Expect more innovation and brand divestitures as Hain Celestial leadership remains focused this year on turning the business around.
President and CEO Mark L. Schiller came into the company one year ago and launched an ambitious improvement plan ranging from brand reviews to tightening up business practices to division reorganization. Hain has divested seven brands in that time.
As Hain Celestial rids itself of underperforming products, the company seeks to keep market share with new products, Schiller told analysts during the Nov. 7 Hain Celestial first-quarter 2020 earnings call.
A new three-year innovation pipeline plan is key. Schiller didn't expound upon the innovation strategy but noted second-half launches in yogurt and snacks are in development. A relaunched plant-based offering will be brought to market in the second half of the year, too, after tapping U.K. and Canadian brand learnings. Hain's revived personal care products and new Celestial Seasonings TeaWell line are recent launches the company is focused on growing now.
"I'm less worried about the competitive environment and more worried about us pruning the tail, getting our innovation to market, having the more strategic growth conversations with customers that we're having now, which is ultimately what's going to allow the growth businesses to get bigger businesses to increase in sales as we projected," Schiller said.
Hain Celestial offered 2020 EBITDA growth guidance of 2% to 16% growth.
"The bottom line is we have to get these brands to either perform well, or we should look for an alternative and that's why you see SunSpire and Arrowhead [Mills] leaving the business," Schiller said. "Both of those were money-losing brands that we were able to find somebody to buy. We got a $15 million check for it and we immediately improved the P&L and simplified the organization by doing it. So I would expect you will see continuous efforts in that area."
Hain Celestial first-quarter 2020 earnings report
Hain Celestial's first-quarter highlights include:
- Net sales decreased 7% to $482.1 million or 5% on a constant currency basis compared to Q1 2019. The figure improved to a 1% decrease when adjustments such as foreign exchange, acquisitions, divestures, SKU rationalizations and other items are made.
- Gross margin of 20.3%, a 320 basis point increase over the prior year period.
- Adjusted gross margin of 20.9%, a 240 basis point increase over the prior year period.
- Operating income of $2.5 million compared to operating loss of $28 million in the prior year period.
- Adjusted operating income of $16.9 million compared to $17 million in the prior year period.
- Net loss of $5 million compared to a net loss of $23.1 million in the prior year period.
- Adjusted net income of $8.4 million compared to $9 million in prior year period.
- EBITDA of $17.7 million compared to a loss of $11.3 million in the prior year period.
- EBITDA margin of 3.7%, a 590 basis point improvement over the prior year period.
- Adjusted EBITDA of $32.1 million compared to $28.7 million in the prior year period.
- Adjusted EBITDA margin of 6.7%, a 110 basis point increase compared to the prior year period.
- Loss per diluted share of 5 cents compared to 22 cents in the prior year period.
- Adjusted earnings per diluted share of 8 cents compared to 9 cents in the prior year period.
New CFO announced
In addition to reporting earnings, Hain Celestial announced that Javier H. Idrovo is joining the company as executive vice president and chief financial officer. He starts Dec. 2. Idrovo comes from The Hershey Company, where he was chief accounting officer. He also held roles at Dole Food Co. and The Boston Consulting Group.