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What’s Impacted Hain Celestial’s US Sales

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Recap of past performance

Hain Celestial’s (HAIN) US segment, which contributes most of its sales, remains mired in trouble. In fiscal 1H18, US sales fell 0.2% to $534 million, impacted by SKU (stock keeping unit) rationalization. The US segment represented 36% of Hain’s total sales in fiscal 1H18. In fiscal 2Q18, segment sales fell 3% YoY (year-over-year).

In fiscal 1H18, the US segment’s adjusted operating margin narrowed 210 basis points to 10.1%, marred by increased marketing investments and higher freight and commodity costs. In fiscal 2018, Hain Celestial expects its US sales to grow by low-to-mid-single digits.

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Hain Celestial’s US growth strategy

Hain Celestial has rationalized over 700 SKUs and is now focused on driving US growth from 500 SKUs across 11 top brands, including Dream, Spectrum, Alba Botanica, Terra, and Sensible Portions. At the CAGNY (Consumer Analyst Group of New York) conference on February 21, 2018, Hain stated that the top 500 SKUs were growing by low-single digits and comprised ~93% of total consumption.

Management also added that the rise of online grocery shopping and organic goods could be driving its US segment. In the United States, the top 500 SKUs grew 63% in the 52 weeks ended December 31, 2017, compared with 40% in the preceding 52 weeks. Online sales represent 5% of the segment’s total sales. The company also remains focused on driving its top line with more innovative products.

Hain Celestial has expanded the distribution footprints for brands Sensible Portions, Alba Botanica, Live Clean, and Earth’s Best. The company expects the expanded distribution to boost consumption trends.

Another growth avenue

In addition to improving US sales, the company is exploring opportunities for its fast-growing international business, whose sales grew 13.1% in fiscal 1H18. In China, the company expects robust growth in Earth’s Best online sales. It expects sales from India, the Middle East, and Africa to reach ~$100 million by the end of fiscal 2021. In fiscal 2018, international sales are projected to be up by mid-to-high single digits.

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