Impressive stock price movement
In 2017, the stock price of organic and natural food manufacturer and marketer Hain Celestial (HAIN) rose 8.6%. Amid activist investor Engaged Capital’s disclosure of its stake and a probable press for a sale, the year was rife with takeover rumors surrounding Hain Celestial.
Several names have cropped up as possible suitors, including the likes of Pepsi (PEP), Nestlé, and Danone. This speculation has helped cushion the stock’s price movements amid the accounting woes and delayed results that have scared off investors.
In contrast to Hain Celestial, peers the Kellogg Company (K) and ConAgra (CAG) fell 7.8% and 4.8%, respectively, in 2017. The majority of food stocks, including Hain Celestial, underperformed the S&P 500 Index significantly in 2017. A challenging retail landscape and escalating costs continue to mar sales and margins for these stocks. In 2017, the S&P 500 Index generated a return of 19.4%.
Engaged Capital reveals its stake
In June 2017, Engaged Capital revealed that it held a 9.9% stake in Hain Celestial. Since then, the activist company has been prodding Hain Celestial to implement managerial changes and explore strategic mergers and acquisitions to unlock shareholder value.
In September 2017, Hain Celestial and Engaged Capital inked an agreement whereby the company’s board would now have 11 members, out of which ten would be independent. Hain Celestial elected six new members, including Engaged Capital’s founder, Glenn Welling.
Audit results provide relief
Hain Celestial reported an accounting error in August 2016, and it subsequently took up an extensive audit of its accounting practices going as far back as fiscal 2014.
On June 22, 2017, almost a year after taking up the audit, the company posted results for fiscals 4Q16, 1Q17, 2Q17, and 3Q17. Much to investors’ and analysts’ delight, the company said that it had found “no material” impact that affected any metric in all its previously reported financials. Since making this announcement, the company has taken up broad measures to put itself on a growth trajectory.
In this series, we’ll have a look at Hain Celestial’s cost-containment efforts, acquisition strategy, latest quarterly performance, valuation, and analyst recommendations.