Dive Brief:
- Hain Celestial reported $619.6 million in fiscal year 2018 fourth-quarter revenue, a 3% increase year over year, but a 0.9% decrease on a constant currency basis, according to the company's most recent earnings report. Full-year revenue jumped 5% to $2.46 billion compared to the prior year, or 2% on a constant currency basis.
- Low double-digit net sales increases from the U.K. and Rest of World segments balanced out a 6% decline in U.S. sales for the quarter. But even after adjusting for acquisitions, divestitures and other initiatives like the 2017 and 2018 Project Terra SKU rationalization, the company saw flat quarterly sales and a 2% decline in total annual U.S. sales.
- Hain Celestial remains optimistic about its fiscal year 2019 forecast. The natural and organic producer predicts total net sales of $2.5 billion to $2.56 billion, about a 2% to 4% increase over fiscal 2018, and adjusted EPS of $1.21 to $1.38, an estimated 4% to 19% boost year over year.
Dive Insight:
Unlike last quarter, when Hain Celestial's sales rose but still widely missed analysts’ estimates, the company gave analysts more of a positive surprise this time around — though its stock price dropped more than 4% on Tuesday morning.
Hain has continued to push forward with its SKU rationalization initiative, Project Terra. The effort is meant to improve the strength of the company's market position, invest in targeted brand building for its top 500 SKUs and improve margins in the long term.
But investors may have to stay patient a little longer. For fiscal 2018, Hain Celestial recorded a gross margin of 21%, a year-over-year decrease of 120 basis points. The company pointed to higher trade and promotional investments in Hain Celestial United States, higher freight and commodity costs and unfavorable mix.
Cost savings from Project Terra did partially offset the company's high quarterly expenditures, but Hain Celestial founder and CEO Irwin Simon seemed anxious to put fiscal 2018 in his — and investors' — rear-view mirror.
"Our top priorities in fiscal year 2019 are to return our United States business to growth and to generate increased profitability," Irwin said in a statement. "We remain optimistic that the aggressive strategic changes and investments in our go-to-market strategy will fuel our future results and value for our stockholders."
Irwin announced in June that he would step down from his current executive roles to assume his position as non-executive chairman of the board after he hires his replacement, per a company release. This move lends credibility to speculation that Hain could still be targeted for an acquisition. Such rumors have swirled around Hain-related headlines since the company's accounting snafus went public in 2016 and carried into 2017.
Sales declines continued to plague Hain Celestial this past quarter, especially in the U.S. The company attributed its limp fiscal 2018 revenue growth to declines in the Better-for-You Snacking, Fresh Living and Better-for-You Pantry platforms. However, growth in the Pure Personal Care, Better-for-You Baby and Tea platforms partially dampened the overall impact of those declines.
Besides a founder-executive shake-up and restructuring initiatives that could make the company more appealing to a buyer, another indicator that Hain Celestial could be ripe for a takeover is in its stock activity. Activist investor Engaged Capital disclosed a 9.9% stake in the company last summer.
Further, the company's stock price has sunk upward of 30% or more this past fiscal year, potentially making it more affordable for a buyer with a leaner organization as Project Terra initiatives play out. And the day before the company released its fiscal 2018 fourth-quarter earnings report, Hain Celestial's stock traded at an "unusually high volume," with 1.68 million shares traded that day, compared with the stock's average daily volume of 1 million shares per day over the past month. Among investors, that kind of sudden volume spike could indicate bullishness or market awareness for the company, which could hint at a more significant move in the future.