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Helen of Troy sees consumers 'tighten,' lays off 10% of workforce

Here's how the Hydro Flask and OXO maker is restructuring in a tough macro environment.

white Apple Magic Mouse beside Hydro Flask jar

Hydro Flask is an ecommerce leader for Helen of Troy. (Photo by Matt Hoffman on Unsplash)

Helen of Troy saw the economic clouds gathering. Now, the consumer products company that makes Vicks, Osprey and OXO is entering 2023 with a new structure moving into place.

“With the macro environment not indicative of a rapid reacceleration due to higher inflation, higher interest rates, uncertainty about the future financial health of consumers and foreign exchange headwinds, we used this summer to take a hard look at ourselves,” CEO Julien Mininberg told analysts during the company’s quarterly earnings call on Thursday. “We zeroed-in on ways to accelerate efficiency projects already underway and identified a comprehensive set of new savings opportunities.”

Restructuring and layoffs

This will mean the El Paso, Texas-based company is moving forward with a smaller team. Helen of Troy is planning to lay off 10% of its workforce as part of a restructuring. The company plans to complete the workforce reductions by March 1. It comes on a week when Amazon, Salesforce, Everlane and Stitch Fix also announced layoffs.

“The new structure will reduce the size of our global workforce with impact across all business segments, departments and shared services,” said COO Noel Geoffroy. “We did not take this decision lightly.”

As part of the restructuring plan, which it calls Project Pegasus, Helen of Troy announced the following moves:

  • Consolidate three business segments to two: Health & Wellness and Beauty will now be Beauty & Wellness, operating alongside the existing Home & Outdoor.
  • Create a North American Regional Marketing Organization: Like EMEA or Asia Pacific, this organization will be responsible for go-to-market activities across channels. This is designed to reduce savings, as it will limit duplication of efforts.
  • Centralize operations: Operations and finance will be under the chief of global operations, who will create a center of excellence on supply and demand planning.

There are also signs that the company is looking to pare back and focus. Geoffroy said three additional focus areas of its work on Project Pegasus going forward include “sharpening our discretionary spending choices, SKU rationalization, and assessing which brands might be good candidates to exit.”

Consumer slowdown

It comes in a quarter when the company’s results were better than expected. Core net sales were down 10% year-over-year, while gross margin and cashflow improved. Earnings per share, as measured on a core adjusted diluted basis were down 26.1% from the same quarter last year. Adjusted operating margins declined by 0.4% to 16.6%.

Mininberg described how the company is seeing a slowdown in consumer spending:

During the third quarter, consumers continue to tighten their purchasing patterns in some categories in response to high inflation and higher interest rates. As consumption slowed, some retailers continued their conservative repurchase patterns to further reduce their inventory. Our promotions across online and in-store channels were slightly elevated on certain parts of our business, such as Beauty and Health & Wellness, helping to support the consumer trends we are seeing and helping our retail partners better reach their inventory reduction goals. The holiday season started off slower than expected with discretionary categories generally under pressure from these trends. In some categories, performance improved in late December, ending largely in line with our expectations.

Mininberg added that the company is seeing increased cases of cold, flu and COVID sub-variants, which resulted in a sales increase for thermometers, humidifiers and inhalants from Vicks and Braun. More inventory rebalancing by retailers is also leading shipments to tick up to kick off the most recent quarter, Mininberg said.

Ecommerce highlights

In ecommerce, the company highlighted that stainless steel water brand Hydro Flask is the category leader on the world’s largest online retailer, which is presumably a reference to Amazon. The OXO brand specifically and direct-to-consumer in particular also performed well during the Black Friday-Cyber Monday period, Mininberg said.

“We went from a third-party manager of our online sales at the biggest online retailer to first-party, and that made a big difference for us,” Mininberg said. “DTC, in general, is a big investment area for us.”

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