Here's the Value Line Report (4/9/99)
"The slump in Helen of Troy's shares continues due to investors' concerns about decelerating earnings. In fiscal 1988 (year ended February 28, 1999), the top and bottom lines likely advanced about 20% and 23%, respectively, year over year, due to healthy demand across the board. And, in fiscal 1999 and 2000, we look for share-earnings to grow about 30% and 16%, respectively. The slowdown in earnings momentum in recent quarters is due mostly to the cost of integrating recent acquisitions. The vast majority of Helen's products are hair-care products sold under the well-known Revlon and Vidal Sassoon labels.
Acquisition-related costs will likely continue in fiscal 1999. The strategy to boost market share and diversify product lines in the hair-care accessory business has resulted in two small acquisitions. Late last year, Helen purchased the WIGO trade name and product lines of professional salon dryers and hair clippers from Elektrogerate GmbH of Germany. These actions diluted earnings by a few cents late last year. In fiscal 1999, more costs are likely as Helen expands its product lines. However…
Helen of Troy's primary business strategy remains in place. To keep costs down, most of Helen's goods are made by foreign subcontractors in China and Mexico. Inventory is then shipped to big discount chains in the United States like Wall-Mart, Kmart, and Target. These merchandisers prefer ordering large shipments from a few suppliers, like Helen, which gives it greater market penetration. And licensing agreements to manufacture and sell well-known brand names like Revlon and Vidal Sassoon give earnings a further boost. Together, these two companies spend $300 million a year to advertise their brand names. Last, due to its Bermuda base, the company enjoys a low tax rate that allows a greater percentage of sales to flow to its bottom line.
Helen of Troy's stock is favorably ranked for the year ahead, based on price and earnings momentum, suggesting investor fears may be overblown. The stock also has above-average 3- to 5-year capital appreciation potential, at the current price."
Value Line projects the following earnings for HELE
1998 Q4 -- .15
1999 Q1-- .23
1999 Q2 -- .32
1999 Q3 -- .45
1999 Q4 -- .20
2000 Q1 -- .28
2000 Q2 -- .37
2000 Q3 -- .50
2000 Q4 -- .25
|
