Hain: FY Outlook Falls After Q3 Sales Miss
Hain Celestial has downgraded its full-year 2023 guidance on the back of slumping sales and net operating losses amidst a strategic corporate shift back to brand building.
The Lake Success, N.Y. company posted net sales of $455.2 million Tuesday morning, down about 9% from the same period last year. Gross profits were down 16% to $97.4 million compared to $115.7 million in the prior quarter.
In light of the “weaker than expected results” attributed to “softness in the snacks, tea and personal care categories,” president and CEO Wendy Davidson said in a prepared statement, the company has downgraded its constant currency guidance for adjusted EBITDA from -15% to -13% from where it was announced in Q2 as -1% to +4%. Adjusted net sales are expected to be down -4% to -3% versus the previous year.
“While we have seen a slowdown in the second half, it has been driven by the pullback in marketing and brand building spend in the prior year as well as customer programs that were not repeated this year,” Davidson said. “We are addressing this with reinvestment support within the quarter as mentioned on the last call, and we anticipate seeing the benefits begin to materialize in the back half of this calendar year.”
In the snacking category, Sensible Portions and ParmCrisps were cited as the company’s two main underperforming brands. The snack brands’ poor sales were attributed to the lack of marketing investment; yet poor timing of the 2021 acquisition of the better-for-you food snack portfolio That’s How We Roll played a part as well.
When asked in the question-and-answer period of the earnings call if the company made a mistake in going through with the $259 million deal with private equity firm Clearlake Capital Group (the prior owner of That’s How We Roll’s ParmCrisps and Thinsters brands), Davidson pointed to the decline in the ketogenic diet trend and the keto category. She noted that the decreasing interest in the diet “gave some consumer headwinds that probably weren’t acutely anticipated at the time of acquisition.”
“We feel good about the brand (ParmCrisps) going forward. We’re just resetting a new starting point, rather than anticipating recovery of that large customer concentration from before,” she added.
In contrast, Hain’s Greek Gods yogurt and Earth’s Best baby products both grew during the period with increased market share in their respective categories even as the infant formula shortage strained Earth’s Best supply.
In the last 12 week period, Greek Gods dollar consumption grew 21% gaining share reflecting double digit growth in velocities as Earth’s Best snacking dollar consumption grew 50% with increased distribution and strong velocities, Davidson reported.
Although Tuesday’s results continued Hain’s trend of sagging sales, there was some optimism in the company’s performance abroad. International net sales showed signs of stabilizing with diversification in both branded and private label working in Hain’s favor overseas; especially in the U.K. When accounting for adjusted foreign exchange currency, international net sales represented a 3.5% increase for Q3 compared to the same quarter in 2022.
When asked about Hain’s strategy moving forward and possible acquisitions or simplifying the portfolio, Davidson responded by saying that she is looking at leveraging brand synergies and scale to put the company back on a profitable track.
“We’re really looking less about overall company portfolio shaping and much more around operating model and organizational shaping that I believe can unlock efficiencies, we can then invest behind growth,” she said.
Hain Celestial’s stock price took a 11% dive Tuesday from $17.61 per share at the end of trading Monday to $15.69 per share at the time of publication.
