Why Helen of Troy Shares Set Sail


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Consumer products company Helen of Troy (NAS: HELE) has once again launched 1,000 ships, but they are screaming away from this stock as quickly as they can. Shares were down as much as 12% after the company reported unfavorable first-quarter earnings results.

So what: For the quarter, Helen of Troy recorded an 11% rise in sales to $300.2 million and a profit of $0.74. Wall Street had been looking for the company to report a profit of $0.86 with sales of $299.1 million. The reason for the shortfall, according to Helen of Troy, was an overall weak spending environment coupled with higher operating expenses and increased levels of discounting to move merchandise. In addition to missing first-quarter estimates, the company lowered its full-year EPS forecast to a range of $3.70-$3.80 versus its original forecast of $3.80-$3.90.

Now what: Yuck! We've been receiving confirmation on multiple fronts of late that consumers are tightening their wallets, including Macy's (NYS: M) on the retail front, which missed Wall Street's June same-store sales estimates, to Tiffany (NYS: TIF) in high-end jewelry, which has lowered its earnings estimates repeatedly. Therefore, today's news from Helen of Troy shouldn't come as a complete shock. What concerns me is the mixture of higher expenses and steeper discounts. That formula is a margin destroyer and a recipe for further earnings misses. It could be worth a spot on your watchlist, but for now I'm keeping my distance.

Craving more input? Start by adding Helen of Troy to your free and personalized watchlist so you can keep up on the latest news with the company.

At the time thisarticle was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Tiffany. Motley Fool newsletter services have recommended shorting shares of Tiffany. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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