- Hain Celestial's net sales increased 4% to $708.3 million for the quarter ended Sept. 30 compared to $681.5 million in the same period a year earlier, the company said in a release. Analysts forecast sales of $697 million during the current quarter, according to MarketWatch. Net income surged 131% to $19.8 million from $8.6 million.
- The organic and natural foods maker said net sales in the U.S., the company's largest market, increased 4% to $263.7 million. The results in the prior period were negatively impacted by inventory realignment at certain customers.
- Hain Celestial reiterated that it expects net sales during the current fiscal year to be between $2.967 billion to $3.036 billion, an increase of approximately 4% to 6% versus the previous year.
Hain Celestial's earnings report Tuesday brings positive news to a company that has been mired in one of its most challenging periods. A year ago, it discovered revenue irregularities in its previous financial reports, and announced it wouldn't release earnings again until it analyzed the discrepancies. In June, it said it would not revise any of those reports, but released a regular quarterly earnings report in August.
Its problems attracted the attention of activist investor Engaged Capital, which took a 9.9% stake in the natural and organic manufacturer in June to help reinvigorate the company's top line growth and bring its margins more in line with its peers. The company agreed to nominate six new directors and announced that three board members won’t run for re-election as part of a deal reached with the investor in September.
During the current quarter, Hain Celestial posted results that are likely to appease Engaged Capital and its other shareholders. Hain Celestial not only showed an increase in sales and profits, but its operating income margin rose from 4% in the first quarter a year ago to 5.6% — a sign it is operating its business more efficiently. Hain Celestial's stock rose $1.77 to $36.08 in early trading on the New York Stock Exchange following the release of its earnings.
The company is still working to identify cost savings opportunities through simplifying its business through an internal initiative called Project Terra, announced in 2016. This initiative came before the discovery of the accounting issues, and is similar to what other manufacturers are doing in terms of trying to grow revenues through internal review.
"Our first quarter results were solid with improved net sales growth and profitability, meeting our expectations across our business segments," Irwin Simon, the company's founder and CEO, said in a statement. "Importantly, we are on track to build momentum throughout the year as our execution of Project Terra continues to drive incremental sales growth and margin improvement to deliver long-term sustainable stockholder value."
The food company, known for its namesake tea and brands including Garden of Eatin', Earth's Best and recently acquired Better Bean, has long been rumored as a takeover target because of its focus on the types of natural and organic products increasingly popular with consumers concerned about what they eat and where their food comes from. Large food manufacturers that have been rumored to be eyeing the company for acquisition could include General Mills, Kellogg, Danone, Mondelez, Coca-Cola and PepsiCo.
Hain Celestial will remain under pressure to continue to improve its operations, or it may have little choice but to sell itself to a cash-rich CPG company desperate for growth — especially with an activist investor agitating for change. The latest results show the company has rebounded from its recent hiccups and, at least for now, is back on the right path, but Hain Celestial has no room to ease up with outsiders closing watching its business.