Hain Celestial shares slide as it trims guidance despite ‘sequential improvement’

08-Feb-2024 - Last updated on 08-Feb-2024 at 15:09 GMT

Source: Hain Celestial

Hain Celestial shares tumbled yesterday to their lowest point in at least five years after the company dropped its fiscal ’24 guidance and reported an unadjusted loss in its second quarter despite a “sequential improvement” in top and bottom-line performance from the first quarter.

The company’s share price fell 15.92% yesterday to $9.54 at the close of market from open after executives revealed a 4.8% drop in organic net sales in North America almost completely offset an 8.5% increase in international sales for a low 0.2% overall increase over the same period last year.

The drop in North American sales was due primarily to a volume decline in the company’s baby and children’s products related to industry-wide challenges in organic baby formula supply, which was a 3% drag on organic net sales in the quarter. Lower snack sales also contributed to the decline.

The performance in North America dragged down the region’s adjusted profit 6.7%, which in turn held back the company’s overall profit, which eked out a 2.8% increase, according to the company.

In response, Hain Celestial tightened its full year guidance so that it now expects a 1% drop in organic net sales in fiscal 2024 over last year and an adjusted EBITDA of $155m-$160m. Previously, the company projected a 2-4% increase in organic net sales for the year over last and a slightly broader range for the adjusted EBITDA, which went up to $165m.

Hain Reimagined off to a promising start, executives claimed

CFO Lee Boyce also attributed the company’s “more conservative view of the balance of fiscal 2024,” in part to an acceleration of Hain Celestial’s aggressive multi-year transformation strategy, which it has dubbed Hain Reimagined.

The initiative has four pillars and focuses on five core categories in five core geographies with the ultimate goal of “building our organizational capabilities to scale our brands and gain share, driving growth through innovation and channel expansion, and progress in generating fuel through working capital management and productivity savings to expand our margins and transform our business for sustained performance,” CEO Wendy Davidson said during the company’s second quarter earnings call yesterday.

She explained that 2024 is a “foundational year” for the initiative, which she said contributed to the sequential improvement in the company’s top and bottom-line trends. She added that she expects the company expects to drive growth in the second half of the year.

For support, she pointed to early gains in incremental distribution across mass and grocery channels for the company’s core snack, baby & kids and beverage platforms.

For example, she noted, the company expanded distribution of its better-for-you snacks, including Garden Veggie and Terra chips, in c-stores (up 18%) and drugstores (up 23%). To support this expansion, the company is investing in brand building and marketing, she added.

Davidson also touted the company’s innovation, another pillar in its Hain Reimagined campaign. Within snacks, she said, the company recently launched Garden Veggie Flavor Burst tortilla chips based on consumer research that revealed a gap in “craveable flavors” of better-for-you options.

As the company innovates it also will rationalize lower margin SKUs, which Boyce said will create a “near-term revenue headwind.”

Still, Davidson said she remains confident in the campaign’s capabilities and expects the company will return to overall growth in the back half of the year.