Sunday, March 21, 2021

An International Equity holding: Helen of Troy Limited (HELE, $220.52): “Troy Is Still Standing” by: Justin Nguyen, AIM Student at Marquette University

 Helen of Troy Limited (HELE, $220.52): “Troy Is Still Standing”

By: Justin Nguyen, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.


• Helen of Troy Limited (NASDAQ: HELE) provides diversified products from a wide range of business segments including: Health & Home, Houseware, and Beauty. The Health & Home provides healthcare and home products such as thermometer, water filtration systems, humidifiers, and air purifiers. The Houseware segment engages in providing food containers, tools, and cleaning products. The Beauty segment develops and sells hair care and related beauty products. 

•  HELE sold their Nutrition Supplements segment in 2017 to focus on the other three main segments.  

•. Strong first year in their strategic Phase II Transformation plan (FY20 – FY24) that emphasizes aggressive investment in global markets and strategic M&A. 

•  HELE acquired Drybar, a hair care and styling brand to strengthen their Beauty segment in early 2020. This move signifies the first highlight of their Phases II plan. 

• After signing exclusive global license of Revlon hair-care products for 100 years, HELE showed ambition in the beauty’s race. 

Key points: 

Helen of Troy Limited was pitched and added to the AIM International Fund in 2016. Since then, the company sold Healthy Directions, their struggling nutritional supplement segment in 2017. The sell was made after HELE acquired the Maryland company for only less than four years, and the goal is for HELE to focus on their three main segments. 

Helen of Troy Limited finished FY20 with a brilliant performance of revenue growing 9.2%, marking a successful start to the company’s Phase II Transformation plan. The plan evolves around aggressive investment in Asia Pacific and Europe. HELE also announced its new international president joined in 2019. Additionally, strategic M&A is also a main goal with concentration on leading brands as well as early-staged companies that show great potential. HELE’s online sales also erupted, amounting up to 25% of total sales FY21 YTD compared to just 6% in FY14. 

Helen of Troy is also seeing some fresh air in its beauty division as the company recorded outstanding growth of 56% YoY. The company’s latest acquisition Drybar contributed $17.5M, or 17% of total segment sales growth. CEO Julien Mininberg also recognized other potential in HELE’s Beauty portfolio such as Revlon’s highly-praised One-Step Volumizer which was referenced by Walmart and Amazon. The next step for this segment lies in smart and cautious M&A strategy, especially after the failure of the supplements segment. 

The company provided its guidance on FY21 revenue to be $2.075B - $2.1B, as well as an average annual growth of 2.5% - 3.5% from FY22-24. Economic bounce back and momentum from the surging digital sales are main drivers for the expected jump from last year. International distribution gains are also anticipated as HELE expanded its international business.

What has the stock done lately?

HELE was pitched and added to the AIM International Fund at a price target of $125.21 in 2016, and has since crushing that estimate with the current price at $220.25. The company’s share price went up to an all-time high at $263.89 in January 27, then stumbled as analysts revised their ratings. HELE is now trading at $220.52, up 0.6% YTD. 

Past Year Performance: 

HELE is up 26.04% during the last 52 weeks, outperforming the S&P 500 which rose by 20.39%. The company suffered a decline due to the pandemic, but thrived their way back and beyond with tremendous sales growth of 9.2%, their best since FY15. However, HELE is experiencing a downward slope on the market since the major drop in late January. 

Source: FactSet

My Takeaway

Positivity coming out of the pandemic in addition to a great start of their new strategic Phase II plan are two factors that make HELE a solid stock to keep in the portfolio. Since the appointment of CEO Julien Mininberg in 2014, the company went through a successful Phase I concentrating on business integration and acquisition. There are a lot of expectations awaited for Phase II, but HELE has shown composure to not chase growth through reckless M&A but rather focus further on organic growth and margin expansion. Helen of Troy is standing strong and looking as good as ever. 

Source: FactSet