Hain Celestial benefiting from s.k.u. rationalization, cost savings

by Keith Nunes
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Hain Celestial Group products
The Hain Celestial Group’s net income for the year totaled $67,430,000, up from $47,429,000 the year before.
 

LAKE SUCCESS, N.Y. – The changes the Hain Celestial Group’s management team outlined this past June took hold in the fourth quarter of the company’s fiscal year and yielded results executives said are positive. While the company’s leadership team conceded there is more work to be done, they also presented a positive outlook for the year ahead.

Net income for the year ended June 30 totaled $67,430,000, equal to 65c per share on the common stock and an improvement compared to the previous fiscal year when the company earned $47,429,000, or 46c per share.

Sales for the year fell slightly to $2,853,111,000 from $2,885,374,000 a year earlier.

Irwin Simon, Hain Celestial
Irwin D. Simon, president and c.e.o. of the Hain Celestial Group

“We are pleased to have achieved sales growth in all of our business segments on a constant currency basis in the fourth quarter, despite an ever changing operating environment for food manufacturers and retailers,” said Irwin D. Simon, president and chief executive officer of the Hain Celestial Group, during an Aug. 28 conference call with financial analysts. “Building upon our core platforms and cost savings initiatives, our global team has made significant progress during the year executing on our strategic plan. The business momentum and operational improvements we experienced in the fourth quarter of fiscal 2017 reinforce our confidence in the tremendous opportunities ahead to generate the growth we know we are capable of achieving over the next several years.”

Net income during the fourth quarter equaled $313,000 and was an improvement compared to the same period of the previous year when the company recorded a loss of $88,597,000.

Hain Celestial Garden of Eatin', Terra Chips, Sensible Portions
Hain Celestial's sales for the period fell to $725,085,000 from $737,547,000 the previous year.
 

Sales for the period fell to $725,085,000 from $737,547,000 the previous year.

Key corporate initiatives outlined this past June included a focus on products and brands that represent 90% of the company’s business, stock-keeping unit (s.k.u.) rationalization and cost elimination through its Project Terra program.

For the quarter, Project Terra generated approximately $45 million in savings, in line with company expectations, Mr. Simon said. In fiscal 2018, the company has identified approximately $100 million in savings from its global operations.

Gary Tickle, Hain Celestial
Gary Tickle, c.e.o. of Hain Celestial North America

“Our s.k.u. rationalization program announced to you in June continues and impacted fourth-quarter top-line sales by $5 million, or 1.5% of net sales, which was in line with our expectations,” said Gary W. Tickle, c.e.o. of Hain Celestial North America. “As we mentioned, it was approximately 20% of our s.k.u.s in the U.S. that were rationalized. We had minimal impact of inventory realignment in our supply chain this quarter.”

Mr. Tickle called fiscal 2017 a “year of significant transformation” that included an investment and brand equity and consumer engagement across the company’s top 500 s.k.u.s and top 11 brands. In fiscal 2018, he expects the strategy to drive low- to mid-single-digit growth on the top line while improving EBITDA performance in line with sales growth.

During the call with the analysts, several asked about Hain Celestial’s relationships with Whole Foods Market and Amazon, and how Amazon’s effort to sell Whole Foods’ 365 brand on-line may affect the company. Mr. Simon said Hain Celestial does business with and has strong relationships with both and added:

 

“… We are a manufacturer and marketer of organic and natural foods,” he said. “We’ve got the infrastructure and supply (chain) in place that we built over the last 24 years. So, it’s just when you say you’re bringing this on, we’re bringing on private label, supply, manufacturing, it’s just not easy to push a button, go out there to get products like a conventional product.”

Amazon’s focus on low prices was also a topic of discussion.

“ … In regards to pricing, I think Amazon sees the opportunity of where Whole Foods prices were to bring them down,” he said. But, he added, Hain Celestial has profit margins it has to achieve and he expects the company to hit those margins. 
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