Segment operating profit for Hain Celestial United States in the third quarter ended March 31 plummeted 44 percent from the year-ago period to $25 million, as higher marketing investments and increased freight and commodity costs more than offset savings from the company’s Project Terra productivity initiatives. Net sales declined 3 percent to $281.1 million, driven by the strategic decision to exit lower-margin stock-keeping units. Other factors contributing to the decrease in US sales included distribution losses for brands including The Greek Gods yogurt, Rudi’s Organic Bakery products and Sensible Portions snacks, as well as lower sales of Spectrum coconut oil due to continued category declines.
“While we’re not pleased with the rate of our improvement, we have made incremental progress in key areas of our business,” said Gary W. Tickle, CEO of North America. “Our core strategic priorities remain unchanged. We are doubling down on our efforts to, firstly, simplify our portfolio; secondly, reduce cost and complexity and mitigate the cost of headwinds; and thirdly, focus on our core 11 brands and top 500 SKUs.”
The company has added approximately 430 additional SKUs to the chopping block for a total of 1,100 SKUs to be phased out of the portfolio by the end of fiscal year 2019, Tickle said.
“Near term, it will take time for us to work through further planned SKU optimization; however, we believe these actions will result in a higher quality, more profitable US portfolio that will be better positioned to drive sustainable growth,” he said.
Consolidated net income in the third quarter ended March 31 was $12,686,000, equal to $0.12 per share on the common stock, down sharply from $31,328,000, or $0.32, in the year-ago period. Net sales advanced 8 percent to $632,720,000 from $588,798,000.
The top-line growth was driven by continued strength in international markets, including the United Kingdom, Europe, Canada and emerging markets, including India and the Middle East. Net sales increased 19 percent for Hain Celestial United Kingdom and 15 percent for the rest of the world to $238.3 million and $113.3 million, respectively.
“At Hain Celestial, we’ve consistently done a phenomenal job of maintaining a strong balance sheet while other companies are leveraging up with debt to achieve growth through acquisitions,” said Irwin D. Simon, founder, president and CEO. “We believe we’re making the right strategic changes and investments in our go-to-market strategy with particular emphasis in the US to support the shifting consumer purchasing dynamics and evolving retail landscape.”
Of the struggling US business, Simon added, “We remain committed to the four-point plan, which includes investing in our top brands and capabilities to grow globally; delivering on Project Terra cost savings and productivity; enhancing our leadership team to deliver on the strategic plan; and last, but of course, not least, returning value to Hain Celestial’s shareholders.”