LAKE SUCCESS, NY. — The Hain Celestial Group, Inc., battling issues ranging from Brexit to baby food to hair care, still managed to post a 41% increase in net income in the third quarter ended March 31.
Net income of $34.3 million, or 34¢ per share on the common stock, was up from $24.3 million, or 24¢ per share, in the previous year’s third quarter. Net sales decreased 11% to $492.6 million from $553.3 million.
In North America, sales fell 10% to $287.5 million for two primary reasons. First, a hair care merchandising program with a wholesale club was not repeated in this year’s third quarter. Second, the previous year’s third quarter benefited from pantry stocking related to the COVID-19 pandemic. Operating income in this year’s third quarter rose 37% to $39.5 million in North America.
“In North America, we grew share and measured channels again this quarter on our big brands like Celestial Seasonings, Sensible Portions and Greek Gods, and we’re seeing good MULO (multioutlet) growth on personal care segments like Live Clean body lotion and body wash and Alba body lotions,” said Mark L. Schiller, president and chief executive officer, in a May 6 earnings call.
A US House of Representatives subcommittee report on heavy metals in baby food issued on Feb. 4 temporarily impacted revenue negatively for the Earth’s Best brand.
“I say ‘temporarily’ because volumes have rebounded significantly in Q4, with Earth’s Best consumption up more than 30% in the most recent four weeks, and share growing, and sales also up significantly,” Mr. Schiller said.
He said the US Food and Drug Administration has confirmed heavy metals are in all items in the food supply.
“It’s in the air,” Mr. Schiller said. “It’s in the water. It’s in the soil. And everything we are eating on this planet, (they have) some level of metals in them. The only regulations that we have from the government are arsenic levels in rice cereal, and we are 100% compliant with the levels that (the FDA has) specified. In fact, we rejected 12% of the finished goods last year to make sure that everything we have is compliant.”
In International, sales plunged 12% to $205.1 million in the third quarter. One reason for the decline was customer inventory reductions in the United Kingdom that came in the second quarter in anticipation of potential Brexit supply disruptions. Another reason was pantry stocking in the previous year’s third quarter. Operating income increased 44% to $26.8 million in International.
Companywide, foreign exchange benefited third-quarter net sales by 320 basis points while divestitures and brand discontinuations reduced net sales by 820 basis points, said Javier H. Idrovo, executive vice president and chief financial officer for Lake Success-based Hain Celestial. The impact of the Brexit pull-forward and the timing of the hair care program represented a headwind of about 700 basis points in the quarter.
“When adjusting for all of these factors, net sales were slightly up for the quarter versus prior year,” Mr. Idrovo said.
Over the first three quarters of the fiscal year, Hain Celestial reported net income of $36.9 million, or 25¢ per share, which compared to a loss of $86.6 million in the same time of the previous year. Sales fell 1.5% to $1.52 billion from $1.54 billion.