Hain Celestial's net sales drop 5%, led by decreases in the US
- Hain Celestial's Q1 net sales dropped 5% to $560.8 million compared to the year before, according to the most recent earnings report. The company reported a first-quarter loss of $37.4 million and saw quarterly earnings of 9 cents per share, missing analysts' expectations of 13 cents per share.
- The decreases were led by its U.S. division, where net sales in the first quarter decreased 8% to $244 million from the last year. The drop in the U.S. was mainly caused by decreases in its better-for-you and pantry snacks, but was partially offset by an increase in its Pure Personal Care platform.
- "Initially, I will be focused on the improvement of our operational and financial results, particularly in the United States," new president and CEO Mark Schiller said in the report. He officially started this role this week. "Looking ahead, I am eager to work with our entire team to further integrate our global operations to achieve sustainable sales growth and cost-savings synergies and deliver long-term value for our stockholders."
The bumpy year continues for Hain Celestial with this latest earnings report. The company's struggling sales this quarter come at a time when it has seen executive turnover, decreases in earnings, pressure from an activist investor and a resolved investigation from the Securities and Exchanges Commission. Overall, Hain Celestial's shares have decreased 38% since the beginning of the year.
But this quarter's decreases were led by the U.S. division. Although consumer interest in better-for-you products continues to grow, it has been a struggle for Hain Celestial. The drops were steepest in pantry and better-for-you snacks, but the new CEO hopes to turn that — and the company — around.
"We have an incredible opportunity at Hain Celestial to accelerate the mission and purpose envisioned 25 years ago, as we further build consumer awareness and access to our organic, natural and better-for-you brands," Schiller said in the report.
Last month, the company announced that Schiller would serve as the new president and CEO. He succeeds founder Irwin Simon, who stepped down to become a non-executive chairman of the board. Schiller most recently served as executive vice president and chief commercial officer of Pinnacle Foods, where he worked to revive sales with M&A and product innovation. Those experiences could help him revive the struggling sales that Hain Celestial has faced — though some have speculated that he could prepare the company for a sale. From his comments in this quarter's earnings report, it seems that for now he is focusing on improving sales.
And the company does have a plan to do so. In 2016, the company announced Project Terra, its restructuring strategy to help the company cut costs. This year, the company has been focusing on its top 500 products in the U.S. to increase margins. However, the plan has yet to help Hain Celestial's bottom line. Other pressures pulled down gross margins to 17.8% this quarter, a 320-point decrease from last year. This was caused mainly by higher trade and promotional investments in the U.S.
Operating income in the quarter was $2.2 million, a 90% decrease from the year before. The decline was primarily caused by higher planned trade investments to drive future growth, as well as increased freight costs.
Although this new strategy has yet to be fruitful, if the company sticks to the plan it could help with long-term gains. With plans to focus primarily on its top selling brands, accompanied with the experience that Schiller brings, the company seems to be optimistic about turning the tide.
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