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Hain Celestial's Irwin Simon sees opportunities in Amazon-Whole Foods deal

Increased consumer traffic and awareness could benefit Hain Celestial and natural brands across channels, Hain's leader said as he reported the company's earning and year-end results. This is what he sees at bricks and mortar and online.

All retail channels—and Hain Celestial brands—will benefit from Amazon’s Whole Foods Market takeover, Hain Founder, President and CEO Irwin Simon said during the company’s fourth-quarter and year-end earnings call Aug. 29.

“This will be very much favorable for us,” he said. “The combined entity represents a significant proportion of [multi-unit outlet] consumption between our U.S. and Hain Pure Protein business, and we know this will grow.”

Hain Celestial Group (NASDAQ: HAIN) has improved its focus on its top SKUs and driving sales on shelf at retail as part of its strategic plan to improve company performance. It has seen results in Whole Foods Market outlets and expects more as Amazon Prime’s 54 million subscribers join a Whole Foods customer loyalty program that Simon predicts will drive additional in-store traffic.

“It’s great to see Hain Celestial trends improving at Whole Foods, particularly the top 500 SKUs, which are up 5 percent in the latest four weeks,” Simon said. “As Whole Foods reduces prices, we believe it will bring more and more consumers to buy our brands, which will fuel incremental future growth. And it also highlights the tremendous opportunity for Hain Celestial as organic and natural products are increasingly becoming more mainstream and accessible to a much broader consumer base.”

That, he says, creates growth opportunity across all channels.

Online, though, might be the greatest.

“Today, natural and organic foods and beverages represent 9 percent of sales within brick and mortar,” Simon said. “Of online food and beverage sales, 29 percent is natural and organic food, or approximately three times brick-and-mortar sales. This represents an increasing opportunity for us as more and more consumers will shop online today.”

Creating company growth means focusing on Hain Celestial’s “Project Terra.” The strategy focuses on top brands that result in 90 percent of its sales, reducing costs, focusing on innovation, and enhancing retail sales execution with a particular focus on consumer needs and brand building.

Hain Celestial financial results

Fourth-quarter 2017 highlights include:

  • Net sales of $725.1 million, a 2 percent decrease, or a 2 percent increase on a constant currency basis, compared with the prior year period. Net sales were impacted by $28.2 million from foreign exchange rate movements versus the prior year period.
  • Operating income of $8.6 million; adjusted operating income of $67.2 million.
  • EBITDA of $82 million compared to $83 million in the prior year period; adjusted EBITDA of $86 million compared with $91 million in the prior year.
  • Earnings per diluted share was breakeven compared with a loss per diluted share of 86 cents in the prior year period; adjusted earnings per diluted share of 43 cents was in line with the prior year period, and foreign currency exchange rates impacted reported results by 3 cents per diluted share.
  • Operating cash flow of $69 million.

For fiscal year 2017, Hain Celestial reported:

  • Net sales of $2.85 billion, a 1 percent decrease, or a 3 percent increase on a constant currency basis, compared with fiscal 2016 net sales of $2.885 billion. Net sales were impacted by $124.3 million in foreign exchange rate movements compared to the prior year.
  • Operating income of $111 million, with adjusted operating income of $202 million.
  • EBITDA of $239 million compared with $362 million in the prior year, with adjusted EBITDA of $275 million compared with $379 million in the prior year.
  • Earnings per diluted share of 65 cents compared with 46 cents in the prior year, with adjusted earnings per diluted share of $1.22 compared with $1.85 in the prior year. Foreign currency exchange rates impacted reported results by 12 cents per diluted share.
  • Operating cash flow of $217 million.

Fiscal year 2018 guidance includes:

  • Total net sales of $2.967 billion to $3.036 billion, an increase of approximately 4 percent to 6 percent compared with fiscal year 2017.
  • Adjusted EBITDA of $350 million to $375 million, an increase of approximately 27 percent to 36 percent as compared with fiscal year 2017.
  • Adjusted earnings per diluted share of $1.63 to $1.80, an increase of approximately 34 percent to 48 percent compared with fiscal year 2017.
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