Hain Celestial’s net sales were up 5 percent in its second fiscal quarter of 2018, but U.S. sales fell 3 percent and earnings failed to meet Wall Street estimates.
In the U.S., growth in Hain’s tea, personal care and baby product platforms was offset by declines in key brands within its snacking, pantry and fresh living segments.
“Our team has already identified specific opportunities to simplify our brand portfolio near-term to enhance stockholder value, positioning Hain Celestial for future growth,” President and CEO Irwin Simon said on an earnings call with investors and analysts Wednesday.
In 2016, the natural and organic food maker unveiled Project Terra, a series of cost savings and productivity initiatives that it hopes will generate $100 million in costs savings that can be reinvested into its brands. In the first half of 2018, Hain has realized $35 million in savings, Simon said.
As part of that project, Hain is simplifying its portfolio and investing in building up its top 11 brands and top 500 SKUs. Simon noted that the Celestial Seasonings and MaraNatha brands both have good turnaround stories to tell, and efforts in the works include a rebrand for Spectrum and changes to Rudi’s bread formulations.
Simon also announced that Hain is exploring a divestiture of Hain Pure Protein, its fresh and processed chicken and turkey brand. While that business has shown good growth potential, it is not core to the company’s go-forward strategy, he said.
Other key metrics from the second quarter ended Dec. 31, 2017 include:
- Net sales were up 5 percent to $775.2 million, or 2 percent on a constant currency basis.
- Net sales for Rest of the World (which excludes U.S. and the UK) grew 12 percent to $107.7 million.
- Gross margin was 18.6 percent; adjusted gross margin was 20.2 percent.
- Operating income was $36.3 million.
- Earnings per diluted share was 45 cents; adjusted EPS was 41 cents.
“I haven’t seen an industry change as much as it has over the last couple years,” Simon said. “During our meetings with major retail partners … they are focused on three key areas: brick and mortar, click and pick, and e-commerce.”
Hain expects to double or triple its e-commerce sales, which currently sit around $80 million a year, over the next few years, Simon said, with major investments starting in mid-third quarter. But the company still sees “major opportunities” in brick and mortar as conventional brands and categories lose sales and free up shelf space for better-for-you products.