Helen of Troy CEO: Company fighting "extremely challenging" environment

Will Atkinson | Oct 10, 2007 12:43pm EDT | Comment

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Helen of Troy Ltd. (Nasdaq: HELE) CEO Gerald Rubin said the developer and marketer of personal care and household consumer products is battling an “extremely challenging” retail environment. Even after receiving a favorable settlement that added $0.24 earnings per share to the second-quarter results, Rubin said the company is lowering guidance. The chief executive made the comments during a midday conference call.

Disappointing consumer spending trends caused the company to lower its fiscal 2008 revenue guidance, Rubin said. The company now expects revenue in the range of $660 million to $680 million, from a previous range of $680 million to $690 million. Earnings are expected to be in the range of $1.90 to $2.10 per share, from previous guidance of at least $2 per share. Fiscal 2007 earnings were $1.58 per share.

“We believe that our company's business fundamentals remain strong,” Rubin said. “Going forward we plan to continue to execute our business plan by introducing new product offerings, increasing market share through channel expansion and product innovation, and continuing our efforts of increasing process efficiencies and reducing related expenses.”

High gas prices, tight credit markets and the subprime crisis were cited as reasons for the lowered guidance. The company has price increases presently in place to combat these negative factors, Rubin said.

At the end of the fiscal year in late February, Rubin said the company expects to have $100 million in cash and will “strongly” consider a share repurchase program.

In response to an analyst’s question, the chief executive said a management buyout is also “on the table.”

“The ratio to [earnings] versus what our stock price is selling is very, very low,” Rubin said. “It might be the best acquisition Helen of Troy can ever have.”

Helen of Troy’s second-quarter earnings were boosted by a tax dispute settlement with the Hong Kong Inland Revenue Department for the fiscal years 1998 through 2005. The settlement increased quarterly earnings by $0.24 per share, which is included in the revised guidance.

“We are very pleased to have settled this longstanding dispute with the Hong Kong taxing authorities,” CFO Thomas Benson said.

The company still has open disputes with the IRS, Benson said. He said the IRS disputes are “much lower than the Hong Kong one.”

Before the opening, Helen of Troy announced that second-quarter sales increased to $157.9 million, slightly above views of $157.4 million and 7.3% above $147.2 million a year earlier. Earnings for the three-month period ended Aug. 31 were $18.3 million, or $0.56 per share, above analyst estimates of $0.39 per share and compared with $10.9 million, or $0.35 per share, in the year-ago quarter.

In midday trading, HELE shares are down 4.06%, or $0.80, at $18.90. Over the last 52 weeks, shares have ranged from $17.45 to $29.26.