A year ago, Hain Celestial reported sales growth in North America for the first time in 10 quarters.
Although sales in North America for the third quarter of 2021 were down 10% from last year – in part due to consumer storage behavior when the COVID-19 pandemic began in March of the last year – Hain CEO Mark Schiller was thrilled. He started Thursday morning’s earnings call by calling the third quarter “another great quarter for Hain.”
“This is the fifth consecutive quarter of improvement in adjusted gross margin and EBITDA of more than 200 basis points,” said Schiller.
“We came out of the third quarter with strong momentum, which bodes well for the fourth quarter as well as (fiscal 2022) and beyond,” said Schiller, outlining four reasons for his optimism:
Macrotrends promote the business. Consumers are much more concerned about their health, they buy more online, they cook more at home. … As the pandemic subsides, we are proving that these trends will remain high and that Hain will benefit, ”said Schiller.
Get Big Brand sales continue to increase. Consumption of Get Bigger brands in the third quarter has doubled since 2019 and categories have increased by 8%. “In short, we are gaining shares in the high growth categories,” he said. And as retailers reset their shelves, new products from Hain are gaining distribution points.
Hain has 8% more distribution outlets than a year ago, with innovative brands seeing the biggest gains, Schiller said.
“It’s important to note that we are also seeing our strongest games of household penetration and loyalty in affluent households, which are less price sensitive, and with younger consumers who are more focused on health and commerce. electronic, ”he said. “These two factors prepare us well for the future.
According to CFO Javier Idrovo, net sales of the Get Bigger brands fell about 4% in North America, mainly because the company launched a personal care club program. However, the Adjusted EBITDA margins of the Get Bigger brands increased by nearly 300 basis points compared to the third quarter of fiscal 2020; the gross margin was 17.5%.
International sales are gaining momentum. “We have the number one or number two equity brand in 10 categories, and we are well positioned in some of the fastest growing categories like plant-based meat substitutes and non-dairy beverages,” said Schiller.
Due to Brexit, many retailers bought products in the second quarter that they would have ordered in the third quarter, he said. Despite this, sales of Hain’s six largest brands and its non-dairy private label businesses in Europe grew by more than 8% in the third quarter from 2020 and more than 12% from 2019, according to the CEO.
Significant productivity opportunities. Over the past two years, Hain has eliminated SKUs, sold unprofitable businesses, consolidated its distribution centers, and made ordering easier for retailers of multiple brands that can then be shipped on one truck instead of multiple.
But Schiller has not finished improving productivity and, consequently, increasing profit margins. The company will now pursue larger projects such as the consolidation of manufacturing plants; simplify pricing to increase the amount of product on a truck; implement a pricing architecture to offer consumers products in the sizes and prices they want; and product redesign, he said. Automation, lean production, and organizational redesign are all part of these processes.
In figures: third quarter results
The company’s third quarter, which ended March 31, canceled the surge in pantry inventories at the start of the COVID-19 pandemic and a personal care product sales program that failed been offered this year.
- Net sales decreased 11% to $ 492.6 million from the third quarter of fiscal 2020.
- Adjusted net sales decreased 6%.
- The gross margin was 26.4%, an increase of 244 basis points from the prior year period.
- The adjusted gross margin was 27.4%, an increase of 317 basis points.
- Net income of $ 34.3 million compared to $ 25.0 million a year earlier, an increase of 37.2%.
- Adjusted net income of $ 44.7 million, compared to $ 28.8 million for the same period in 2020, an increase of 55.2%.
- Adjusted EBITDA of $ 73.8 million compared to $ 60.7 million, an increase of 21.6% over the previous Q3.
- Adjusted EBITDA margin of 15.0%, an increase of 400 basis points.
- Earnings per diluted share (“EPS”) of $ 0.34 compared to $ 0.24 a year earlier.
- Adjusted EPS of $ 0.44 compared to $ 0.28.
During the third quarter, Hain Celestial repurchased approximately 200,000 shares or 0.2% of its own outstanding common shares at an average cost of $ 41.86 per share, for a total of $ 8.6 million.
As of March 31, Hain was authorized to spend an additional $ 109.5 million on the buyback program.
Hain met or beaten third trimester screenings
Overall, the global health and wellness business beat its forecast for the quarter, Schiller noted. He predicted that sales revenue would fall by at least 10%; net sales fell 11% for the company as a whole.
“We said we were going to generate at least 100 basis points of margin improvement. We achieved a 317 point improvement in adjusted gross margin and a 400 point improvement in our Adjusted EBITDA margin – well on track. ahead of our forecast, ”Schiller said, strongly emphasizing the numbers.
Hain also projected Adjusted EBITDA growth of around 10% and reported growth of 21.5% for the third quarter. This is the seventh consecutive quarter of double-digit EBITDA growth, the CEO noted.
In North America, Hain saw Heavenly Seasonings, Sensitive Servings, and Greek Gods gain shares in their categories, he said.
“The underlying revenue of the business has been excellent over the past quarter, clouded by some one-time events. I remain pleased with our progress and remain optimistic about the future,” said Schiller.