3 Factors That Make Helen of Troy (HELE) an Attractive Pick

Helen of Troy Limited HELE is gaining from robust growth efforts, which have been boosting investors’ optimism. Notably, shares of the company have rallied 34% in the past three months compared with the industry’s growth of 16.5%. Also, the stock has comfortably outperformed the Zacks Consumer Staples sector’s rise of 18.9% in the same time frame.

Let’s discuss the factors that are likely to keep driving the company’s growth.

Transformation Plan on Track

Helen of Troy successfully concluded Phase I of its multi-year transformation plan and is on track with Phase II, which is expected to drive growth for the next five years. Phase II of the plan includes continued investments in Leadership Brands, with plans to grow the same through customer-friendly innovations, international expansion and acquisitions. In this context, the company acquired Drybar Products LLC (completed on Jan 23, 2020), which is strengthening the Beauty segment. Management aims to enhance operating efficiency and shared service facility. Long-term goals of Helen of Troy’s transformation plan include better organic sales growth, continued margin expansion and efficient capital allocation.

Strength in Leadership Brands

Helen of Troy is focused on making solid investments in its “Leadership Brands,” which is a portfolio of market leading brands. Brands in this portfolio, including Braun, PUR and Vicks as well as parts of OXO and Honeywell, are positioned well to enhance market share. These brands account for a significant chunk of the company’s sales, which generate solid margins and volumes. The company’s constant investments in these brands have been delivering robust results.

During the fourth quarter of fiscal 2020, sales from Leadership Brands increased 15.7%. Management is on track with investments in product launches, marketing efforts and e-commerce strategies for Leadership Brands. As previously mentioned, the company’s recent buyout of Drybar Products is a move in this direction. Drybar, which marks the company's eighth Leadership Brand, is already yielding results.

Robust Digital Efforts

Helen of Troy is on track to make continued investments in the digital space, in an attempt to keep pace with the evolving consumer environment. In fact, the company is persistently augmenting its digital presence through sophisticated marketing plans and improved content. Incidentally, online sales advanced nearly 39% year over year in the fiscal fourth quarter and contributed around 24% to the company’s top line.

We believe that Helen of Troy is likely to keep gaining from its consistent online sales and digital marketing efforts. These along with its aforementioned strategic endeavors are likely to help this Zacks Rank #1 (Strong Buy) stock to remain in investors good books.

Other Solid Consumer Staple Bets

The Estee Lauder Companies EL, with a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 9.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kimberly-Clark KMB, which carries a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 5.1%.

Nu Skin Enterprises NUS, with a Zacks Rank #2, has a long-term earnings growth rate of 1.7%.

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