Automation Woes Lead to Shareholder Revolt at Worldwide Marketer
Helen of Troy lowered its net sales forecast, citing ongoing challenges at its new Tennessee facility as a contributing factor. This news triggered a significant sell-off, with Helen of Troy's share price plummeting over 27% on July 9, 2024.
“The recent performance issues raise concerns about the transparency surrounding the Tennessee distribution center’s capabilities," said Reed Kathrein, a partner at Hagens Berman, a law firm specializing in securities litigation. We are currently looking into whether investors were given an accurate picture of the potential risks associated with the new facility.” Reed Kathrein, a partner at Hagens Berman, a law firm specializing in securities litigation.
Helen of Troy, the parent company of brands like Vicks and Hydro Flask, encountered near-term disruption during an automation technology integration at its new distribution center in Tennessee, according to a July 9 earnings call.
The hiccup created “unexpected challenges” that impacted the company’s fulfillment of small retail customer and direct-to-consumer orders for brands like Oxo and Hydro Flask, CEO Noel Geoffroy said.
In 2023 Helen of Troy’s ‘Project Pegasus’ global restructuring initiative was starting to bear fruit, according to company leaders, as the consumer goods company aggressively continued to identify operational efficiencies.
The initiative included global operations teams implementing new standardized tools and “fully owning its supply chain end-to-end,” said CEO Julien Mininberg in an earnings call.
Pegasus was expected to generate savings of approximately $20 million in fiscal 2024 and result in the creation of a North American Regional Market Organization, with plans for joint business plans with key retail partners, and shopper data.
A significant part of this strategy and its nearshoring efforts to decrease supplier reliance on China, Helen of Troy planned to open a new, LEED Silver-certified distribution center in Tennessee with advanced automation capabilities, providing the company with more capacity and capabilities for in-line customization and personalization for direct-to-consumer Hydro Flask orders.
This state-of-the-art facility, equipped with next-level technology, promised to bolster the company's capacity for years to come. However, the final phase of automation implementation has brought unforeseen challenges.
“I spoke earlier about the need to invest in our infrastructure and core capabilities to support the growth we are targeting. Our new distribution center in Tennessee is one of these necessary investments. While this facility brings us next level technology and capacity that will serve us for years to come, we have encountered some near term disruption as we go live with the last phase of automation.” (CEO Noel Geoffroy)
While the company expected some implementation hiccups, the latest phase—employing the most advanced technology—has disrupted the fulfillment of small retail customers and direct-to-consumer orders for OXO and Hydro Flask. This has led to three major impacts: lost revenue, delayed productivity savings, and increased costs.
“Our team in Tennessee is working diligently with our suppliers to address the remaining issues and we have seen our shipping throughput progressively improved during June and early July.” (CEO Noel Geoffroy)"
The shipping backlog significantly contributed to a net sales miss for the quarter, while the delay in productivity savings and additional costs for manual system workarounds hurt profitability. Despite these setbacks, upgrading to state-of-the-art processes and systems remains a crucial strategic move. The CEO said that its Tennessee team is working diligently with suppliers to resolve the issues, with shipping throughput showing improvement through June and early July.
Headquartered in El Paso TX, Helen of Troy includes such brands as OXO, Hydro Flask, Osprey, Vicks, Braun, and Honeywell in its portfolio. Pegasus resulted in the creation of two business segments — home and outdoor, and beauty and wellness — and its search for efficiencies has extended into its packaging systems.
The company has been scaling its automatic carton packaging system, which creates custom shipping boxes from continuous feed corrugated cardboard, resulting in shipping cartons “perfectly sized” for each order, according to COO Noel Geoffroy
“This real-time format change is managed automatically and directly from a database. The equipment offers high levels of flexibility, automation and speed of processing and can create one box every few seconds.”
Its new made-to-fit packaging bumpers for its Hydro Flask bottles also reduce the amount of packaging required and decrease customer transport volume queue by almost half for the bottles, according to the company.
Helen of Troy (HELE) Crashes Amid Distribution Center Woes – Hagens Berman - July 22, 2024 16:02 ET
Source: Hagens Berman Sobol Shapiro LLP
SAN FRANCISCO, July 22, 2024 (GLOBE NEWSWIRE) -- Hagens Berman urges Helen of Troy Ltd. (NASDAQ: HELE) investors who suffered substantial losses to submit your losses now. The firm also encourages persons with knowledge who may be able to assist in the investigation to contact its attorneys.
Visit: www.hbsslaw.com/investor-fraud/hele
Contact the Firm Now: HELE@hbsslaw.com | 844-916-0895
Investigation into Helen of Troy Ltd. (HELE):
Helen of Troy Ltd. (HELE) finds itself under increased scrutiny regarding the progress of its restructuring plan, particularly the functionality of its recently opened distribution center in Galloway, Tennessee.
Company officials, including CEO Noel Geoffroy, had previously positioned the Tennessee facility, touted as “state-of-the-art,” as a cornerstone of its strategy to achieve organic sales growth and margin expansion. Public statements, such as one on April 24, 2024, emphasized the distribution center’s role in this plan.
However, questions arose on July 9, 2024, when Helen of Troy’s Q1 2025 earnings report significantly disappointed investors. The company’s organic net sales for Q1 2025 declined by 12.2% year-over-year, while its GAAP consolidated operating margin for the same period dropped to 7.4%, down from the previous year.
Management attributed the weak performance primarily to issues in the Home & Outdoor business segment. According to a company statement, “shipping disruptions at the Company's Tennessee distribution facility due to automation startup issues” negatively impacted “some of the segment’s small retail customer and direct-to-consumer orders.”
Furthermore, Helen of Troy lowered its 2025 net sales forecast, citing ongoing challenges at the Tennessee facility as a contributing factor. This news triggered a significant sell-off, with Helen of Troy's share price plummeting over 27% on July 9, 2024.
“The recent performance issues raise concerns about the transparency surrounding the Tennessee distribution center’s capabilities," said Reed Kathrein, a partner at Hagens Berman, a law firm specializing in securities litigation.” Kathrein added, “We are currently looking into whether investors were given an accurate picture of the potential risks associated with the new facility.”
If you invested in Helen of Troy and have substantial losses submit your losses now.
About Hagens Berman
Hagens Berman is a global plaintiffs’ rights complex litigation firm focusing on corporate accountability. The firm is home to a robust practice and represents investors as well as whistleblowers, workers, consumers, and others in cases achieving real results for those harmed by corporate negligence and other wrongdoings. Hagens Berman’s team has secured more than $2.9 billion in this area of law. More about the firm and its successes can be found at hbsslaw.com.
