As mentioned earlier in this series, Hain Celestial’s (HAIN) US segment is the largest contributor to the company’s top line. In fiscal 1Q18 (which ended on September 30, 2017), the segment’s sales rose 4% YoY (year-over-year) to $263.7 million, representing 37% of the company’s total revenue. However, its net sales remained unchanged compared to fiscal 1Q17 after taking into account certain factors such as SKU (stock keeping unit) optimization and inventory repositioning.
Note that from fiscal 1Q18 onward, sales from Ella’s Kitchen will no longer be considered part of the US segment. These sales will now be included in the UK segment’s sales.
Excluding the impact of SKU optimization, the US segment’s gross margin rose 110 bps (basis points) driven by cost-effective trade promotions and the Project Terra initiative. The segment’s operating income came in at $20.9 million, a rise of 11% YoY.
Strategy for US market
Hain Celestial has been working on improving its performance in the domestic market. The company has established seven platforms—Fresh Living, Better-for-You Pantry, Better-for-You Baby, Better-for-You Snacking, Tea, Cultivate Ventures, and Pure Personal Care—to boost its sales and margins.
The company is paying attention to the top 500 SKUs in the top 11 brands (including Celestial Seasoning, Dream, Earth’s Best, Imagine, MaraNatha, Sensible Portions, Spectrum, and Terra) and is heavily investing in brand marketing in the United States. It’s cutting down costs through Project Terra, and it’s working on increasing the online presence of its brands.
On the company’s fiscal 1Q18 earnings conference call, CEO Irwin Simon said that household penetration had increased 1.3 million to 57.4 million households in the last 52 weeks.
For fiscal 2018, Hain’s US segment’s sales are expected to rise in the low to mid-single digits.
Let’s look at Hain Celestial’s valuation in the next article.