross margin pressure in both its personal care and housewares segments, as well as expenses associated with the a new warehousing system for its OXO houseware business.

"The increased expenses related to operating two warehouses will continue through this year's fourth quarter, but we do not expect to incur those additional warehouse expenses in the next fiscal year,"​ said Gerald Rubin, company CEO.

For the third quarter sales in the company's personal care segment rose eight per cent to reach $173.74m, while sales for the nine month period rose eight per cent to reach $390.04m.

The company reported that overall sales for the nine month period rose eight per cent to reach $491.05m, whereas net earnings fell from $42.66m to reach $40.36m.

However, the company pointed out that its balance sheet remains healthy, with stockholder's equity increasing $46.8m to reach $515.7m, at the end of November, and cash levels increasing from $20m to $59m.

The company is predicting that for its fourth quarter sales should be in the range of $135m to $140m, compared to sales of $134.5m in the last quarter of 2005.

This means that sales for the full year should be in the range $626m to $631m, a figure that is lower than the company had predicted earlier on in the year.

"For the fiscal year March 1, 2007, we are providing guidance of annual sales in excess of $660m,"​ said Rubin. "We believe these increases will be driven by new product introductions, reductions in non-recurring expenses, and more efficient operations."

He added that during the year ahead the company was hoping to extend sales of Bed Head by TIGI and Tony & Guy appliances on a worldwide basis, to derive increased margins from the consolidation of its warehouse operations.

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